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S&P 500 carbon emissions equivalent to that of France, Germany, UK combined

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

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Essential Energy Insights - January 2021


S&P 500 carbon emissions equivalent to that of France, Germany, UK combined

Should each constituent of the S&P 500 pare their directemissions down to zero, the impact would be roughly equivalent to removing all theemissions produced in France, Germany and U.K. combined, according to the recentlyreleased S&P Index Carbon Emitter Scorecard.

Announced by S&P Dow Jones Indices on April 7, theresearch provides regional and thematic breakdowns of carbon emissions of majorglobal equity benchmarks. It is based on the S&P Global 1200 which capturesapproximately 70% of global equity market capitalization and is constructed of sevenheadline indices – the S&P 500, S&P Europe 350, S&P TOPIX 150, S&P/TSX60, S&P/ASX All Australian 50, S&P Asia 50 and S&P Latin America 40.

The report found that the world's blue-chip corporationsdirectly produce approximately 15% of global emissions while the reduction requiredfor global temperature to remain within the 2°C of pre-industrial levels set bythe 2015 United Nations Climate Change Conference may be as much as 98%.

The 2015U.N. Paris Talks has put the spotlight on climate change and has prompteddifferent sectors to converse on the topic. How exactly investors can, or should, modify their behavior was somethingthat was pondered on, along with the how much weight their actions carry in termsof meeting the target of a "two degree economy."

The research found that in terms of revenue footprint,defined as the ratio of total emissions to revenue generated by index constituents,Asia ranks as the lowest which means Asian markets are the least susceptible tothe risks of a global carbon tax regime. Meanwhile Latin America nets the highestscore making it the most vulnerable to such a scenario.

In terms of investment footprint, or the total emissionsper unit of market capitalization, the research noted that Latin America once againranks the highest. The U.S. and Canada scored the lowest, suggesting that investmentsin the region carry less material environmental impact.

Considering sector emissions also produce a more detailedpicture, noted the research, adding that geographic and sector differences as wellas investment styles such as growth and value have a strong relationship to carbonfootprint. It noted that if an investor was leaning towards companies associatedwith innovation and cutting edge development, then they are likely to favor growthcompanies, and lower their emissions footprint at the same time.

When it comes to the financial sector, the U.S. markethas every other region beat when it comes to the size of its carbon footprint, thereport said.

The S&PDow Jones Indices and S&P Global Market Intelligence are owned by McGrawHill Financial Inc.