Trends in Carbon-related Analysis of Investment Portfolios by Institutional Investors

Abstract

This study focuses on the carbon-related analysis of investment portfolios, an approach that has been developed by practitioners in recent years. A comprehensive review of the relevant literature reveals four stages in the development history of carbon-related analysis to date: concept formation, voluntary disclosure, TCFD compliance, and new indicator development. The objectives of conducting carbon-related analysis, the proposed indicators, and the challenges in conducting the analysis are also reviewed. There are two different objectives: to improve investment performance and to create environmental impact. The indicators vary from GHG emissions-based indicators to monetary value and temperature-based indicators. The study also identified a number of practical issues for institutional investors in conducting carbon-related analysis.