Twelve Dutch financial institutions – including the large asset managers APG, PGGM and MN – have developed a method for measuring carbon emissions from equities, government bonds and other asset classes.
The players – members of the Platform Carbon Accounting Financials (PCAF) – have targeted a uniform approach for setting and measuring carbon reduction goals. PCAF was set up two years ago, in the wake of the Paris Climate Agreement.
The PCAF’s main aim was to establish the CO2 impact from emissions of companies, suppliers and products. It said a worldwide standard for measuring the carbon footprint for several asset classes did not exist yet.
In PCAF’s report – presented last week to coincide with the two-year anniversary of the Paris deal – the measuring model has been expanded to cover government bonds, listed equity, project financing, mortgages, real estate and corporate financing.
The method involves proportionally assigning a company’s carbon emissions to investors, for example, making a 1% stakeholder responsible for 1% of a company’s carbon footprint.
Carbon data are usually supplied by the companies themselves or by specialised firms such as Sustainalytics or Trucost, according to PCAF.
It said members would continue their co-operation through sharing their experiences, discussing dilemmas and improving the measuring instruments.
The organisation is affiliated with the Platform for Sustainable Financing, established in 2016 and chaired by supervisor De Nederlandsche Bank (DNB).
Most schemes still to develop climate change policies, survey finds
Despite this progress, many Dutch pension funds still haven’t developed a formal policy on climate change, according to a survey by the Association of Investors for Sustainable Development (VBDO) and AXA Investment Managers.
VBDO and AXA examined 38 large pension funds and found that 58% of the schemes lacked a policy aimed at mitigating climate change, or aligning their investment portfolio with the goal of limiting global warming to 2ºC above pre-industrial levels.
No more than 16% of the schemes had set a quantitative goal for the reduction of carbon emissions, which was usually limited to listed equity, it said.
Several surveyed pension funds indicated that they wanted to gather more data first.
The report concluded that pension funds have not yet found a way to fundamentally address climate change through investment policy.
However, it said that 61% applied the trial-and-error approach through engagement, while one-third of the surveyed schemes were discussing the subject with their asset managers.
One-quarter of the schemes said they excluded companies from their portfolio because of links to climate change causes. Another quarter said they had earmarked investments, such as solar and wind power, to counter climate change.
In an interview in the report, the €19bn SPF Beheer – the asset manager for the railways scheme SPF and the public transport scheme SPOV – emphasised the importance of transparency and quality data for formulating a sound policy.
“Many things aren’t measurable, and many small companies are doing the right things, but we are unable to see it,” the asset manager said.
SPF Beheer indicated that, on one hand, it couldn’t keep on waiting for perfect data, but on the other hand its clients wanted to wait for a carbon analysis for their entire investment portfolio before developing a climate policy.
SPF Beheer’s experience fitted with a trend observed by the report, as a majority of the schemes questioned had usually analysed the carbon footprint for no more than half of their investment portfolio, focusing on equity and real estate.
In three-quarters of cases, the outcome of the analysis had not been made public, according to the report. VBDO and AXA said such transparency was crucial for gathering data.