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Carbon Footprint Analysis: An Interview with Aegon Asset Management and Trucost

curtin_claireAegon decided to gain a better understanding of the CO2 impact of its investments as a first step in deciding on possible future actions regarding climate change and carbon emissions.  Aegon selected three actively managed GA investment portfolios, which are managed against a recognized benchmark. Given its strong emphasis on fixed income investing, Aegon selected fixed income portfolios. Trucost provided a customized report for each portfolio showing the CO2 intensity of the portfolio against the benchmark that is being tracked.

Below is an extract from Aegon’s Responsible Investment Report 2014, which features an interview with Mike Mansfield (Aegon Sustainability) and Claire Curtin (Trucost), who managed the project.

Why did you decide to measure the carbon footprint of your investments?

Mike: We are now beginning to see Aegon shareholders taking an active interest in our sustainability profile, including the companies we invest in. This has, for example, been seen recently in questions asked from the floor at our shareholder meeting about measuring Aegon’s environmental impact. As an insurance company, Aegon itself doesn’t have a big operational impact, but through its large portfolio of investments held by Aegon Asset Management it has an indirect ‘carbon footprint.’ The carbon footprint of a company is considered to be the most direct pointer to the sustainability profile of any enterprise. Aegon must be able to anticipate this demand for information and that means we are establishing the processes, tools and culture needed to respond to these requests.

Claire: It’s important to understand that this interest is not driven by soft environmental sentiment. The world is just beginning to realize that there can be no business sustainability without environmental sustainability – and, from an investment perspective, that means identifying companies which have made the reduction of their carbon footprint a priority.

With your initial activity, what was the focus and what was the result?

Mike: We selected three diverse portfolios, one in the UK, one in the Netherlands and one in the US. We initially considered carrying out the carbon footprint analysis ourselves, but rejected this in favor of engaging Trucost. In part this was because we wanted their independence to lend credibility to this process, and, in part, because in this newly emerging area of business analysis, they have already established a respected reputation.

Claire: The results of this initial investigation were interesting: each of the three portfolios was less carbon intensive than the benchmark, sometimes significantly so. We found that this was often because of an underweighting of the more carbon intensive sectors, for example utilities, which are typically highly carbon intensive because of their utilization of fossil fuels. Also other, less carbon intensive, sectors tended to be underweighted.

Claire Curtin
Claire Curtin is the head of investor research at Trucost. Prior to joining Trucost, she worked as a client relationship manager at EIRIS. She has over ten years’ experience in the asset management and hedge fund industry, as a product specialist for a range of asset classes and strategies and working for Pioneer Alternative Investments, BlackRock and JPMorgan Asset Management.
 
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