Building a Carbon-Free Equity Portfolio
13 Pages Posted: 16 Feb 2015
Date Written: February 14, 2015
Endowments, foundations and individual investors considering the divestment of carbon industries need to know the potential impact on risk and return. In this paper, we analyze the cost of divesting from broad market indices. Our key findings are: • Optimized carbon-free portfolios closely tracked the U.S. market since 1988 and the global market since 1997; • Carbon-free portfolios in markets with large concentrations in Oil, Gas and Consumable Fuels have historically incurred significant tracking error; • On average, divesting has transferred assets from the Energy Sector to Utilities and Materials.
Keywords: Divestment, Endowment, Foundation, Individual Investor, New Institutional, Oil, Carbon-free, Energy, Utilities, Materials, Tracking Error
JEL Classification: G11
Suggested Citation: Suggested Citation