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Carbon Footprinting Demystified
May 1, 2024
Assessing the carbon footprint of a portfolio is the first step in addressing the investment implications of climate change. Carbon footprinting sets a baseline to inform future actions, which can range from reporting and engagement to decarbonization and integrated risk management. Investors can, however, find it challenging to navigate the complex and fast-evolving landscape and to decide which metrics and underlying inputs to use.
This guide provides a clear and intuitive structure that leads investors through the evaluation and application process, including:
- Selecting the appropriate carbon-footprint metrics based on measurement objectives and varied use cases.
- Choosing calculation inputs based on the underlying portfolio constituents and adjusting as necessary.
- Expanding the measurements to asset classes beyond corporates and sovereigns in the portfolio, if applicable.
- Tracking the portfolio’s carbon-emissions profile over time by conducting an attribution analysis.
Carbon-footprint metrics in alignment with reporting standards
Source: MSCI ESG Research.
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Research authors
- Carrie Wang, Vice President, MSCI Research
- Guido Giese, Managing Director, MSCI Research
- Xinxin Wang, Executive Director, MSCI Research
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