Publication / 06 Jul 2009

Carbon Risks in UK Equity Funds

Trucost research on the carbon footprints of portfolios and carbon management in pension fund assets.

By commissioning this report WWF was seeking to demonstrate that there are strong financial incentives for pension funds and other institutional investors to ensure that carbon risk is actively considered as a factor by their fund managers. In addition, WWF was in favor of support measures like comprehensive, mandatory company reporting, which increase the opportunities for fund managers to manage such risks.

The aim was that the disclosure of carbon liabilities would play an important role in providing better information and creating market incentives for investors to support and drive a successful low-carbon economy, particularly by financing clean, sustainable and renewable energy. In addition, it would help to encourage companies to work harder to prepare for a low-carbon economy where higher emissions will mean lower profits, and the leaders will be those who grasp new opportunities for sustainable business.

Trucost’s analysis of the combined portfolios shows that the 2,380 companies invested in emit over 10 billion tonnes of greenhouse gases globally each year, measured as their carbon dioxide-equivalent (CO2-e) emissions. Since the aggregated 118 funds own approximately 1.4% of the total market capitalization of these companies, they “own” 1.4% of greenhouse gases emitted by them annually, or 134 million tonnes of CO2-e. This equates to 22% of total UK GHG emissions.

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