While investors are beginning to recognize the systemic risks presented by climate change, this is by no means universal, and it is likely that very few investors have fully integrated these risks in their portfolio management. This case study was intended to summarize how investors can identify and manage carbon liabilities embedded in their portfolios.
Trucost’s analysis found that the Pax World Global Environmental Markets Fund was 25% less carbon intensive than its benchmark MSCI World due to a combination of 37% negative sector allocation effects and 62% positive stock selection effects. It identified opportunities for Pax to improve the environmental disclosure of its high impact holdings through company engagement. Following Trucost’s analysis, Pax was able to make its Pax World Global Environmental Markets Fund carbon neutral.