Mistra’s carbon footprint

Through its activities, Mistra aims to contribute to society's sustainable development. Working, as an institutional asset owner and investor, for a sustainable financial market is a key aspect of this endeavour. 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. Assessment should cover emissions relating to production, the supply chain, use and waste management. The estimate should, in other words, be based on a lifecycle approach. For this to be feasible, data must be available and relevant boundaries set.

    For Mistra, estimating the carbon footprint of our investments and equity portfolio is worthwhile because the results can serve as a basis for dialogue with asset managers and companies. We also perceive worth in supporting development of methodology and a process whereby climate and other sustainability aspects come to be included in the financial sector’s discussions and decision-making. Moreover, asking for emissions data can promote greater data access. Mistra has therefore signed the international Montréal Pledge (www.montrealpledge.org) 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 the notion of a ‘carbon footprint’. As it is often estimated today, a carbon footprint of an investment or portfolio is not sufficiently informative about 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

    Assisted by the analyst company MSCI, Mistra has measured the carbon footprint both of its entire equity portfolio and of the individual equity funds it contains. 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 greenhouse-gas (GHG) emissions and indirect emissions from use of electricity. 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), but 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 carbon dioxide equivalents (tCO2e). In terms of the proportions of the companies’ turnover to which Mistra’s ownership shares 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 tCO2e per SEK million invested. By comparison, it may be mentioned that the carbon intensity of the Fourth Swedish National Pension Fund (AP Fund), in the sense of its carbon footprint 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.

    Mistra’s carbon footprint, 2017 and 2018

    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 5,100 23,000 25,000 8,400 24,000 27,000  
    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[1] index (Index MSCI ACWI ESG Universal[2]).

    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).

    [1] Environment, Social and Governance.

    [2] https://www.msci.com/documents/10199/0ca6fd46-3b5e-410e-bbde-e3bdbea88ef3.