ABP affiliate Innovest unveils “carbon beta”

UK – We may in future be talking of portfolios in terms of their “carbon beta” if a project in which Dutch pension fund ABP has a stake takes off.

Socially responsible investing consultancy Innovest Strategic Advisors – in which Stichting Pensioenfonds ABP has a 10%-15% stake – has launched a so-called Carbon Audit to provide fund managers “with information allowing them to compare the overall level of portfolio risk to their particular benchmark”.

The audit would measure a portfolio’s SRI liability, expressed in terms of “carbon beta”.

Innovest explained the concept. “For example, a portfolio with a capitalization-weighted carbon risk exposure three times greater than its benchmark would have a carbon beta of 3.0 and a portfolio only half as risky as its benchmark would carry a carbon beta of 0.5.”

The audit “investigates industry sector exposures, geographic risk exposures and company specific factors”, Innovest says.

Dr Martin Whittaker, head of Innovest’s Carbon Finance practice, said: “As the competitive and regulatory environment increases around the globe, fund managers will be exposed to increasing portfolio risk.” He said the risk would come from “carbon intensive” industries like transport, automobile makers, energy services and utilities.

Whittaker said there is “undeniable evidence” that environmental performance affects competitiveness, profitability and share price performance.

Civil service pension fund ABP bought its stake in Innovest in January for an undisclosed sum.

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