NEW YORK and LONDON, April 13, 2015 /PRNewswire/ --
Investors can help reduce their exposure to heavy emitters of
greenhouse gasses and fulfil their fiduciary objectives by adapting
a green beta investment approach, according to a white paper from
Mellon Capital Management*.
"Generating a return on capital that meets a benchmark set by
institutional investors, while reducing the carbon intensity in a
portfolio requires a more nuanced approach than simply eliminating
or underweighting business sectors that are heavy carbon emitters,"
said Karen Q. Wong, managing
director and head of equity portfolio management at Mellon Capital
and co-author of the report.
The Mellon Capital paper, Green Beta: Carbon Efficient
Investing, notes that investors can take steps to make their
portfolios more environmentally friendly even if they retain their
exposure to the carbon-intensive sectors of the stock
markets. The key, according to Mellon Capital, is to
underweight the companies within those sectors that have the
highest carbon intensity.
Carbon intensity measures the amount of carbon emitted per unit
of revenue. Utilities and energy and materials companies account
for more than 75 percent of the overall carbon emissions intensity
of the Russell 3000 index, yet just over 16 percent of the
index composition, the report said.
"One potential pitfall in pursuit of reducing carbon emissions
exposure is to significantly underweight these three sectors, which
can introduce unintended sector tilts," said Wong. "We think it's
better to underweight companies within these sectors that have
higher carbon intensity. We would maintain exposure to the
sectors as a whole by overweighting companies within the same
sectors that are taking a more proactive approach to reducing their
carbon emissions."
The report notes that a truly robust strategy goes beyond the
sector level and neutralizes exposures at the industry level.
This is particularly important when considering a sector as diverse
as consumer discretionary, where an unintended bias can be created
between the auto (heavier emissions) and apparel industries (lower
emissions), according to the report. Many high carbon
intensity companies tend to have lower volatility, larger market
capitalizations, relatively high yields and tend to be oriented
toward value instead of growth, according to Mellon Capital.
"It's important to compensate for these exposures if such
companies are underweighted to achieve lower carbon exposure," said
William Cazalet, managing director
and global investment strategist at Mellon Capital and co-author of
the report. "Also, portfolio managers must guard against
introducing different types of risks into the management of the
portfolio that could occur by lowering exposure to companies with
these characteristics."
BNY Mellon offers a wide range of products and services that
help investors meet their return/risk goals, while considering the
environmental, social and governance impact of their
investments.
|
*Investment Managers
are appointed by BNY Mellon Investment Management EMEA Limited
("BNYMIM EMEA") in relation to contracts for portfolio management
services entered into by clients with BNYMIM EMEA and by affiliated
fund operating companies to undertake portfolio management services
in relation to certain funds operated by BNY Mellon group
companies.
|
Notes to Editors:
Founded in 1983 by innovators in the investment management
field, Mellon Capital Management Corporation applies a disciplined
and analytical approach to global investment management strategies.
It is a wholly owned subsidiary of The Bank of New York Mellon, one
of the world's largest asset managers.
BNY Mellon Investment Management is one of the world's leading
investment management organizations and one of the top U.S. wealth
managers, with $1.7 trillion in
assets under management. It encompasses BNY Mellon's affiliated
investment management firms, wealth management services and global
distribution companies. More information can be found at
www.bnymellon.com.
BNY Mellon is a global investments company dedicated to helping
its clients manage and service their financial assets throughout
the investment lifecycle. Whether providing financial services for
institutions, corporations or individual investors, BNY Mellon
delivers informed investment management and investment services in
35 countries and more than 100 markets. As of Dec. 31, 2014, BNY Mellon had $28.5 trillion in assets under custody and/or
administration, and $1.7 trillion in
assets under management. BNY Mellon can act as a single point of
contact for clients looking to create, trade, hold, manage,
service, distribute or restructure investments. BNY Mellon is the
corporate brand of The Bank of New York Mellon Corporation (NYSE:
BK). Additional information is available on www.bnymellon.com, or
follow us on Twitter @BNYMellon.
All information sourced by BNY Mellon as of December 31, 2014. This press release is
qualified for issuance in the UK, Europe and US and is for information purposes
only. It does not constitute an offer or solicitation of securities
or investment services or an endorsement thereof in any
jurisdiction or in any circumstance in which such offer or
solicitation is unlawful or not authorized. Any views and opinions
contained in this document are those of the investment manager,
unless otherwise noted. This press release is issued by BNY Mellon
Investment Management (US) and BNY Mellon Investment Management
EMEA Limited (BNYMIM EMEA) to members of the financial press and
media and the information contained herein should not be construed
as investment advice. Past performance is not a guide to
future performance. The value of investments and the income
from them is not guaranteed and can fall as well as rise due to
stock market and currency movements. When you sell your
investment you may get back less than you originally invested.
Registered office of BNYMIM EMEA: BNY Mellon Centre, 160 Queen
Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorized and regulated
by the Financial Conduct Authority. A BNY Mellon Company.
Contact:
Mike Dunn
+1 212 922 7859
mike.g.dunn@bnymellon.com
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/green-beta-can-help-investors-lower-portfolios-carbon-intensity-while-fulfilling-fiduciary-responsibility-according-to-mellon-capital-300064618.html
SOURCE BNY Mellon