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Carbon intensity: Cut your emissions, not your return

Average reduction of S&P500 carbon intensity for different TE assumptions (2009-2013)

For a company, its carbon intensity is defined as: (direct emissions + indirect emissions from consumption of purchased electricity) / sales.

With very low budgets of tracking-error (TE), we can build portfolios with much lower carbon intensity than their benchmarks. For example a 40% reduction in the S&P 500 carbon intensity can be achieved with only a 0.10% TE, and a 0.50% TE budget allows to reduce carbon intensity by as much as 75%.

The absence of negative impact on performance of such optimizations may assist in the development of low-TE/low-carbon processes, in particular for institutional clients.

Tegwen LE BERTHE, CFA, Quantitative Research at Amundi
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Carbon intensity: Cut your emissions, not your return
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