Fund Managers To Report on the Carbon Footprint of Portfolios

September 27, 2014 – In yesterday’s Globe and Mail, Canada’s purported national newspaper, Janet McFarland wrote a piece on ethical investment describing the Montreal Carbon Pledge and the commitment being made by global funds to report the carbon pollution within their portfolios. Portfolio screening focused on environmental issues is a relatively new practice for fund managers. Carbon represents just one in a number of the risks being assessed. Water, land use, pollution and waste are also measured against portfolios and policy decision making.

In her article McFarland describes the pledge made by eight funds including the $298 billion USD California Public Employees’ Retirement System. The California fund is the largest pension plan in the U.S.

Other funds are considering joining the eight who made the pledge on Thursday, September 25th at the United Nations Principles for Responsible Investment meeting held in Montreal, Quebec.

A growing number of tools to help portfolio managers are finding their way into the market. Trucost, a company out of the United Kingdom, is one of a number of analysts providing tools for managing risk. and applying a “true cost” to that risk. Their software gives companies, investors, and governments a better understanding of the economic consequences of decision making by quantifying and putting a price on environmental risk. Joining them is Bloomberg Professional Services (see image below) which launched a Carbon Risk Valuation Tool (CRVT) in December 2013 providing investors with 5 financial risk scenarios focused on decarbonizing.

Today 78% of the 500 largest publicly traded companies report on carbon emissions. That’s why investment funds can no longer ignore carbon in advising clients. And in light of growing pressure to divest funds of fossil fuel assets, (see the posting I wrote earlier this month on the Rockefeller Brothers Fund) portfolio managers have never found themselves under more environmental scrutiny by those they serve. Carbon emissions and climate change have become just too hot to ignore.

Related articles across the web

• Divestment in Unburnable Assets Begins at Stanford University
• The Carbon Time Bomb in Your Retirement Account
• Every Government Official Should Read This – Choosing Between Economic Growth and Fighting Climate Change is No Longer An Issue
• Big investors to act on carbon footprint of assets in bid to tackle climate change