In May 2015, BNP Paribas Asset Management became one of the first international asset managers to sign the Montreal Pledge. This UN-supported initiative aims to help investors better take carbon risk on board. Since then, BNP Paribas Asset Management has been working at measuring and publicising its portfolio’s carbon footprint. In addition to financial reporting, the carbon footprint provides insight into the carbon impact of investment funds. A fund’s carbon footprint expresses the quantity of greenhouse gases (GHGs) connected to the investments chosen. It is measured in terms of CO2 equivalent.
The GHG Protocol 1 has set standards for reporting companies’ greenhouse gas emissions, which are divided into three categories, the proportion of which varies as a function of the company’s business profile.
- SCOPE 1: direct emissions from company facilities.
- SCOPE 2: indirect emissions from the company’s energy consumption.
- SCOPE 3: Other indirect emissions, including those produced from the use of the company’s products.
To calculate its portfolios’ carbon footprint, BNP Paribas AM is currently focusing on companies’ scope 1 and 2 emissions.
The carbon footprint of BNP Paribas AM’s portfolios is calculated on the basis of a method developed in-house. Each company’s scope 1 & 2 emissions are weighted with two factors:
- The company’s enterprise value (i.e., the sum of its debt and market cap)
- The companies’ weighting in the portfolio or the index, whether the carbon footprint is being calculated or its benchmark index.
Each company’s carbon intensities are then added up to produce the portfolio’s carbon footprint and its benchmark index, in order to better compare them. To understand all this better, the sum of the calculation is expressed in kg of CO2-equivalent (CO2e) emitted per €100 invested in the portfolio or benchmark index. Our approach allows us to measure the carbon footprint of equity funds, as well as that of funds invested in corporate bonds.
This year, BNP Paribas Asset Management also calculated the carbon footprint of its bond portfolios.
As of the end of December 2018, this amounted to €50 billion.
1 GHG Protocol: an international standard measuring greenhouse gases. Source: Copyright © 2019 S&P Trucost Limited (“Trucost”), an affiliate of S&P Global. All rights in the Trucost data and reports vest in Trucost and/or its licensors. Neither Trucost, nor its affiliates, nor its licensors accept any liability for any errors, omissions or interruptions in the Trucost data and/or reports. No further distribution of the Data and/or Reports is permitted without Trucost’s express written consent. Investments in the funds are subject to market fluctuations and the risks that are inherent to investing in financial securities. The value of investments and the revenues they generate are subject to both highs and lows and it is possible that investors may not recover their entire investment. The funds described pose a risk of loss of capital. For a definition and fuller description of the risks, please refer to the fund prospectus and KIID.