What is portfolio decarbonization and by how much do I have to commit to decarbonize my portfolio(s) to be able to join the PDC?
For now two approaches are feasible:
- After the decarbonization exercise, the carbon-footprint of the corresponding portfolio(s), if benchmarked, should be significantly lower than that of the underlying benchmark(s). In the case of absolute-return portfolios the portfolio footprint post-decarbonization should be significantly lower than the footprint pre-decarbonization.
- Investors are also welcome to submit climate-oriented capital-reallocation strategies which are not based on reductions of the portfolio carbon-footprint. In these cases decarbonization can be measured by the amount of capital re-allocated on the basis of climate-related objectives.
- Investors can also provide a description of the outcome(s) resulting from a corporate engagement exercise, and where possible, an estimate of the reduction of GHGs from that exercise.
What method can I use to measure the carbon-footprint of my portfolio?
The PDC is agnostic as to how (method employed) investors commit to calculating their carbon-footprints, but PDC members will have to fully disclose the method used in calculations. However, in 2015 the Greenhouse Gas Protocol and UNEPFI will issue guidelines aimed at standardizing and harmonizing portfolio carbon-footprinting and disclosure worldwide.
What is the minimum fraction of my AUMs that my organization needs to commit to decarbonize to be eligible for membership in the PDC?
There will be no minimum but it is expected that members will increase ambition over time as be seeing the values of the coalition.
What are the techniques that I can use to decarbonize my portfolio(s)?
While there is no ‘silver-bullet’ to the techniques and means used in decarbonization, PDC members will be required to fully disclose an overview and the main features of the techniques used for decarbonization. Techniques can include SRI approaches in active fund management; replication of carbon-tilted indexes in passive fund management; as well as engagement on GHG emissions with portfolio companies; etc.
What asset classes are eligible to decarbonization?
The PDC is agnostic as to the asset classes subject to decarbonization.