Climate risks and natural capital disclosure: investigating ETF fossil free and low-carbon investments

The climate deal struck in Paris in December 2015 (COP21) achieved an unprecedented agreement on limiting global warming and an important milestone in the global shift towards better and more comprehensive non-financial reporting which companies can follow to disclose – for investors, credit rating agencies, insurers, and other users of financial statements – more standardized information on their exposure to climate risks. Many investors are therefore focusing on those companies whose management involves a positive impact on climate risks, who pursue divestment strategies on fossil fuels, adopt a low use of coal and carbon, pay attention to renewable energy and are not responsible for high greenhouse gas emissions (GHG). This paper aims to provide a brief overview about the current state of reporting on climate risks and natural capital information in the investors’ perspective and a recognition of the academic literature on this topic. The second part of the paper will analyze the integration of ESG criteria especially on natural capital in order to investigate the methodological approach of the development of an ETF low-carbon and fossil free index. It also is important to assess the ETF investment strategy with a low carbon and fossil free thematic approach in according to the Sustainable Development Goals (SDG) No. 13 “Climate Action” by the United Nations 2015.