Carbon Footprinting Demystified
Research Paper
May 1, 2024
Preview
Assessing the carbon footprint of a portfolio is the first step in addressing the investment implications of climate change. Carbon footprinting sets a baseline to inform future actions, which can range from reporting and engagement to decarbonization and integrated risk management. Investors can, however, find it challenging to navigate the complex and fast-evolving landscape and to decide which metrics and underlying inputs to use.
This guide provides a clear and intuitive structure that leads investors through the evaluation and application process, including:
- Selecting the appropriate carbon-footprint metrics based on measurement objectives and varied use cases.
- Choosing calculation inputs based on the underlying portfolio constituents and adjusting as necessary.
- Expanding the measurements to asset classes beyond corporates and sovereigns in the portfolio, if applicable.
- Tracking the portfolio's carbon-emissions profile over time by conducting an attribution analysis.
Carbon-footprint metrics in alignment with reporting standards
Source: MSCI ESG Research.
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A Framework for Attributing Changes in Portfolio Carbon Footprint
We present a framework that allows investors to understand to what extent changes in a portfolio's carbon footprint are due to companies' real-world decarbonization efforts, a portfolio manager's investment decisions or changes in companies' financing.
Understanding MSCI’s Climate Metrics
With no "one fits all" solution, to help investors identify the most suitable climate metrics, we take an in-depth look at MSCI ESG Research's climate metrics in terms of what they measure, how they are calculated and their potential use cases.
Total Portfolio Footprinting
Total Portfolio Footprinting means, you'll benefit from visibility over your whole portfolio with a snapshot of financed emissions for all asset classes and subsets.
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