Companies’ carbon emissions hamper portfolio performance

New research finds that Europe’s largest asset managers are outperforming their U.S. counterparts when it comes to the carbon intensity of their investment portfolios.

A report from MSCI Research examined the carbon footprints of the world’s 10 largest asset managers, which includes seven U.S.-based firms and three European companies representing US$25 trillion in assets under management (AUM).

The research found that the European fund managers had weighted average carbon intensity levels (an efficiency ratio defined as carbon emissions relative to US$1 million in annual sales) of around 150 tonnes of CO2/US$million in sales, compared with around 200 tonnes/$million for the U.S. firms.

“European fund providers generally had more strategies focusing on European companies, which were often better positioned versus their non-European peers in addressing environmental risks,” MSCI said in a release.

The research also found a modest positive correlation between firms’ assets under management and the financed emissions associated with their portfolios.

“Among U.S. fund managers, each US$ trillion invested led to an extra 10-20 tons of CO2,” it reported.

The firm also said that, while total AUM mattered, asset class did not.

“The asset manager exhibiting the highest carbon intensity and financed emissions was a global bond fund manager with significant exposure to emerging markets and high yield debt,” it reported.