Greening the Swiss National Bank's Portfolio

48 Pages Posted: 19 Aug 2021

See all articles by Rüdiger Fahlenbrach

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Eric Jondeau

University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute; Swiss Finance Institute

Date Written: August 16, 2021

Abstract

We analyze the carbon footprint and emissions of the Swiss National Bank's (SNB) U.S. equity portfolio and compare its carbon performance to those of the world's largest asset manager, BlackRock, and to the Norwegian Government Pension Fund Global (GPFG). The SNB portfolio does as well as BlackRock's but has a significantly worse carbon footprint than the portfolio of GPFG. Few firms are responsible for much of the carbon emissions of the SNB portfolio so that carbon-conscious investment approaches have a large impact on portfolio emissions but little impact on performance, diversification, or tracking error. We explore several avenues to reduce the carbon footprint of the SNB's portfolio, while not altering its financial performance. If the SNB excluded the firms with the highest carbon intensity representing 1% of the portfolio value and reinvested in the companies with the lowest intensity in the same sector, the total financed carbon emissions would be reduced by 22% in 2019, with no impact on the portfolio's financial performance.

Keywords: Portfolio carbon footprint, Decarbonized financial investment

JEL Classification: G11

Suggested Citation

Fahlenbrach, Rüdiger and Jondeau, Eric, Greening the Swiss National Bank's Portfolio (August 16, 2021). Swiss Finance Institute Research Paper No. 21-59, Available at SSRN: https://ssrn.com/abstract=3906654 or http://dx.doi.org/10.2139/ssrn.3906654

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne ( email )

Quartier UNIL-Dorigny
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Swiss Finance Institute

c/o University of Geneva
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CH-1211 Geneva 4
Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Eric Jondeau (Contact Author)

University of Lausanne - Faculty of Business and Economics (HEC Lausanne) ( email )

Extranef 232
Lausanne, 1012
Switzerland
+41 21 692 33 49 (Phone)

HOME PAGE: http://people.unil.ch/ericjondeau/

Swiss Finance Institute ( email )

40, Boulevard du Pont-d'Arve
40, Bd du Pont-d'Arve
1211 Geneva 4, CH-6900
Switzerland
+41 21 692 33 49 (Phone)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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