Login
Contact
To find out more about commissioning customised research, contact:
UK & INTERNATIONAL
+44 (0) 20 7160 9800
NORTH AMERICA
+1 800 402 8774
Carbon Counts: assessing the carbon exposure of Canadian institutional investment portfolios
01 September 2010
Please enter your login details on the right hand side of this page to download the report.
Key Findings
- The S&P/TSX is the third largest market in terms of carbon footprint, measured in carbon dioxide equivalent (CO2e) per USD1 million sales. Canada is only preceded by India and Emerging Markets, and is followed by Australia. As expected, these findings are consistent with resource-based economies.
- The average carbon exposure of the 181 Canadian pooled funds studied in this report is less than that of the benchmark.
- This result is largely due to the sector allocation decision of managers to underweight the heavily emitting utilities, energy and materials sectors. Except for the materials sector, security selection within these sectors also helped reduce the footprint of Canadian pooled funds.
- Canadian pooled-fund sector rotation was higher over the last year than in the previous three. This resulted in very different carbon footprint findings from quarter to quarter.
- In terms of style, for the Canadian pooled-fund universe and the world non-segregated equity funds, the growth portfolios tended to have lower carbon footprints than did their value counterparts.
- In contrast with the Canadian market, large cap international non-segregated equity funds tend to have a lower carbon footprint than do their small/mid cap counterparts.
- Non-segregated global value portfolios have a much wider range of carbon footprints than do growth or core portfolios, making fund selection more important.
- On balance, world non-segregated growth funds offer the lowest carbon footprints, even after adjusting for the respective benchmarks. Also, their range of tilts is much narrower than that of value funds.
Extract
The credit crisis provided an alarming example of what can happen when the investment community fails to identify and address systemic risks building within the global financial system. Following growing scientific consesus and public concern, investors are increasingly narrowing their sights on climate change as another material risk that will soon face businesses and the capital markets.
Climate change and related carbon risk are becoming important issues for institutional investors - both in terms of potential risk and opportunity.
As world leaders debate global emission reduction targets and consider additional carbon trading systems, markets continue to fail to systematically integrate climate change considerations into company valuations.
Why did WWF-Canada commission the report?
WWF-Canada commissioned this study in order to identify the carbon exposure of Canadian institutional pooled investment products and raise awareness regarding its findings. The study was undertaken by Mercer, utilizing carbon footprint data provided by environmental data provider Trucost Plc (Trucost).
In analyzing the carbon intensity of portfolios, this report aimed to raise and respond to the following questions:
- How exposed are Canadian pension funds and other institutional investors if a quantifiable value is introduced for carbon emissions?
- Are investment managers incorporating carbon risks and opportunities into their investments?
- Which economic sectors or individual companies make the largest contribution to carbon emissions in a portfolio?
- What can investors do to help ensure risks and opportunities are being managed in their portfolios?
Report image: Market capitalization of equity pooled funds
About Trucost
Trucost services for companies
Trucost services for financial institutions
Trucost services for government
Trucost University Partnership