Your mutual funds may have a dirty little secret, but someone has just published an exposé.
In fact, according to the first carbon-footprint analysis of over $11 trillion in global funds and ETFs, all 10 of the world’s top asset managers have fund lineups with a higher average carbon footprint than an S&P 500 benchmark.
Oakland, Calif.-based non-profit investor advocacy center As You Sow and Zurich-based sustainability analyst South Pole Group released the data on Thursday showing that the biggest fossil fuel heavyweight among major asset managers is Dimensional Fund Advisors, whose funds have an average carbon footprint that is 161 percent higher than that of the S&P 500.
“Carbon footprint analysis follows the ownership logic,” said Stephen Scofield, director of financial industry solutions, North America, for South Pole Group, in a conference call. “If you as an investor own these companies through a fund, then you also own a percentage of what that company produces in terms of pollution through its operations. … You’re financing the emissions of portfiolio companies in which you may be invested.”
The data was made public Thursday via Fossil Free Funds, a website and digital tool that allows users to search through the data. For the analysis, the firms used data provided by a climate carbon footprint that was measured as approximate tons of carbon dioxide released per each $1 million of investment.
Dimensional’s Social Core Equity fund, DSCLX, which attempts to screen portfolios based on certain social issues, happens to allow a lot of carbon dioxide into its holdings, the analysis said. The portfolio has a carbon footprint 85 percent greater than that of the MSCI All World Index, according to the analysis, with 13 percent of the portfolio made up of companies like Royal Dutch Shell, BP and Suncor.
After Dimensional, SPDR State Street Global Advisors placed second with a carbon footprint 141 percent higher than the S&P 500, BlackRock’s iShares placed third with a carbon footprint 123 percent higher, and Franklin Templeton Investments ranked fourth with a carbon footprint 99 percent higher.
In comments via e-mail, a Dimensional spokesperson noted that DSCLX does not aim to reduce carbon exposure, but instead uses social screens based on investment guidelines by the U.S. Conference of Catholic Bishops.
Dimensional does offer two sustainability equity strategies, according to the spokesperson. The first, the U.S. Sustainability Core 1 Portfolio, has just over three percent of its portfolio exposed to fossil fuel companies, and is recognized by As You Sow for being free of coal-firing utilities and miners. The second, the International Sustainability Core 1 Portfolio, has a little over 4 percent of its portfolio exposed to fossil fuel companies, and is recognized for being free from the 15 largest coal polluters.
The massive data set includes funds in the U.S., U.K., Germany, France, Denmark and Hong Kong.
Andrew Behar, CEO of As You Sow, said on the conference call that the data reveals that some companies that acknowledge sustainability or climate risk fail to invest accordingly.
For example, BlackRock, despite a recent report on portfolio climate risk, still offers funds that have outsized carbon footprints. The BlackRock Emerging Europe Fund, or BEEP, has a carbon footprint 1,695 percent higher than that of the MSCI All World Index and 1,045 percent higher than the iShares MSCI Emerging Markets ETF.