Supported by the UN-convened Net-Zero Asset Owners Alliance, the London Stock Exchange Group (LSEG) released the ‘Decarbonization in Equity Benchmarks’ research paper analyzing trends in the carbon exposure for the FTSE All-World Index. This global benchmark covers over 4000 companies, capturing both large and mid-cap corporates in developed and emerging markets. Scope 3 emissions – vital to capturing the full picture on progress towards net zero – is not yet included but it is intended that this will add to future iterations of this report.

By publishing data on the FTSE All-World Index, LSEG has effectively shown decarbonisation trends in what can be called a ‘reference portfolio’ – a portfolio broadly representative of the (public equity) investment universe. The exercise is very useful for climate-ambitious investors as it identifies the broad trends in the economy, such as changes in carbon efficiency, which in turn reveal the default for passive investing.

LSEG’s analysis for the FTSE All-World Index between 2014 and 2020, highlights the following key findings:

  • Absolute emissions in public equities increased, driven partially by an expanding investment universe. When adjusting for constituent changes, emissions reductions are evident from 2019, with over half of constituents consistently reducing emissions.
  • This reduction can also be seen in carbon intensity trends; global equity portfolios saw a modest decline in both Weighted Average Carbon Intensity (WACI) and Carbon Footprint.
  • Utilities saw material declines in both absolute and intensity-based emissions, contributing to portfolio-level reductions in the FTSE All-World.
  • Technology was the only sector to materially increase its contribution to WACI, due to emissions increases in constituent firms and consistent growth in index weight.
  • Removal of index constituents in the Energy Industry was a significant contributor to portfolio intensity reductions.

Download the report here.

About London Stock Exchange Group

LSEG is a leading global financial markets infrastructure and data group with expertise in data and analytics, risk, collateral and processing solutions, capital formation and trade execution.

About the UN-convened Net-Zero Asset Owner Alliance

The 77 members of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years, and iii) to regularly reporting on progress. The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).