Our 2021 Carbon Metrics Report details the weighted average carbon intensity (WACI), fossil fuel related revenues, reserves exposure and the disclosure rates among companies within the Fund's listed equity portfolio. A summary of the key findings can be found below. The Report is available in full here.
WACI is one of the measures recommended by the Taskforce on Climate-related Financial Disclosures (TCFD) and forms the basis of our goal to reduce the carbon intensity across our equity portfolio by 30% relative to the benchmark by 2022.
- The report shows that all active listed equity portfolios that the Fund invests in exhibit a lower WACI that their respective benchmarks.
- The portfolio saw a 22% year-on-year reduction in carbon intensity, based on WACI.
- Relative to the benchmark the aggregate portfolio rated 30% more efficient (less carbon intensive) than the benchmark, which means we have hit the above referenced climate change objective significantly ahead of plan. This target will be kept under review as we continue to work toward our longer-term net zero 2050 target.
To assess ‘stranded asset’ risk we look at metrics that highlight companies with business activities in extractive industries as well as companies that have disclosed both proven and probable fossil fuel reserves in the portfolio.
- Weighted fossil fuel revenues exposure represents 0.79% of the aggregate portfolio relative to benchmark exposure of 1.76%
- Future emissions from reserves are 1.6 MtCO2 vs 5.1 MtCO2 for the benchmark
The year-on-year improvement in future emissions from reserves is due to a combination of factors including decarbonisation of the underlying portfolios (driven by investment managers allocating capital to less carbon intensive sectors and/or companies) and the Fund’s own strategic asset allocation; principally the replacement of the oil & gas heavy UK equity allocation (and reduction in global equities) with the allocation to the Brunel global sustainable equity portfolio - which as can be seen from the report - has a nil exposure to future emissions from reserves.
The level of carbon disclosure is based on each company’s direct scope 1 emissions and can be classified as fully disclosed, partially disclosed or modelled.
- The rates for full disclosure of carbon data were 58% (carbon-weighted measure) compared to 52% in 2019, which indicates disclosure rates among extractive companies have increased over the past 12 months.
- The rates for full disclosure of carbon data were 55% (investment-weighted measure) compared to 66% in 2019. This outcome is attributed to the increased exposure the Fund has to small-cap companies within the sustainable equities fund. Smaller companies do not tend to have the same resource to provide full and comprehensive disclosure relative to large-cap companies. Irrespective, these scores indicate scope for improved reporting among investee companies, which is a core aim of the engagement work adopted by the Fund, Brunel and its strategic partners.