The index is meant to identify companies that will be hurt least by or even profit from climate change and regulations such as caps on greenhouse gas emissions.
Merrill Lynch has identified the automotive industry, capital goods, semi-conductors and building materials as most exposed to this theme. The Merrill Lynch Energy Efficiency Index is divided into four components: integrated plays with a focus on the capital goods sector; fuel efficiency in the automotive industry; building insulation; and energy-efficient solutions, including products, applications and industrial processes.
Merrill Lynch’s analysts note the global manufacturing industry could improve its energy efficiency by between 18 percent to 26 percent overall (and at the same time reduce the sector’s CO2 emissions by 19-32 percent).
While not all of these potential savings are likely to occur without a strong framework of regulation and/or incentives, the potential over time is considerable. The index also highlights companies in the capital goods sector which are best positioned to reduce CO2 emissions and energy consumption across the industry.