Is My Portfolio Still Green? the 2006 carbon audit of the Henderson Global Care Income Fund
01 June 2006
Please enter your login details on the right hand side of this page to download the report.
In absolute terms, the carbon associated with the stocks in the fund fell by 1%. The fund’s relative carbon intensity – emissions per million pounds of investment – fell faster, declining by 7% to 554 t CO2e/£ million.
Within the fund, some companies cut their emissions, such as BT and Pennon, while others increased their carbon output, such as Centrica and Scottish & Southern Energy.
The fund’s focus on high-yielding stocks gives it a high weighting in utilities, notably Scottish Power, Centrica and Scottish & Southern Energy, which account for over 40% of the fund’s carbon footprint.
Turning to the wider stock market as measured by the FTSE All Share, absolute emissions rose by 5%, but its relative carbon intensity fell by 4%. This was largely due to the departure from the index of carbon intensive companies – such as BPB, Exel and P&O – and increased valuations for the oil and gas sector. By and large, new entrants to the index were 15% less intensive than those that exited the All Share.
Portfolio companies had considerably higher levels of carbon disclosure than the index, with 52% reporting their emissions, compared with less than 20% for the FTSE All Share.
This report summarises the analysis of the carbon emissions associated with the Global Care Income fund managed by Henderson Global Investors. The greenhouse gas emissions for each holding in the portfolio have been calculated and converted to tonnes of carbon dioxide equivalent (CO2e). The direct emissions from each company are taken into account as well as the indirect emissions from the first tier of suppliers (e.g. from purchased electricity). Each holding's contribution to the emissions profile of the portfolio is then calculated on an equity ownership basis.
The 'Carbon Footprint' of the fund is the sum of all of these contributions. The 'Carbon Intensity' of the portfolio is the Carbon Footprint normalised by its value. This analysis has also been carried out on the portfolio's benchmark, the FTSE All Share, for the purposes of comparison. The Carbon Intensity of the portfolio is 34% lower than the benchmark. This means that on a weighted basis, the holdings of the portfolio are less carbon intensive than companies in the benchmark.
Why did Henderson Global Investors commission the research?
Just as companies need to improve the quality and quantity of their reporting on climate change, it is also important for investors to become transparent about their own policies and practices. To this end, Henderson published the first carbon audit of an investment portfolio in June 2005, commissioning Trucost to compare the emissions associated with the Global Care Income fund with its benchmark, the FTSE All Share. The results showed that the fund was 32% less carbon intensive than the overall market, testimony to the environmental criteria that guide its investments.
Henderson then wished to repeat the exercise in 2006 to understand how the fund’s performance had evolved. Trucost calculated the carbon emissions (CO2e) associated with the fund’s holdings and the wider index on 31 December 2005, making estimates where data was not reported. These results were then normalised using the value of the fund and the index to produce a measure of carbon intensity.
Further Trucost research commissioned by Henderson