When climate-aware investors set environmental objectives for their portfolios, they usually choose reducing overall portfolio emissions as their main, and often, sole, target (often taking umbrage at regulatory developments relating to climate benchmarks).
While it is understandable that climate-aware investors would seek to measure - and, ideally, work to minimise - the contribution of their investments to climate change, we argue that this approach runs the risk of disguising marginal changes to portfolio allocation as significant environmental improvements, and propose the use of broader set of forward-looking metrics. We illustrate the reductions in aggregate carbon metrics resulting from excluding a very limited number of high-emitting companies from a global equity index. Avoiding just 50-100 stocks, while leaving the remaining 2,000...
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