by Robert Kropp
Using analysis by Trucost, Green Century
Capital Management finds that greenhouse gas emissions of companies in its
Balanced Fund portfolio are 66% less than those of S&P 500 companies.
SocialFunds.com -- At a meeting of nearly 500 financial leaders
and institutional investors held at the UN in February, 2008, Al Gore said, "If
you really take a fine-tooth comb and go through your portfolios, many of you
are going to find them chock-full of subprime carbon assets. The assumption that
you can safely invest in assets that come from business models that assume
carbon is free is an assumption that is about to go splat."
In April, 2009, Trucost, a
global provider of environmental data and analysis, issued a report entitled Carbon Counts USA: The Carbon Footprints of Mutual Funds in the
US, which examined the carbon performance of 91 mutual funds in the United
According to the report, "The combined global emissions
associated with fund holdings analyzed amount to over 615 million metric tons of
greenhouse gases (GHG)," or 8.6% of US emissions in 2007.
"a less carbon-intensive mutual fund (that is, one that holds less carbon
intensive companies) is better positioned to succeed in a carbon constrained
economy," Green Century
Capital Management, a Boston-based investment advisor, asked Trucost to
apply its emissions analysis to Green Century's Balanced Fund, which invests its
assets in companies that Green Century believes are working to reduce their
impact on the environment.
With the analysis, the Green Century Balanced
Fund became the first US-based mutual fund to disclose its own carbon footprint.
SocialFunds.com spoke with Erin Gray, Director of Marketing and
Strategic Analysis at Green Century, who said, "With this report, we are taking
an important step toward more comprehensive carbon accounting. We hope this
helps set a new standard for carbon disclosure in the mutual fund industry."
Trucost applied the identical methodology to its analysis of the Green Century Balanced Fund as it did in a
recent report entitled Carbon Risks and Opportunities in the S&P 500, which
is available for download from Trucost's website. Its analysis of absolute
emissions by companies includes direct emissions from operations as well as from
direct (first-tier) suppliers to each company, including electricity and
business air travel. The report found that "For each million dollars of revenue
generated by companies in the S&P 500, 384 metric tons of greenhouse gases
"Trucost reviewed the emissions of nine greenhouse gases
of companies in our Balanced Fund portfolio, as well as their first tier, or
direct, suppliers," said Gray. "Including direct suppliers prevents companies
from simply outsourcing their carbon emissions."
Trucost's analysis of
the Green Century Balanced Fund found that companies in the Fund's current
portfolio emit 126 tons of carbon dioxide equivalent (CO2-e) emissions for every
$1 million of revenue generated, which is 66% less than the benchmark of
companies in the S&P 500. Three companies in the portfolio—Air Products and
Chemicals, General Mills, and 3M—were found to account for 28% of the
portfolio's carbon footprint, but only 5% of its value.
footprint of the Balanced Fund is also about half that of the socially
responsible investing (SRI) funds analyzed by Trucost for its April report. The
companies in the portfolios of the SRI funds analyzed for that report averaged
226 tons of CO2-e emissions for every $1 million of revenue generated.
For its April report on the carbon footprints of mutual funds, Trucost
aggregated fund holdings according to their investment styles, and found that
"combined Sustainability/SRI funds have the smallest carbon footprint." However,
Trucost also found that "some of the largest SRI funds are more carbon intensive
than the S&P 500."
According to Green Century, "The majority of the
Green Century Balanced Fund’s low carbon intensity is attributable to the Fund’s
underweighting or avoidance of the utilities, oil and gas, and basic resources
sectors." In fact, as Trucost found in its analysis of S&P 500 companies,
"Utilities companies emit 59% of greenhouse gases released from operations owned
or controlled by companies in the S&P 500." As a result, according to
Trucost, "Utilities could face the greatest exposure to carbon costs incurred
under proposed climate change regulations in the US."
building around this issue," said Gray. "Mandatory carbon reduction is becoming
a reality for companies." The American Clean Energy and Security Act, commonly
referred to as the Waxman-Markey Clean Energy Bill, was passed by the US House
of Representatives on June 26, and includes provisions for a federal
cap-and-trade program intended to reduce carbon emissions by 17% by 2020 and
over 80% by 2050 compared to 2005 levels.
"By disclosing the carbon
footprint of our Balanced Fund, we're hoping to set the bar high, and to have
others follow in our footsteps," Gray said. "It is important for all of us as
investors to say, this is important information that we need to have to make
Lisa Woll, who is Chief Executive Officer of the
Social Investment Forum
(SIF), a membership association dedicated to the practice and growth of SRI,
told SocialFunds.com, "Whenever a financial services company, or any company for
that matter, pays attention to its carbon footprint and makes it an important
priority, it is a positive step."