A Carbon Footprint is a measure of the impact our activities have on the environment in terms of the amount of green house gases produced, measured in units of carbon dioxide. The ethical investor can minimise their personal impact on climate change by taking steps to reduce their CO2 emissions. For ethical investors, avoidance of all CO2 emissions will be impossible – in this case, Carbon Offsetting, plays a vital role. However, significant reduction of CO2 emissions is possible by taking into account the carbon footprint of your investment portfolio on a fund by fund basis.
By taking into account the environmental impacts of all the major companies, Trucost studied both ethical and mainstream investment funds, with over 80% of their portfolios invested in the UK, and calculated the greenhouse gas emissions for which these companies were responsible. The emissions were then converted to carbon dioxide equivalents (C02e) based on 'Global Warming Potential' factors. The total CO2e emissions attributed to each fund were calculated based on the percentage holdings of each stock in the fund and their corresponding emissions. In order to compare the results, the CO2e emissions of each fund are divided by the size of the fund (£mn) to give a Carbon Footprint allowing valuable comparisons with other funds.
The table below shows the carbon footprints of 10 mainstream ethical investment funds.
|Fund||CO2 tonnes/ Market value|
|Prudential Ethical Trust||169|
|AXA Ethical Acc||173|
|Norwich Union Sustainable Future UK Growth||234|
|Scottish Widows UK & Income - Environmental Investor||250|
|Scottish Widows UK - Ethical Fund||294|
|Aegon Ethical Equity Acc||378|
|Henderson - Global Care Income Fund||398|
|F&C Stewardship Growth||457|
|Aberdeen Ethical Engagement UK||544|
|F&C UK Ethical||663|
|CIS Sustainable Leaders||845|
|Standard Life UK Ethical||856|
|Jupiter Environmental Income||1,046|
There is a massive range in performance between the best and worst: the worst fund has a footprint more than five times larger than the best.
Some ethical funds have larger Carbon Footprints than many mainstream funds.
Trucost has calculated that by switching a £10,000 investment from its highest carbon emitting fund to its lowest, a staggering 14 tonnes of CO2 emissions would be saved per annum. To put this into perspective, the average UK household emits 6 tonnes of CO2 per annum.