The “Trucost” of Climate Investing

S&P Global
By December 18, 2019 15:35

The “Trucost” of Climate Investing

The “Trucost” of Climate Investing: Managing Climate Risks in Equity Portfolios 

Sustainable investing1 is a significant consideration for an ever-growing class of investors. Forty-two percent of investors surveyed in North America (Schroders Global Investor Study, 2017) cited performance as a primary concern in sustainable investing. The numbers were even higher in Asia (45%) and Europe (48%). Does sustainable investing come at a “cost”, and is the fear of investors around the performance concessions of “green” portfolios warranted? Our research suggests investors’ fears are misplaced – carbon sensitive portfolios have similar returns and significantly better climate characteristics than portfolios constructed without carbon emission considerations (Figure 1, Table 3, Table 4). The baseline ("BasePort") and carbon sensitive portfolios (CSPLow, CSPMid and CSPHigh) are each made up of 75 stocks selected from the S&P 500 using a quantitative stock selection model. BasePort ignores a company’s carbon intensity (“CI”) when selecting stocks, while the carbon sensitive portfolios target increasingly stringent levels of CI (carbon intensity facilitates the comparison of greenhouse gas emissions across firms of different sizes). Our findings:

S&P Global
By December 18, 2019 15:35

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