A recent Funds Europe report on European asset management firms has revealed key data on carbon emissions, showing that the average Weighted Average Carbon Intensity (Waci) for the firms analysed is 220.02 tCO₂/€mn. This provides a crucial benchmark for evaluating the carbon intensity of investment portfolios and the transition risks carbon-heavy sectors pose. However, concerns over sustainability reporting transparency persist, with 26% of European asset management firms opting not to disclose their Waci figures.
One of the metrics for measuring carbon intensity is Waci, which shows the carbon intensity of the underlying investments, based on portfolio weights. It is calculated about the revenue generated by these entities, rather than the investment value of the company itself. It is an effective way of comparing companies within sectors. Waci provides a broad reflection of the intensity of carbon emissions about a company’s revenue, not a market cap, weighted to the portfolio holding.
The Funds Europe Carbon Impact Research Report for 2024, produced in collaboration with Corporate Adviser Intelligence, highlights the wide variations in the carbon footprints of Europe’s largest asset managers. The report explains how these firms address decarbonisation and their standing on the net-zero roadmap.
While many firms are leading the charge in sustainability reporting, the 26% non-participation rate underlines the need for more standardisation and transparency across the sector. Firms such as UBS Asset Management and Eurizon have embraced comprehensive carbon reporting frameworks, yet the reluctance of a significant number of firms to share their carbon data signals that more needs to be done to ensure the financial sector aligns with global sustainability objectives. The average Waci of 220.02 tCO₂/€mn suggests that European portfolios are spread across both high- and low-carbon sectors, presenting a moderate carbon intensity for the industry overall. Firms with higher carbon intensity are more exposed to transition risks as governments introduce tougher climate policies and carbon pricing mechanisms.
The report has also shown that many funds have been classified under Article 8 of the EU’s Sustainable Finance Disclosure Regulation, signalling that asset managers are increasingly factoring in environmental and social considerations. However, fewer firms have committed to Article 9 funds, which focus explicitly on achieving sustainability goals. Impax and Thematics Asset Management, however, stand out as leaders in the Article 9 space, showing a clear commitment to integrating sustainability into their portfolios.
A key takeaway from the report is the growing influence of the Science-Based Targets Initiative (SBTi) on European asset managers’ strategies. Companies aligned with the SBTi framework are committed to reducing emissions in line with Paris Agreement goals, providing a proactive approach to managing transition risks. Firms like Fundsmith and Seb Asset Management lead in this area, with 86% and 58% of their assets under management invested in companies committed to SBTi targets.
Read the full report here: https://funds-europe.com/carbon-impact-research-report/
