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Carbon Footprinting 2017

By Esmé Van Herwijnen, Responsible Investment Analyst
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For the second year, EdenTree has commissioned carbon footprints of its Equity Funds to understand better the environmental impact and climate risks within our portfolios.

Climate change as a topic is well integrated in EdenTree’s approach. It starts with the Amity screening process where through our positive pillar on Environmental Management we look for companies with strong management systems and good environmental performance. This takes into account issues like greenhouse gas emissions, pollution and climate change. It also stops mining and most oil from entering the Amity Funds. In addition we have been collaborating with industry organisations such as the PRI and IIGCC and have been a long standing signatory to the CDP. These different initiatives provide collaborative opportunities for responsible investors, and have allowed us to encourage companies to provide better disclosure on greenhouse gas emissions, and to support the commitment of countries to tackle climate change.

In 2016, we took our work on climate change a step further and commissioned a carbon footprint analysis of our funds. It confirmed our intuition that the Amity Funds provide a “carbon aware” solution for clients. It also presented a starting point for informed engagement with the highest emitters within the funds. Consequently we became a signatory to the Montréal Pledge and committed to measure annually and publicly disclose the emissions related to our investments.

This year’s results provide some encouraging highlights. All four Amity Funds are less carbon intensive than their relative benchmarks. In addition, the Amity UK Fund, The Amity International Fund and the Amity Global Equity Fund have seen a decrease in emissions financed (TCO2/£ financed). This is mainly due to stock selection by the fund managers and a testimony that our screening process only commends environmentally responsible companies into the funds. The largest progress was observed in the Amity International Fund, where various high carbon stocks were sold during the year.

footprint graph

One interesting development is to see the number of companies that report their emissions has increased. This is due to the companies improving their disclosure. In addition, the Amity International Fund increased exposure to companies with better reporting practices. Previous engagements with companies to improve disclosure are bearing fruit and this trend is likely to continue. There is still room for improvement, especially in Asia where reporting has been less transparent. However, with new reporting requirements set by the Hong Kong Stock Exchange as well as the recent recommendations from the Task Force on Climate-Related Financial Disclosures, investors should benefit from better quality disclosure. This in turn will allow investors to identify better the risks and opportunities related to climate change.

As the US has announced its withdrawal from the Paris Agreement, this provides an opportunity for businesses and investors to lead the climate change agenda. As long term investors, our timeframes surpass those of political mandates and we therefore take our stewardship responsibility very seriously. We will continue to engage with companies to encourage transparent disclosure, question emission trends and ask companies to implement long term strategies to manage their impacts, including setting ambitious emission reduction targets.

The full results of the carbon footprints as well as an explanation of the methodology are available here:

We have also conducted the analysis for our non-screened UK Equity Growth Fund

Further information on EdenTree’s approach to climate change can be found in our Amity Insight: The Energy Paradox in which we examine how to meet rising energy demands in a carbon constrained world and what this means for responsible investors.

The value of an investment can fall as well as rise as a result of market and currency fluctuations, you may not get back the amount originally invested. Past performance should not be seen as a guide to future performance. If you are unsure which investment is most suited to you, the advice of a qualified financial adviser should be sought. EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.