TRUCOST RELEASES GROUND BREAKING CARBON FOOTPRINT RANKING OF UK INVESTMENT FUNDS

12 June 2006, London:

Trucost, the environmental research company which produced the environmental reporting guidelines for business for the UK government, has released the first Trucost Carbon Footprint Ranking of UK Investment Funds. For the first time this enables investors to compare investment funds on an environmental basis.

The report ranks the carbon intensity of 44 main UK investment and mutual funds, revealing the best and worst performers in terms of their carbon footprint. The funds amount to approximately £45bn, and are managed by 28 different fund managers.

The Trucost Carbon Footprint Ranking of UK Investment Funds will be produced every six months to allow investors to see how different funds are managing their carbon risk.

Key highlights from the Trucost ranking are:

• There is a massive range in performance between the best and worst: the worst fund has a footprint more than five times larger than the best.

• The impact of moving a £10,000 investment from the worst fund to the best is 14 tonnes of CO2 emissions per annum. The average UK household emits six tonnes of CO2 per annum

• There is no gain in financial performance from ignoring the environment - funds with larger carbon footprints do not produce higher returns

• The top performer is Scottish Widows IP UK & Income ICVC, Environmental Investor; the worst performer is AXA UK Investment Company ICVC - UK Equity Income Fund

• Some SRI funds have larger Carbon Footprints than many mainstream funds.

• The worst SRI fund performer is Old Mutual Investment Company - Old Mutual Ethical Fund with a Carbon Footprint over twice as large as the best mainstream fund Lazard Investment Funds - UK Alpha Fund;

Carbon emissions are now a financial issue that have a real price following the introduction of the EU Emissions Trading Scheme in 2005. The Trucost Carbon Footprint Ranking provides valuable information to fund managers looking to control and measure the risks of carbon emissions in their portfolios, as well as individual investors seeking to get the most out of their investments while taking greater responsibility for the environment.

Using its unique and extensive database of the environmental impacts of all the major companies, Trucost studied SRI and mainstream investment funds, both active and tracker funds with over 80% of their portfolios invested in the UK, and calculated the greenhouse gas emissions for which these companies were responsible.

The emissions were then converted to carbon dioxide equivalents (C02e) based on 'Global Warming Potential' factors. The total CO2e emissions attributed to each fund were calculated based on the percentage holdings of each stock in the fund and their corresponding emissions. In order to compare the results, the CO2e emissions of each fund are divided by the size of the fund (£mn) to give a Carbon Footprint allowing valuable comparisons with other funds.

Overall the holdings of the 44 funds researched are responsible for carbon emissions of over 50 million tonnes a year. Based on the current price of European carbon emission permits of €21.80 per tonne the cost of credits purchased to cover these emissions would be over £7 billion a year.

The results

The results of Trucost's analysis show a massive variation in performance.

Best Carbon Footprint Funds

The best performing fund, with the smallest carbon footprint, was the Scottish Widow IP UK & Income ICVC, Environmental Investor. The second fund was Scottish Widow Ethical. Norwich Union Sustainable Future ICVC - UK Growth Fund is in third place. Surprisingly Lazard UK Alpha Fund, a mainstream fund appears fourth in the rankings above most of the SRI funds.

Worst Carbon Footprint Funds

The fund with the largest carbon footprint is the AXA UK Investment Company ICVC - UK Equity Income Fund which is responsible for over five times as much carbon per pound invested as the Scottish Widows fund - 1719 tonnes per £mn invested.

Best mainstream funds

Second of the active mainstream funds was the Aberforth Smaller Companies Trust, with the third lowest carbon footprint achieved by Schroder UK Alpha Plus Fund and Equator Investment Funds ICVC - UK Equity Fund in fourth place.

The carbon footprints of the FTSE indexes were also measured. FTSE All Share has a carbon footprint of 1133 tonnes/£mn whilst the FSTE350 was 1138 tonnes. Tracker funds closely matched the carbon intensity of the indexes

Financial Performance

Trucost's research shows that there is no gain in financial performance from ignoring the environment. Across the study funds with larger Carbon Footprints do not produce higher returns, meaning that investors do not have to sacrifice profits to protect the environment.

Trucost has constructed a sector-neutral FTSE 350 fund that replicates index returns with low tracking error while reducing carbon footprint by 41 per cent, so fund managers can maximise returns while minimising the Carbon Footprint of their portfolios. The portfolio mirrors the sector weightings of the FTSE 350, but rebalances the companies within sectors by overweighting of less carbon intensive companies and the underweighting of more carbon intensive companies.

Such a portfolio is designed to benefit from any increase in regulation controlling carbon emissions without sacrificing financial performance.

This means that fund managers can manage their exposure to carbon emissions without sacrificing returns and retail investors can get the most out of their investments with minimum environmental impact.

Simon Thomas, Chief Executive of Trucost, said:

'For the first time investors can evaluate how well an investment fund is managing its carbon emission risk. The results show that funds with larger Carbon Footprints do not produce higher returns; that SRI funds do not necessarily lead to environmentally sound investment.. Investors should look at what fund managers actually do with respect to the environment, not what they say.

Trucost provides products that allow investors to manage their environmental risks'

David Lee, Director of Research at Aequos, the market-leading supplier of information to IFAs said:

'IFAs will find this analysis invaluable when they are guiding retail investors in their choice of funds. Retail investors are increasingly interested in understanding the environmental impacts of their investments and recent media coverage such as the BBC's Climate Chaos season has reinforced this. This groundbreaking report from Trucost will become the industry standard for environmental risk for retail investors'

Nick Robins, Henderson Global Investors in 'How Green is My Portfolio?'

'Trucost's detailed company-by-company analysis of the fund's holdings helps to show how investment choices between alternative stock ideas can affect the fund's future carbon performance.'.

Mercer Investment Consulting - A Trustee's Guide to Understanding and Addressing Climate Risk, August 2005

This information can then be reported to pension fund clients and trustees who 'want to ensure that these risks (and associated opportunities) are being addressed in relation to the funds in their care.'

Simon Thomas, Chief Executive of Trucost, is available for interview.

For further information please contact:

Trucost 020 7321 3731

Ashleigh Lezard, Marketing Manager

Hogarth Partnership 020 7357 9477

Nick Denton, Vanessa Orr, Anthony Arthur

About Trucost (www.trucost.com)

About Trucost Plc

Trucost Plc is an environmental research business which helps companies and investors understand the environmental impacts of business activities in financial terms. Trucost offers expert advice and research to major corporations, both public and private, institutional investors and to Government departments and associated agencies. Trucost wrote the environmental reporting guidelines for UK business with the UK government, released in January 2006.

Over the past six years Trucost has built up a database of the environmental impacts and disclosures of over 3000 major companies worldwide. Trucost's database of climate change disclosures is the world's largest. Trucost has developed unparalleled experience and expertise in the area of environmental performance, analysis and reporting, working with leading multinational companies in a range of business sectors including Avis, Bloomsbury, Christian Salvesen, Prudential, LogicaCMG, Legal & General and Land Securities Plc.