The BlackRock Emerging Europe fund has been named among the UK’s worst fund for its carbon footprint, followed by the SLI UK Equity Recovery and the SLI Global Emerging Markets funds, as a new tool launches to analyse funds’ climate risk.
The BlackRock fund produces more than 3,600 tonnes of carbon dioxide per $1m invested, while the SLI funds produce 1,453 tonnes and 1,378 tonnes respectively.
The Fossil Free Funds website, launched by As You Sow, includes data for 8,500 funds globally worth more than £9trn.
The BlackRock and SLI funds were the worst in a universe that included equity and balanced funds with than 40 per cent in equities. Funds also had to have more than 40 per cent portfolio coverage for footprint data.
BlackRock says the fund’s investible universe has more than 55 per cent of its holdings in carbon-intensive industries, including energy and materials.
A spokesperson says: “We have a fiduciary obligation to invest in the markets our clients choose, against specific benchmarks. Relative to its benchmark, the BlackRock Emerging Europe fund is underweight in oil, gas, and refining and overweight lower carbon industries.”
SLI also says funds need to be compared to their relative benchmarks when it comes to examining their carbon footprint.
However, As You Sow chief executive Andrew Behar says when “dirty is compared to dirtier” that does not mean a fund can be described as “clean”.
“Just because a fund is cleaner than its dirty benchmark does not mean that it is not a major contributor to GHG emission and carries carbon risk,” Behar says.
The Royal London Sustainable Trust was the UK fund with the lowest carbon footprint, then the Henderson Global Care Growth fund, followed by five Alliance Trust Sustainable Future funds.
The Fossil Free Funds analysis tool includes 1,300 UK funds holding £600bn, which can currently be compared to the FTSE, S&P and MSCI indices.
The BlackRock fund is 2,746 per cent higher than the carbon footprint of the S&P 500, while the SLI UK Equity Recovery fund is 1,026 per cent higher and the SLI Global Emerging Markets fund is 968 per cent higher.
Behar explains: “The tool is primarily a transparency effort aimed at expanding the conversation and providing people with data that has never been previously available, so they can be more sophisticated in how they incorporate climate into their investing.”
The tool uses financial data from Morningstar and carbon footprinting data from South Pole Group and YourSRI.
An SLI spokesperson says while carbon footprints are a useful mechanism for assessing climate risk in a portfolio, they can be challenging. “It is backward looking and does not take into account forward planning and current actions by companies. In addition, where data is unavailable, assumptions have to be made, which might not be accurate.”
However, the spokesperson says fund managers need to engage with all companies to assess how they are reducing their carbon exposure.
Last month, the Asset Owners Disclosure Project slammed BlackRock for hypocrisy over its shareholder voting record at oil giant ExxonMobil, which it argued was at odds with the UN Principles for Responsible Investment.