MSCI in practice: Managing your portfolio's carbon footprint and understanding the impact of changing market conditions

Measuring and understanding a portfolio’s carbon footprint and its changes over time was the foundation of regulatory reporting, stakeholder communication, climate-related risk assessment, and climate strategies and actions.

Changes in portfolio carbon footprints could be driven by changes in climate-related variables, portfolio rebalancing, or financial variables.

During this event, we discussed a carbon footprint attribution framework that attributed changes in portfolio-level emissions to their primary drivers, including changes in the portfolio composition, changes in issuers’ emissions, and changes in the ownership and financing structure. The framework was designed to allow investors to understand to what extent changes in a portfolio’s carbon footprint were due to companies’ organic decarbonization efforts, a portfolio manager’s investment decisions, or changes in companies’ financing.

We provided the investor perspective on the necessity and importance of carbon footprint attribution.