Responsible Investor

Trucost expands its carbon count

UK research house to measure footprint of US equity funds

The carbon pollution levels of US equity mutual funds will come under scrutiny next year when Trucost, the London-based environmental research company, launches a US version of its Carbon Counts ranking of the CO2 emissions of UK retail equity funds.
Simon Thomas, chief executive and co-founder of Trucost, said there had been significant interest from large US institutional investors, particularly pension funds, to measure the carbon footprint of equity funds: “The report will use the Russell 1000 index as its benchmark and will measure the whole US mutual fund industry. There are hundreds of mutual funds, of course, so we will have to buy a certain amount of fund data. It’s a massive exercise, but one of the things we are good at is handling large amounts of data.”
Trucost’s UK study, published in July, calculated the weightings of 185 UK retail funds in companies according to the levels of carbon dioxide and then measured them against the companies in the FTSE 350 index. It revealed that socially responsible funds managed by Standard Life, the Co-operative Insurance Society and Jupiter Asset Management invested in

companies with a larger collective carbon footprint than those in the FTSE 350 index. The report said a quarter of funds marketed as socially responsible invested in portfolios of stocks that were bigger polluters than the index.
Three quarters of socially responsible funds did, however, emit less carbon across their investments than the FTSE 350 market portfolio (ex investment trusts). Funds managed by Prudential, Axa and Sovereign Ethical were shown to be the most environmentally friendly. Interestingly, the report found that more than half of the 20 most carbon-efficient funds were run on a growth investment strategy, which typically includes pharmaceutical and recovery stocks and smaller companies. Trucost said the report was significant because figures from the UK Investment Management Association (IMA) showed the sale of ethical retail funds was growing rapidly. IMA investment fund statistics for the first quarter of 2007 showed that assets in UK ethical funds had surpassed £5bn for the first time. Net retail sales reached £400m over the first three months of the year, three times the sales level in the first quarter of

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