A Framework for Attributing Changes in Portfolio Carbon Footprint

Zoltán Nagy, Guido Giese, Xinxin Wang

2023 | Practitioner | Carbon, Climate, Portfolio Construction, Portfolio Reporting

A framework is proposed that attributes changes in portfolio-level emissions to their primary drivers, including changes in the portfolio composition, changes in issuers’ emissions, as well as changes in ownership and financing structure. The framework proposed allows investors to understand to what extent changes in a portfolio’s carbon footprint are due to companies’ real-world decarbonization efforts, a portfolio manager’s investment decisions, or changes in companies’ financing.