Trucost, an environmental consultancy under the S&P umbrella, has released research in which it argues that Latin American indices are well suited to a low carbon future.

The research examined the impact of so called “stranded assets” in which carbon intensive industries such as coal mining and oil production are forced to leave their assets in the ground in order to meet attempts to avoid more than two degrees of global warming above pre-industrial levels.

Factors examined in the report include the Carbon Footprint,  i.e. the emissions produced if the index’s constituents burned their reserves, the exposure of each index to coal and what it calls the “green-brown revenue share”. This is the mix of each index that receives revenues from both “climate solutions” and “climate aggravators”.

While the S&P Latin America 40 is a very carbon intensive index, its strong footing comes from its ability to transition towards a low carbon model. This is because of its limited exposure to the coal sector and the fact that a large proportion of power is derived from hydroelectric sources.

On the other hand Australia will struggle the most to make such a transition, being highly dependent on the coal sector, although the research does note that Australia is pledging to generate 23% of its energy from renewable sources by 2020.