Measuring the carbon footprint of UniSaver’s investments
Article by Russell Investments, UniSaver’s investment manager and consultant
New Zealand made international headlines in 2020 when it declared a climate change emergency, committing to urgent action on reducing emissions and moving to a low-carbon economy. Since then, the financial industry has broadly united around several key climate risk measures in response to their obligations under climate-related frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD).
One such measure is Weighted Average Carbon Intensity[1] (WACI). This is calculated by dividing a company’s annual greenhouse gas emissions by its annual revenue. WACI can be aggregated across companies to determine an investment portfolio’s overall exposure to carbon-intensive companies. This can then be compared to a benchmark WACI to see whether the portfolio has a higher or lower exposure to carbon-intensive companies. Benchmarks form a reference measurement point, and will typically be a market index which represents all available securities for a manager’s investment style, e.g. S&P500, MSCI ACWI or NZX50. A portfolio with a lower WACI than its benchmark has a lower exposure to carbon-intensive companies.
Among a variety of temperature and carbon-related metrics, Russell Investments monitors and reports on UniSaver’s WACI at the total scheme level, and across each investment option.
Table 1: UniSaver scheme and option WACI vs benchmark as at 30 September 2024
Option |
Weighted Average Carbon Intensity vs index |
|---|---|
|
Growth |
76% |
|
Balanced |
78% |
|
Conservative |
80% |
As can be seen from the table above, the scheme and each investment option’s WACI are lower than the benchmark. This is primarily because of the sustainable investing initiatives adopted by UniSaver, the most material of which is the scheme’s investment in the Russell Investments Sustainable Global Shares Fund. All of the investment options, apart from Cash, invest in this fund which targets a reduction of at least 50% in carbon emissions and carbon reserves, as compared to its benchmark and an increased exposure to renewable energy.
As at 30 September 2024, the Sustainable Global Shares Fund reported the following compared to its benchmark:
Carbon footprint
This is the WACI which we define as the weighted average of each portfolio companies' Scope 1 & 2 GHG emission divided by revenue (CO2e/$1M revenue USD).
Carbon reserves
We refer to carbon reserves as the oil, gas and coal reserves held by a company. Specifically, it is defined as fossil fuel reserves (in millions of tonnes) divided by total company assets (USD).
Green energy ratio
The green energy score calculates the percentage of total energy produced from renewable energy sources. The calculation accounts for energy source classifications of Green, Brown and Grey power generation, with the calculation reflecting the proportion of green power generation divided by total power generation.
[1] Weighted Average Carbon Intensity is defined as the weighted average of the portfolio companies' Scope 1 & 2 greenhouse gas emissions divided by revenue (CO2e/$1M revenue USD).
This information is provided by Russell Investment Group Ltd (Russell Investments) in good faith and is designed as a summary to accompany the Product Disclosure Statement for the Russell Investment Funds (Scheme). Product Disclosure Statements for the Scheme are available from Russell Investments the investment manager, or the issuer and manager of the Scheme, FundRock NZ Limited (FundRock), and on https://disclose-register.companiesoffice.govt.nz/. The information and any opinions in this article are based on sources that Russell Investments believes are reliable and accurate. This disclaimer extends to FundRock, and any entity that may distribute this publication.
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