Investors with Net Zero ambitions will not be able to rely on stock selection alone to achieve their goals, and must start to look at carbon offsetting techniques like short selling, according to one asset manager in the US.
Boston-based alternatives specialist AQR Capital Management released a paper last week titled (Car)Bon Voyage: The road to Low Carbon Investment Portfolios, whose “central message” is that while inclusion and exclusion of securities “can lead to a substantial carbon reduction”, the approach “will not be enough for investors with the most ambitious reduction targets”.
To realise these goals, investors will need to employ other strategies, such as shorting and offsetting through carbon credits, it claimed.
Of the two approaches, the paper argued short selling is “more efficient” because it is financially motivated and therefore “likely aligned with an investment view”. “An allocator would short a high emitter when it …