A new report by a leading environmental data company looks at which U.S. mutual funds hold companies with the lowest and highest greenhouse gas emissions.

Trucost, based in Boston and London, looked at 75 of the largest U.S. equity funds and 16 sustainability/SRI funds. The five funds with the lowest carbon footprint were Financial Select Sector SPDR Fund, Vanguard Health Care Fund, Power Shares QQQ Trust, Ariel Appreciation Fund and Oppenheimer Global Fund. The five funds with the highest carbon footprint were Energy Select Sector SPDR Fund, Sentinel Sustainable Core Opportunities Fund, Janus Fund, Fidelity Capital Appreciation Fund and iShares FTSE/Xinhua China 25 Index Fund.

Simon Thomas, Trucost's chief executive, emphasized the report was the first ever to evaluate the carbon footprint of U.S. mutual funds. To be fair, he says, fund managers previously had no idea that their fund's carbon footprint-the greenhouse gas emissions of their underlying holdings-could be measured. Trucost's object with this first report was not to criticize those who ranked the lowest, he says.

The purpose of the report, Carbon Counts USA, is to highlight the costs of carbon risks embedded in U.S. mutual funds. President Obama has outlined plans to reduce greenhouse gases, which are causing global warming. To achieve its targeted reductions, the federal government plans to consider a "cap-and-trade" program that would aim to cut emissions beginning in 2012. If such a program is enacted, electric utilities, cement producers and other companies would need to get permits to emit CO2 and other greenhouse gases. Companies that didn't have enough permits for their emissions would have to buy permits from other firms.

Thomas notes Trucost's research found no correlation between a mutual fund's returns and its carbon footprint. However, that could change if a cap-and-trade program is implemented, he says.

"Carbon emissions are a financial issue that will soon have a real price in the U.S., and companies and shareholders will likely bear a percentage of this cost in the future. Fund managers and asset owners can use carbon analysis to protect their assets from these costs," says James Salo, the report's author and Trucost's vice president of strategy and research.

Fund managers can reduce fund exposure to carbon liabilities while maintaining financial returns, the report says. Standard & Poor's, NYSE Euronext and UBS are among financial institutions that are using carbon footprint data to manage carbon risks in indices and funds.

Trucost partnered with Lipper, who supplied the fund data, to conduct the analysis. The data was from 2007, Thomas says.