Over two days, SSF travelled from Zurich to Geneva with the Institutional Investors Group on Climate Change (IIGCC) and a panel of Carbon Foot Printing experts, as well as asset owners currently implementing sustainable investment strategies, to discuss the topic of portfolio carbon intensity with 150 professionals.
In light of the recently published Swiss Federal Office for the Environment (FOEN) report on the risks of holding carbon intensive assets in portfolios, these two back-to-back events came at the perfect time.
Each of the 4 service providers on the panel moderated by Eric Borremans (Pictet AM) were given a portfolio to analyse and presented their results, as well as, insights into their methodologies.
Antti Savilaakso (MSCI ESG), Tobias Jung (Inrate), Jean-Florent Helfre (Trucost) and Maximilian Horster (South Pole Group) all provided a short but concise overview of the carbon intensity they calculated for the exact same portfolio and benchmark and went on to talk about various factors that are important when looking at carbon data.
Specifically of interest to the audience and panellists was the debate around scope 3 emissions, avoided emission, fossil fuel reserve considerations and data accuracy and availability. In addition, the methods of taking a snap-shot of carbon intensity was criticized and it was argued that more forward-looking data should be incorporated in analyses to gain a better picture of a company's intentions of reducing their carbon exposure.
On the asset owner panel, moderated by Stephanie Pfeifer (IIGCC) in Zurich, Christina Olivecrona (AP2), David Engel (Publica) and Peter Signer (Nest Collective Foundation) described their investment processes and how they have looked to incorporate CO2 foot printing and other sustainable criteria into their investment decisions. While AP2 in Sweden has a legal obligation to invest with environmental and social considerations, the two Swiss pension funds described their voluntary efforts to develop investment strategies that do consider such things as "climate risk".
In Geneva, Christina Olivecrona (AP2) was joined by 3 new faces, Olivier Bonnet (ERAFP),Caroline Schum (Nest Collective Foundation) and François Vuille (EPFL). Olivier Bonnet described the process ERAFP currently has in place to exclude the most carbon intensive companies without sacrificing diversification. He also expressed the need for more active management solutions as opposed to the passive solutions that are already on the market (i.e. low carbon indices). Caroline Schum explained that Nest does not use a "best-in-class" approach, but rather a "best-in-service" approach. This strategy tends to lead to a natural divestment in fossil fuel intensive companies as they are seen as less prepared to face the challenges of the future. The Geneva panel ended with some controversial statements from François Vuille, who asked the question: Are we doing enough? In his view, a more in-depth Life Cycle Assessment is needed to truly make informed investment decisions.
While all experts agreed that measuring the carbon footprint of a portfolio is a good and necessary first step, there still seems to be a long way to go to make sure portfolios comply with a 2 degree warming scenario. With COP21 on the horizon, we will see in which direction the international community is heading.
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