We measure the carbon footprint when we have an adequate information basis, which applies to most of our equities funds. The criterion for calculating our funds' carbon footprint is that data showing their carbon dioxide emissions (or the equivalent) is available for at least 75 per cent of the fund's market value. For a number of companies and markets, there is currently insufficient information to measure their carbon footprint, but we are increasing the number of funds analysed, to make this information available. Two different reports are available for the measured funds: a summary report that can be found under the Swedish stock listing, which is also available in English, and an extended analysis report in English, also found at this site.We report the carbon footprint in order with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. There is no cohesive and widely agreed standard of how carbon emissions should be disclosed. However, we follow ongoing discussions and adapt according to the latest methods. From 2020, the new industry standard will be based on the risk-focused alternative carbon metric, weighted average carbon intensity.
Weighted average carbon intensity measures how much carbon dioxide and other greenhouse gases that are emitted yearly by a company, at a given moment in time, in relation to the company´s revenues. It thereby shows how carbon efficient a company is. The key difference of the new industry standard is that it measures a portfolio’s exposure to carbon-intensive companies (i.e. better reflects the risks) instead of ‘our part’ of our portfolio companies’ emissions. The metric has several limitations in terms of measuring climate-related risks, including data reliability, scope and coverage, being backward- looking and not factoring in the sector-specific emissions reductions required to fulfil the Paris Agreement. Therefore, carbon footprint is only one of several climate metrics that we use.
Calculation formula for the metric weighted average carbon intensity:
Portfolio’s exposure to carbon-intensive companies, expressed in tons CO2e / $M revenue.
It should also be noted that the carbon footprint gives a historical snapshot of the emissions from companies in the fund's equity portfolio. The values will vary in step with changes in the companies' emissions, but also according to changes in the portfolio structure. Exchange rate movements will also affect the measurements to a lesser extent. The summary carbon reports which can be found in our stock list covers scope 1 and 2 emissions. Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy.
It must be noted that the carbon footprint does not show the investments' total climate impact, for the following reasons:
- Only certain emissions are included. Indirect emissions from suppliers are not always included in the calculations. The same applies to the normal emissions as a consequence of using a company's products.
- The companies' emission data is not complete.
- Only certain asset classes are measured.
- Emission savings through products and services are not included.
- Information concerning fossil reserves is not included.
- The measurement does not indicate how well a portfolio is positioned towards, or its contribution to, the transformation to a low-carbon society.
Sustainability is more than carbon footprint
Although company reporting on carbon emissions has increased in the past few years, we are also aware that the metric used to calculate carbon emissions has distinct limitations. We integrate sustainability into all the fund management company’s activities. For example, we assess all potential investments from both a financial and sustainable perspective because both aspects are essential for a company’s future earnings and stability. In addition to carbon emissions, we also consider a number of factors when we consider an investment’s potential. We aim to continuously increase our investments in companies that help solve global sustainability challenges, thus contributing to sustainable development goals. We understand how important sustainability is to our clients and we strive to provide them with relevant information and the tools to make wise sustainable choices.
The Swedish Investment Fund Association