While the EU has a carbon market, the US is further behind in establishing a mechanism for setting a price on carbon. In light of that regulatory vacuum, the private sector has had to pick up the slack. And those that do, are way ahead of the game.
Raising the bar in terms of private carbon reporting, the Green Century Balanced Fund (GCBLX) recently announced the results of its carbon footprint analysis, performed by environmental data and analysis firm Trucost. In so doing, the Green Century Balanced Fund has become the first U.S.-based mutual fund to disclose its carbon footprint: a footprint which the fund managers will proudly tell you is 66% less than the carbon intensity of the S&P 500 Index.
The survey was compiled and based upon a methodology developed by the environmental research firm, Tru-Cost, which looked at the carbon performance of 90 mutual funds in April (pdf), concluding that sustainable/socially responsible investing (SRI) mutual funds have the lowest carbon footprint overall.
Based on measuring the tons of carbon emissions per million dollars of revenue of the companies held by the Balanced Fund and those of the companies included in the S&P 500 Index, the carbon intensity of the Balanced Fund is two-thirds less than that of the S&P 500.
But the key difference between the April report and the one commissioned by Green Century for Tru-Cost is that the latter focuses on a single fund and provides a level of detailed disclosure and transparency not presented in the April report.
“The debate over climate change is over. With emissions restrictions pending in the U.S. and internationally, we believe it is in the best interest of our shareholders to recognize and understand the carbon footprint of the Fund’s investments,” said Green Century Funds President Kristina Curtis. “This information will better inform investment decisions and will strategically enhance our efforts to encourage companies to further measure, report, and reduce their carbon emissions.”
Driving change in the financial services industry
The carbon footprint of the Green Century Balanced Fund (126 tons of carbon per million dollars of revenue of each of the Fund’s portfolio holdings) is almost half the average footprint of 16 other sustainability and socially responsible investing funds.
"We saw an opportunity to be a leader on an issue that is very important to us and is at the core of what we are all about," said Erin Gray, marketing and strategic analyst at Green Century Capital Management. Gray told me that Green Century believes carbon intensity is a good indicator of financial risk because companies most exposed to carbon-intensive industries are most at risk in light of likely carbon regulation.
By pushing the financial services industry, Gray said Green Century hopes to push others mutual funds to take a step towards more comprehensive carbon accounting "and set a new standard for transparency and disclosure for environmental issues within the whole mutual fund industry."
Environmental organizations praised the move from Green Century Balanced Fund. Margie Alt, Executive Director of Environment America, states, “Carbon emissions resulting from the production and use of fossil fuels inflict costly damages on our environment, health, and society. Every additional dollar we spend on fossil fuels buys us more global warming, more smog, and more asthma attacks. Investors should focus on options like the Green Century Balanced Fund that are free of fossil fuel companies and their detrimental impacts.”
Started in 1991 by a group of non-profit environmental advocacy organizations focused on environmental investing, Green Century has long held to a belief in using shareholder advocacy to improve environmental performance.
The Green Century Balanced Fund invests in stocks and bonds of environmentally responsible corporations of various sizes, including small, medium, and large companies. The majority of the Green Century Balanced Fund’s low carbon intensity is attributable to the Fund’s underweighting or avoidance of the utilities, oil and gas, and basic resources sectors.