The Carbon Footprint of Capital Investments - adelphi

014 adelphi • The Carbon Footprint of Capital Investments adelphi • The Carbon Footprint of Capital Investments
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The comparison of the two savings products
demonstrates how much integrating renewable
energy into loan allocations can reduce the
greenhouse gas emissions financed by the savings
products concerned. Compared to the conventional
savings product, the renewable energy savings
product offers the potential to reduce financed
greenhouse gas emissions by as much as 67 %.
5.2
Company shareholdings
Greenhouse gas emissions are financed differently
in the case of financial investments
through investment products such as stocks,
stock certificates or stock funds than in the
Figure 5: Greenhouse gas intensity in companies
Least greenhouse gas-intensive companies
Sector Company gGHG
per Euro
1 Personnel
service providers
2 Software/
IT service
providers
3 Telecommunications
4 Pharmaceuticals
Adecco Group/
Randstad Holding/
Hays PLC
Adobe, Oracle
Dassault Systemes
S. A., SAP, Symantec
TF1, British
Sky, Telefonica,
Vodafone, British
Telecom, Nokia,
Arcor
Sanofi-Aventis,
Novartis, Pfizer,
Roche, Fresenius
5 Renewables Solarworld,
Q-Sells, Renewable
Energy Corp., First
Solar, Gamesa,
Vestas
6 Financial service
providers
Source: envIMPACT ® , INrate
Aviva, UBS, Swiss
Life, Allianz, ANZ
Banking Group
case of savings products. By their investment in
stocks, investors make equity capital available to
companies who are looking for funding on the stock
market. They thereby finance business activities
and contribute indirectly to the greenhouse gas
emissions those activities generate.
The starting point for calculating the emissions
financed by an investment product is the method
applied in the GHG Protocol (WRI/WBCSD 2004).
The so-called equity share method additionally
takes into account the greenhouse gas emissions
of the company's subsidiaries. Thus, if a parent
holds 30 % of the shares in a company, that
proportionate amount is offset against the parent's
own emissions figure.
Most greenhouse gas-intensive companies
The viewed renewable energy index tracks 30
of the world's leading stock market quoted
companies operating in the field. Those sectors
are not the lowest-emission ones in terms of their
greenhouse gas balance, but by concentrating on
this sector the index does remain well below the
emissions figures of the comparative indices. The
greenhouse gas intensity in this case is 165 gGHG
per euro. The comparison of stock indices shows
a clear correlation between the greenhouse gas
intensity of the products and the incorporation of
climate protection aspects in their composition.
While the greenhouse gas intensity of sustainabi-
Ranking
Ranking
Sector Company gGHG
per Euro
60 1 Mining El Paso, Snam
Rete Gas, Encana,
BHP Billiton
Limited, Gas
Natural SDG,
Royal Total SA
90–100 2 Aircraft
and defence
industries
120–390 3 Building
materials
210–220 4 Energy
supply
230–440 5 Technological
and industrial
products
300–800 6 Automotive
industry
Rolls Royce,
EADS, Bombardier
10,500–3,000
9,000–6,000
Holcim, Lafarge 5,000– 4,700
RWE, EON,
Enel, Energias
de Portugal
Komatsu, ABB,
Lockheed, PCS
(Fertiliser)
Porsche, Daimler
(armament
manufacturing),
Volkswagen, BMW,
Renault
4,700–3,500
4,000–3,500
3,500–2,000
INrate expanded this method to incorporate a
financing component. Accordingly, the greenhouse
gases financed by capital investments are not
calculated proportionately to their percentage of
the total shares held in a company, but only to the
extent to which shares contribute to the financing
of the company by way of equity capital. This takes
account of the fact that, by purchasing shares,
investors increase the equity of the company
the first time a dividend is paid on them. The
commercial activity of the company may, however,
also be financed by borrowings. Based on this
approach, therefore, only the proportion of the
emissions of a company corresponding to the
respective equity share is included in calculating
the emissions financed by investors.
The decisive factor in determining the greenhouse
gas intensity of capital investment products, apart
from the equity share, is the greenhouse gas
intensity of the enterprises concerned. This varies
very widely between different sectors (figure 5).
Greenhouse gas-intensive companies emit up to
175 times more greenhouse gases per euro earned
than low-emission companies. Low greenhouse
gas emission companies are mainly in the service
sector. Renewable energy companies are "only" in
fifth place, as no negative Scope 3 emissions are
taken into account.
5.2.1
Stocks and stock certificates
As there is no data relating to the overall portfolio
composition of stock investments held by German
private investors, the study instead utilised the
composition of stock indices to calculate the
emissions financed by capital investments in
stocks and stock certificates. The indices mostly
weight the companies according to the value of
their stock in circulation and their performance. 15
They thus provide a guide value – if a rough
one – for the average investment behaviour on
the stock market. The emissions financed by a
capital investment in stocks or stock certificates
are produced from the different weighting of
the companies in the respective index and their
equity-financed greenhouse gas intensity. In this,
a standard index is compared against a renewable
energy index and two sustainability indices.
The emissions financed by conventional investors
are calculated by way of example based on a
European standard index 16 . It maps the performance
of the largest European blue-chips,
representing a major portion of the total market
capitalisation of all stock market quoted European
companies. The calculations produce an emissions
intensity for the index overall of 1,243 gGHG per
euro.
With regard to sustainability indices, two particularly
market-relevant indices were applied
as the calculation base. Both indices select only
companies which have attained a certain minimum
score in the underlying non-financial ratings. 17
Climate aspects are covered by both ratings
systems, but are weighted very differently. That is
also reflected in the greenhouse gas intensities.
The much less greenhouse gas-intensive index, at
464 gGHG per euro, also imposes more stringent
climate criteria than the much poorer-performing
index, with emissions of 976 gGHG per euro. In
this case, stricter criteria for non-financial ratings
result in a lower greenhouse gas intensity of the
indices. Both indices are, however, well below the
greenhouse gas intensity of the standard index by
comparison. Their average weighted by investment
volume is 632 gGHG per euro.
15 The
composition of the individual indices is mostly based on different criteria. The two criteria cited are the ones most frequently used
however.
16 This index represents around 50 % of the free-float shares of European stock market listed companies.
17 Sustainability
indices in some cases pursue very different approaches with regard to the composition of their funds (see also Fowler,
Stephen J. and Chris Hope 2007).