$11 Trillion in Mutual Funds Analyzed for Carbon Risk

FossilFreeFunds.org, a website created by As You Sow, an environmental advocacy non-profit focused on climate finance, that enables all investors to know the climate risk embedded in their retirement accounts has now added carbon footprinting of over $11 trillion in global mutual funds and ETFs to the site — the largest ever analysis of this kind.

The free tool now offers new advanced functionality that empowers investors to track their exposure to carbon pollution that companies embedded in their mutual funds and ETFs are emitting. The analysis utilizes data provided by global sustainability solutions provider South Pole Group, and yourSRI.com, a leading carbon data analyst and reporting solution provider for responsible investments.

“Transparency leads to transformation,” said Andrew Behar, CEO of As You Sow. “Measuring a company’s carbon emissions is a critical way to understand the specific climate risk of your investments. We have aggregated this data for all of the companies embedded in each of the 8,500 most-held global mutual funds and ETFs. This tool enables every investor to answer the question, ‘Am I investing in my own destruction or the clean energy future?’”

Traditional fossil free investment approaches avoid companies with reserves of coal, oil, and gas that represent potential future emissions. Carbon footprinting turns the focus to current greenhouse gas emissions, helping unveil businesses who operate with lower footprints than their industry peers. This launch will cover funds in the US, UK, Germany, France, Denmark, and Hong Kong. The developers plan to expand to cover every fund in every exchange across the entire globe soon.

“Decarbonizing” a portfolio involves investing in companies that have lower carbon footprints than their peers. Institutional investors such as California’s CalPERS and Sweden’s AP4 have embraced carbon footprinting as a way to protect their assets from climate risk. Major index providers are increasingly offering low-carbon options that incorporate a footprinting analysis. But investors should be warned that some funds called “sustainable,” “ecology,” “green” or “integrity” may actually have very high carbon footprints. The platform allows investors to see the real scores that are updated every month with Morningstar’s latest holdings data.

Some surprising examples emerge from the analysis: Given that BlackRock recently published a major report on portfolio climate risk, it may be a surprise that the BlackRock Basic Value Fund’s (MABAX) has a carbon footprint 170% higher than its benchmark, the Russell 1000 Value Index. Dimensional Social Core Equity (DSCLX) has 85% more carbon than the MSCI All World Index, with 13% of the portfolio made up of fossil fuel companies including Shell, BP, and tar sands giant Suncor. And the State Street SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) holds 40 fossil fuel companies including companies with reserves like Phillips66, Valero, and Marathon; coal fired utilities Duke Energy and Southern Company, and oil field services leader Halliburton.

By providing a lens for investors to look at carbon demand and consider the entire value chain when measuring climate impact, the data can help investors large and small align their investing with their values. Fossil Free Funds analyzes over 8,500 global mutual funds, including 3,000 of the most commonly-held funds in U.S. retirement plans.

“Having funds with smaller footprints is one way to avoid climate risk,” said Andrew Montes, Director of Digital Strategies at As You Sow. “It also actively rewards companies that have made positive decisions to lower the climate impact of their operations. Investor demand will drive fund managers to drop companies with high carbon footprints and include those companies that are shifting to the clean energy economy.”

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