Through its activities, Mistra aims to contribute to society’s sustainable development. A key part of this endeavour is to work proactively, as an institutional asset owner and investor, for a sustainable financial market. Sustainability analysis of our investments is based largely on dialogue with our asset managers. To compile documentation for this dialogue we use various tools, including the carbon footprint presented here.
A carbon footprint can be estimated for a company, product or investment, for example. It is a way of presenting total greenhouse-gas (GHG) emissions associated with the business, product or investment concerned. To describe this, assessment should include emissions related to production and the supply chain, use and waste management. The estimate should, in other words, be based on a life-cycle approach. For this to be feasible, data must be available and relevant limits set.
For Mistra, getting an estimate of the carbon footprint of our investments and equity portfolio is worthwhile because the results can underpin dialogue with asset managers and companies. We also perceive value in supporting development of methodology and a process whereby the financial sector includes climate and other sustainability aspects in its discussions and decision-making. Asking for emission data can also promote greater data availability. Mistra has therefore signed the Montréal Pledge (www.montrealpledge.org), an international initiative to support development and implementation of efforts to monitor GHG emissions associated with capital investments.
Nonetheless, Mistra is well aware of the limitations of a carbon footprint. As it is often estimated today, a carbon footprint of an investment or portfolio is not sufficiently informative about its climate impact. Some reasons for this are as follows:
- Rather than being forward-looking, the method focuses on historical emissions.
- It normally includes neither emissions in companies’ supply chains nor emissions from products and services.
- The impact of sector selection, rather than companies’ actual climate performance, can dominate an analysis of a portfolio’s carbon footprint.
- Biogenic emissions are equated with those from fossil fuels.
- Data reporting is incomplete.
Mistra’s carbon footprint in 2018
For 2018, assisted by the analyst company MSCI, Mistra had the carbon footprint measured both for its entire equity portfolio and for individual equity funds. The figures are estimated on the basis of Mistra’s ownership interest in each company through investment in the equity fund concerned. This analysis includes data on direct GHG emissions and indirect emissions from electricity use. Emissions from the rest of the value chain, use of manufactured products and their disposal as waste are not included. The GHG emissions are presented as ‘carbon dioxide equivalents’ (tCO2e). Biogenic CO2 emissions (those produced by living organisms) are not included in the estimates.
The carbon footprint of Mistra’s equity portfolio at 30 September 2018 was 5,100 tonnes of tCO2e. In terms of the proportions of the companies’ turnover to which Mistra’s ownership interests correspond, the portfolio’s carbon footprint represents a carbon intensity of 5.2 tCO2e per SEK million of turnover, while in relation to investment value the figure is 3.0 tCO2e per SEK million invested. By comparison, it may be mentioned that the carbon footprint of the Fourth Swedish National Pension Fund (AP Fund) in relation to turnover for 2017 was 13.5 tCO2e per SEK million of turnover.
In dialogue with fund managers, information from the analysis will serve as a basis for discussing, mainly, how companies that do not report GHG emissions can be induced to do so. Discussions will also focus on companies defined in MSCI’s analysis as ‘laggards’ when it comes to risk management associated with GHG emissions.
|Carbon footprint||30 September 2018||30 September 2017|
|Mistra/ MSCI||Index||Index MSCI ACWI ESG Universal||Mistra/ MSCI||Index||Index MSCI ACWI ESG Universal|
|tCO2e/SEK m of turnover||5.2||20||22||8.0||20||23|
|tCO2e/SEK m of investment||3.0||13||15||5.4||15||17|
The carbon footprint of the equity portfolio was compared with the weighted benchmark index used for the financial trend of the portfolio (SIXPRX/MSCI ACWI), and with an ESG index (Index MSCI ACWI ESG Universal).
The equity portfolio analysed had a market value of SEK 1,700 million, excluding liquid assets in the funds, corresponding to 52 per cent of Mistra’s aggregate investments (2017: SEK 1,447 million and 46 per cent).
 Environment, Social and Governance.