Carbon Footprint Investing

If you have been to this blog before, then you are likely familiar with the concept of ESG investing. It takes into account environmental, social and governance issues when selecting investments. In general, if you are trying to invest while doing your part to make the world a better place, its a way to concentrate your investments in companies that try to behave.

However, if you care about all three of those issues, but you want to give particular attention to the environmental aspect of an investment, there may be a better way to screen them. One of the ways Balanced Capital builds the Green Series of portfolios is by diving into funds to give them a carbon footprint score.

That carbon footprint score comes from looking at the underlying companies energy use, including the amount and the type of energy. It also goes further to look at the materials used by the companies and how those are sourced, carbon production, land use and many other factors. he Green Series only considers funds that fall into the top quartile hen it comes to carbon footprint.

We value carbon footprint as a metric for many reasons, but the main one is that it provides a more realistic view of what companies are trying to move the world forward. Case in point; many ESG funds have a 0% fossil fuel mandate. On the surface, we have no problem with that. If you want to keep things simple ,it’s a great way to look at the problem.

In a perfect world there would be no fossil fuels to invest in. Unfortunately that world does not exist yet. Because of that, the carbon footprint model of investing does not exclude all fossil fuels from portfolios. Instead it uses the model to identify which companies are actively making strides to move away from fossil fuels and move to a carbon neutral business model.

If that sounds counterintuitive, we get it. We understand. How can we call something the Green Series of portfolios if it includes the antithesis of green companies. Put simply, we designed the Green Series as a group of portfolios that helps clients invest in companies that help make the world a better place. Sometimes that means investing in companies that aren’t perfect yet, but they are trying. We feel that makes a bigger impact that burying our heads in the sand and pretending the world is perfect.

If you have an interest in learning more about green investing, look at our other posts, or give us a call.