Document summary
In light of changes in regulation and public attitudes, investors increasingly want to understand the carbon footprint of their investment portfolios. In the coming years, BAML thinks that environmental measures such as a company’s carbon footprint, will become an increasingly important factor in capital allocation. In this report, BAML presents their methodology to assess carbon footprint at an investment portfolio level. Using SIC (US Standard Industry Classification) activity breakdowns, they have modelled peer-group-based CO2 estimates for around 4,000 non-disclosing and 1,200+ disclosing companies, using an innovative mathematical way of interpolating data. Applying the carbon screener to certain major investment indices, they estimate that the carbon directly emitted in 2011 by 1,051 companies amounted to roughly 213 tons of CO2eq/US$mn of market value. Assuming a reasonable long-term cost of US$20/ton CO2eq, this represents 0.32-0.56% pa of market value for the major indices. Applying the Carbon Screener and overlaying corporate sales data, they estimate that the utilities sector has the highest direct CO2 exposure proportionate to sales, at 1,692g of CO2eq/US$ sales, followed by basic resources at 369g and the oil & gas sector at 287g. For more details in addition to the report, see also
CO2 Screener - Index, Sector and Market Value Impacts.