Grünfin Blog

Your Climate Portfolio Impact explained.

We know figuring out the impact of your investments is a difficult exercise with often vague and subjective conclusions. Therefore, we aim to describe it for you as concretely as possible across our three portfolio themes of climate, gender equality and health.

Impact of your Climate portfolio investments - help control global warming

We track the greenhouse gas (GHG) emissions in your portfolio as they’re the main cause of global warming.

We humans create GHG through the burning of fossil fuels - coal, oil and gas. When released, GHG emissions trap heat in the atmosphere which leads to global warming.

Excessive global warming causes fires, floods, droughts and marine life destruction, in turn making parts of Earth inhabitable and some land inarable, increasing malnutrition and disrupting water sources.

Governments across the world agree global warming must be controlled. Nearly 200 countries ratified the Paris Climate Agreement. This accord’s main goal is to lower emissions to net zero by 2050 to limit global warming. This saves the planet.

ETFs aligned to Paris Agreement

Therefore, we look for exchange-traded funds (ETFs) that, through their investments in underlying companies, are aligned with the goal of the Paris Agreement. This may include companies:

  • operating factories fully with renewable electricity,
  • setting net zero emissions targets across their supply chain,
  • developing key green technologies, among many examples.

We aim to show your portfolio’s emissions compared to the general stock market, for which we use the S&P 500 stock index. We then aim to bring this difference to real world terms by comparing it to daily activities.

For example, your climate portfolio may have 66% lower emissions than the broad stock market. This is similar to choosing an electric vehicle over a diesel car for the same distance.

For these calculations we used a comparative tool created by the UK government.

Note that we show greenhouse gas emissions as “CO2” (carbon dioxide) for the sake of simplicity as the standard metric used to quantify GHG emissions is ‘carbon dioxide-equivalents’.

The amount of CO2 in your portfolio companies is adjusted to the level of sales of those enterprises to fairly compare them across different sizes. Why? Think of a gigantic factory that mainly uses solar panels for its electricity. Now think of a tiny factory that uses oil for its electricity. The gigantic one will likely emit more CO2 in absolute terms because of its sheer size, but on a relative basis, it’s greener than the tiny oil-based factory. Adjusting for sales, we avoid penalizing big companies who do good in the world.

Examples of companies in your climate portfolio

Your climate portfolio holds companies in sectors that are quite obvious such as renewable energy or green tech. Example of companies are:

Your portfolio also includes less obvious sectors like technology, consumer goods and pharmaceuticals where some big companies are doing good things in alignment with the Paris Agreement.

Let’s face it, we need action from large corporations too as their impact can seriously move the planet in the right direction and influence the behavior of smaller players. Examples include:

  • SAP (tech): runs all data centers and offices on 100% renewable electricity;
  • Unilever (consumer goods): runs own operations on 100% renewable electricity, created €1bn Climate Fund for forest and ocean protection;
  • Sanofi (pharma): helping its supply chain companies adopt 100% renewable electricity.

See the impact of your Gender Equality portfolio and Health portfolios. You really are a changemaker!

It’s worth clarifying that these three impact areas apply to your stock investments. Bond investing is a bit more challenging as the availability is less, but your climate bonds are still funding projects with direct environmental benefits (green bonds).

Your gender equality and health bonds are invested in ETFs promoting sustainability characteristics, albeit, more general and less specific to the theme.

Your holdings may change over time, but we hope this gives you a good idea of what’s inside your portfolio.

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