Extended Viewer
A Framework for Attributing Changes in Portfolio Carbon Footprint
May 3, 2023
Tracking a portfolio’s carbon footprint is a key requirement for setting and tracking net-zero targets. However, this is challenging in practice since changes in carbon footprints may be driven by changes in climate-related variables, portfolio rebalancing or financial variables. In this paper, we propose a framework that attributes changes in portfolio-level emissions to their primary drivers, including changes in the portfolio composition, changes in issuers’ emissions and changes in the ownership and financing structure. The framework allows investors to understand to what extent changes in a portfolio’s carbon footprint are due to companies’ real-world decarbonization efforts, a portfolio manager’s investment decisions or changes in companies’ financing. ©2023 With Intelligence. Republished with permission from the Journal of Portfolio Management, from: Zoltán Nagy, Guido Giese, and Xinxin Wang. 2023. “A Framework for Attributing Changes in Portfolio Carbon Footprint.” Journal of Portfolio Management 49, no. 8 (August 2023).
The drivers of financed emissions — a worked example
Download PDF
Research authors
- Zoltán Nagy, Executive Director, MSCI Research
- Guido Giese, Managing Director, MSCI Research
- Xinxin Wang, Executive Director, MSCI Research
Related content
Understanding MSCI’s Climate Metrics
With no one-size-fits-all solution to help investors identify the most suitable climate metrics, we take an in-depth look at MSCI ESG Research’s climate metrics in terms of what they measure, how they are calculated and their potential use cases.
Explore moreImplementing Net-Zero: A Guide for Asset Owners
Pension funds, sovereign-wealth funds, insurance companies and other institutional owners of capital are committing to reduce financed emissions across their portfolios. This guide from MSCI ESG Research outlines concrete steps to help asset owners convert climate commitments to action.
Learn moreHow to Evaluate Climate Metrics and Avoid the Big Confusion
Climate metrics can often be a daunting field, with misunderstanding and confusion rife. We present a two-step toolkit that can help investors identify the most suitable metrics as they look to gauge progress toward their climate-investing goals.
Read more