ESG Investing: Giving Up Greenhouse Gases, Not Performance

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ESG Investing: Giving Up Greenhouse Gases, Not Performance

Carbon from burning fossil fuels is the key greenhouse gas that causes climate change, and cutting investments in carbon-emitting companies doesn’t mean falling behind in performance
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#ESG Investing: Giving Up #GHG's, Not Performance http://bit.ly/2xhVMww via @NorthernTrust @NTCSR

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Mamadou-Abou Sarr

Thursday, September 21, 2017 - 1:25pm

CONTENT: Article

by Mamadou-Abou Sarr, Global Head of ESG, and Julia Kochetygova, Senior ESG Research Analyst

Investors do not have to give up returns when hedging their portfolios against climate risks. Strategies to reduce investments in companies that produce carbon emissions or fossil fuels themselves, the culprit of climate change, can be optimized to avoid unintended risks and closely track benchmarks.

Free Option

The tracking error of optimized decarbonized indices versus conventional benchmarks can be very low, which allows seeing them as a “free option” on carbon. It means that if and when wider regulatory actions are taken on the way to mitigate climate change, the markets will re-price climate risks and such low-carbon strategies should start outperforming conventional benchmarks.

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Keywords: Sustainable Finance & Socially Responsible Investment | Northern Trust | burning fossil fuels | esg | greenhouse gas emissions | performance

CONTENT: Article

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