The impact of biological, chemical and geological processes on Earth is an undeniable reality, but nothing perhaps more so than the impact of concentrations of CO₂in the atmosphere. Triodos invests in companies that take measures to reduce their carbon footprint.
Since the industrial revolution, the burning of fossil fuels has increased CO₂ concentrations in our atmosphere, and the figure is rising. Most of the world has acknowledged the severity of the impact and the reality of climate change. The Paris Agreement , signed unanimously by 195 countries in November 2015, aims to keep global warming limited to 2°C above pre-industrial levels.
Corporate pledge
Whilst the Paris Agreement was among nation states, the international business community also supports the overall goal and has pledged targets to reduce greenhouse gas emissions. The corporate contribution to fighting climate change begins with transparency and setting goals. These goals need to be meaningful, measurable and based on sound analysis.
Recently, several companies have started to use the Sectoral Decarbonisation Approach (SDA) to set their emission targets. The SDA methodology was developed by the Carbon Disclosure Project (CDP), the UN Global Compact, the World Resources Institute (WRI) and World Wildlife Fund (WWF). SDA is a scientifically-informed method for companies to set CO₂reduction targets necessary to stay within a 2°C temperature rise above preindustrial levels. SDA is fairly new and differs from other methods because of its specific (sub) sector approach. As yet, only 157 companies globally have committed to using it. Thirteen of those are part of our SRI funds’ portfolios (9% of our 139 investee companies), including Spanish wind-turbine producer Gamesa, Japanese automobile manufacturer Toyota Motor Company and Dutch financial group ING. Earlier this year, we contacted all our investee companies calling upon them to use SDA, and we will continue to engage on this issue throughout the year.
Triodos Sustainable Equity Fund’s carbon footprint
In 2015, the carbon footprint of the Triodos Sustainable Equity Fund was calculated by a third-party consultant, South Pole Group , who reviewed and analysed the greenhouse gas emissions of all investee companies. We also conducted our own in-house research based on the data from Sustainalytics . Sustainalytics concluded that the Triodos Sustainable Equity Fund was found to be almost 30% less carbon intense than our benchmark, the MSCI World Index. This assessment is based on scope 1 and 2 emissions only. These are emissions that an organisation is directly responsible for. The lower carbon footprint is the result of our strict investment principles. On the one hand, we exclude carbon-intensive industries like oil and gas and coal-fired power plants, while on the other hand we select the industry outperformers. Having this information allows us to further engage with companies on this topic.
British beverage producer Diageo, one of the companies in the fund’s portfolio, is an industry leader in reducing its carbon footprint. Last year, for example, the company turned a challenge at two of its distilleries in Turkey into an opportunity. Leftover organic waste from its operations proved to be a great source of energy – with a little help from bacteria. Diageo started using this renewable energy source in 2015 and the initial results are encouraging: the company expects to reduce the distilleries’ carbon footprint by a further 20% compared to 2014, contributing to an overall reduction of 70% since 2007.
Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.