UNEP FI: The London Stock Exchange Group analyses decarbonisation trends in the investment universe
19 October 2022
This global benchmark covers over 4000 companies, capturing both large and mid-cap corporates in developed and emerging markets.
Supported by the UN-convened Net-Zero Asset Owners Alliance, the
London Stock Exchange Group (LSEG) released the ‘Decarbonization in
Equity Benchmarks’ research paper analyzing trends in the carbon
exposure for the FTSE All-World Index. This global benchmark covers over
4000 companies, capturing both large and mid-cap corporates in
developed and emerging markets. Scope 3 emissions – vital to capturing
the full picture on progress towards net zero – is not yet included but
it is intended that this will add to future iterations of this report.
By publishing data on the FTSE All-World Index, LSEG has effectively
shown decarbonisation trends in what can be called a ‘reference
portfolio’ – a portfolio broadly representative of the (public equity)
investment universe. The exercise is very useful for climate-ambitious
investors as it identifies the broad trends in the economy, such as
changes in carbon efficiency, which in turn reveal the default for
passive investing.
LSEG’s analysis for the FTSE All-World Index between 2014 and 2020, highlights the following key findings:
- Absolute emissions in public equities increased, driven partially by
an expanding investment universe. When adjusting for constituent
changes, emissions reductions are evident from 2019, with over half of
constituents consistently reducing emissions.
- This reduction can also be seen in carbon intensity trends; global
equity portfolios saw a modest decline in both Weighted Average Carbon
Intensity (WACI) and Carbon Footprint.
- Utilities saw material declines in both absolute and intensity-based
emissions, contributing to portfolio-level reductions in the FTSE
All-World.
- Technology was the only sector to materially increase its
contribution to WACI, due to emissions increases in constituent firms
and consistent growth in index weight.
- Removal of index constituents in the Energy Industry was a significant contributor to portfolio intensity reductions.
Download the report here.
UNEP FI
© UNEP
