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A Framework for Attributing Changes in Portfolio Carbon Footprint
May 3, 2023
Tracking a portfolio’s carbon footprint is a key requirement for setting and tracking net-zero targets. However, this is challenging in practice since changes in carbon footprints may be driven by changes in climate-related variables, portfolio rebalancing or financial variables. In this paper, we propose a framework that attributes 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 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. ©2023 With Intelligence. Republished with permission from the Journal of Portfolio Management, from: Zoltán Nagy, Guido Giese, and Xinxin Wang. 2023. “A Framework for Attributing Changes in Portfolio Carbon Footprint.” Journal of Portfolio Management 49, no. 8 (August 2023).
The drivers of financed emissions — a worked example
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Research authors
- Zoltán Nagy, Executive Director, MSCI Research
- Guido Giese, Managing Director, MSCI Research
- Xinxin Wang, Executive Director, MSCI Research
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