If there’s anything in the notion that millennials prefer to invest socially responsibly and that they would affect this through cheap, passive vehicles, then the under-35s will not be happy with some of the largest exchange-traded funds (ETFs).
As You Sow, an advocate of climate finance, says many major fund families are “carbon hyprocrites” after researching the carbon footprints of $11 trillion (€9.97 trillion) worth of global mutual funds, including ETFs.
The group found “unexpectedly” high carbon exposure in funds that are managed by firms that “preach the merits of low-carbon investing”. All the top ten asset managers, accounting for 60% of the analysed assets, have an average carbon footprint higher than the S&P 500 benchmark, the group said.
As You Sow is a US-based not-for-profit group and based its analysis on data from South Pole Group, a firm that specialises in greenhouse gas reduction, and yourSRI.com, which screens funds on environmental, social and governance criteria.
“If it is true that sunshine is the best disinfectant, then this long-overdue transparency breakthrough can clean up the practices of fund managers and give investors real reason to think about what they are part of,” said Andrew Behar, chief executive of As You Sow.
The research aggregated carbon footprint data for all of the companies embedded in each of the 6,500 most-held global mutual funds and ETFs. Each company’s carbon footprint was added together and then divided by the fund’s dollar value to display carbon per dollar.
As You Sow is using the data to launch a carbon screening platform in covering funds initially in the US, UK Germany, France, Denmark, and Hong Kong. The developers plan to expand to cover every fund in every exchange across the globe soon.
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