Bank for International Settlements (BIS)

December 16, 2021 – Bank for International Settlements (BIS)

Basel Investing and Carbon Footprint

The Basel Committee for Banking Supervision (BCBS) issued a paper “Building Benchmarks Portfolios with Decreasing Carbon Footprints”


Summary

The paper explores how passive investors can cut carbon footprints on global/regional portfolios. It determines whether investors need to move from emerging market economies or high-emissions sectors such as energy, utilities, and cement to reduce carbon footprint. The analysis excludes corporates with carbon footprint above a given threshold for any given year and reports how many stocks are excluded and how to reinvest the proceeds. In addition, the research compares financial performance of usual benchmarks with alternative net zero-consistent ones.


Findings

Passive investors could have cut portfolio carbon emissions by 10% per year over past 10 years with relative ease and without changing its country or sectoral exposure.
A 64% reduction could have been reached in 2019 by excluding 11% of the most polluting corporates.

For more information, visit www.bis.org.



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