Anurag Singh, Linda-Eling Lee, Remy Briand, Sébastien Lieblich, Véronique Menou – Thursday, December 10, 2015
Beyond Divestment: Using Low Carbon Indexes, provides an actionable roadmap for institutional investors trying to navigate a financially viable path for managing carbon risk. The research provides a new framework for evaluating ways to reduce exposure to both current and potential future carbon-related assets. Currently, most approaches are focused on divesting assets from companies in the fossil-fuel sector based on current emissions only. More specifically, the research compares a selective divestment strategy with two approaches that use re-weighting and optimization to increase exposure to more carbon-efficient companies and decrease exposure to large current and future emitters, thus aiming to reduce long-term portfolio risk. Both approaches also use optimization techniques to reduce short-term risk against the benchmark.