Carbon Footprints

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
Sovereign Ethical 185
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
FTSE Allshare 680

Source: Trucost "Carbon Counts. The Trucost Carbon Footprint Ranking of UK Investment Funds".

carbon footprint

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.