Companies active in sectors with the most environmental challenges will inevitably have a higher carbon footprint than companies active in other sectors. For instance, a utility company will obviously have a larger carbon footprint than a pharmaceuticals company.
Looking only at the carbon footprint when investing, may therefore penalise companies who, in a challenging sector, show the way in best practices and develop solutions to reduce the emissions-impact of their sector.
Furthermore, with only the carbon footprint as an indicator, some activities (such as nuclear) would seem attractive although they carry other risks which responsible investors prefer to avoid.
That is why investors need an approach that combines existing methods of carbon footprint monitoring with a truly in depth sustainability analysis of business models and company practices.
Our in-depth sustainability analysis covers both the carbon intensity of the business model of companies (our macro view), and the environmental practices of the company across all its operations (our micro view).
We look at how a company’s goods and services, during their life cycle, i.e., from production to end-use, may deplete resources and be a source of C02 emissions. Furthermore, we assess the C02 emissions across a company’s entire supply chain, evaluating its level of best practice at each step. As a consequence, in this company’s assessment, scope 1,2,3 emissions are taken into account.
We select companies actively working for a low-polluting energy mix, and we ignore those that do not, all the while avoiding the trap of investing in sectors that present risks of their own (such as nuclear power).
Using such comprehensive analysis for a best-in-class selection allows investors to limit investment exposure to the most polluting activities (eg coal in the energy sector) in a sector and to go instead for true sector leaders driving energy transition and eco-efficiency.