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Carbon footprints of top US mutual funds revealed in Trucost report

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Trucost, an environmental data and research firm, has published a report which enables investors and fund managers to compare the carbon footprints of leading US mutual funds.

Trucost, an environmental data and research firm, has published a report which enables investors and fund managers to compare the carbon footprints of leading US mutual funds.

The report shows that the carbon intensity of mutual funds varies widely, with the highest-carbon fund found to be 38 times more carbon intensive than the fund with the smallest carbon footprint.

The Carbon Counts USA report examines the carbon performance of major US mutual funds with a combined value of USD1.55trn. The research covers 75 of the largest US equity funds and 16 major sustainability/socially responsible investment funds, using fund holdings and style analysis data provided by Lipper.

Analysis of the greenhouse gas emissions associated with eight investment styles shows that overall, sustainability/SRI funds have a smaller carbon footprint than core, growth, value, index, country/regional, equity income and sector funds. However, some of the largest SRI funds are among the most carbon-intensive analyzed, reflecting the diverse environmental, social and governance criteria used by managers.

Simon Thomas, Trucost chief executive, says: "The research findings provide valuable information to fund managers and institutional investors looking to identify exposure to future liabilities from carbon emitted by companies in their funds. Using Trucost data, asset managers can reduce the carbon footprints of funds that employ any investment style to control carbon risks, without sacrificing financial returns."

Dr. James Salo, report author and vice president, strategy and research, Trucost, says: "Carbon emissions are a financial issue that will soon have a real price in the U.S., and companies and shareholders will likely bear a percentage of this cost in the future. Fund managers and asset owners can use carbon analysis to protect their assets from these costs."

Funds with large carbon footprints have holdings which could face greater financial risk from carbon being priced under cap-and-trade schemes. Companies with heavy carbon footprints for their sectors could be hardest hit by carbon costs under carbon trading, promised in the latest US federal budget. The carbon intensity of companies will influence which are most exposed, with knock-on effects on investment returns. Carbon-efficient investment funds are set to be well positioned under carbon constraints.

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