WHEB Commentary

Seb Beloe

WHEB Fund 70% lower carbon ‘footprint’ than benchmark

At the end of December 2014, the FP WHEB Sustainability Fund was analysed by external experts[i] to determine the volume of carbon emissions generated by companies in the fund.  This analysis showed that 91 tonnes of CO2e[ii] was produced per £1million invested in the fund. This compares with 282 tonnes of CO2e per £1million invested in the fund’s benchmark. An investment in the WHEB fund therefore has a carbon ‘footprint’ that is 70% less than an equivalent investment in the benchmark.


Carbon footprinting is a methodology that is used to measure the total greenhouse gas emissions associated with a given investment fund.[iii] Using data on the percentage of shares owned by the fund, the analysis calculates what proportion of each company’s total emissions the fund is ‘responsible’ for and then aggregates these to give the total ‘footprint’ of the fund.

This total is then divided by the size of the fund to give the tonnes of CO2e produced per £1millon invested. We compare this with the benchmark figure which gives an ‘average’ figure for the market as a whole. The FP WHEB Fund is in the top 20% of funds globally and the top 10% in the UK market on this measure.[iv]

Why is the WHEB footprint so small?

The size of the WHEB fund’s footprint is driven by two related factors. The first and most important contribution is the proportion of the fund that is invested in heavy carbon emitting sectors like energy utilities and oil and gas companies. 8% of the MSCI World is invested in oil and gas companies with a further 3% in utilities and another 2% in basic resources (mainly mining). Together these sectors make up nearly three-quarters of all carbon emissions from the MSCI World.

In contrast, the WHEB fund is a ‘fossil fuel free fund’ and has no exposure to basic materials or oil and gas companies.[v] In a supreme irony, however, solar companies are actually classified within the oil and gas super-sector, and the WHEB Fund does have 2% allocated to this sector and with a further 2% in waste and water utilities, this accounts for 32% of the fund’s total emissions.

Stock selection

The second factor driving the size of the footprint is the selection of companies within sectors with some companies having radically higher carbon emissions compared to peers. Here our performance is more mixed. For example, the largest absolute contributor to the fund’s carbon footprint is the water and waste business Suez Environnement which is responsible for 17% of the fund’s footprint (treating water and waste is still a relatively energy intensive business). But the company is also 20% more carbon intensive than the average for its sector. Similarly, Smurfit Kappa, a manufacturer of recycled cardboard packaging, is twice as carbon intensive as its sector peers. We plan to write to both of these businesses to understand why they seem to perform so poorly and what they might do to improve this performance.

Montreal Pledge

Carbon footprinting is, we believe, a useful tool giving a snapshot of a fund’s carbon profile and highlighting areas of weak performance. It is, however, not perfect. For example, the energy used in solar module manufacturing is captured in the footprint, but not the energy that is subsequently saved through their use. We think that the fund’s footprint would be still smaller were these full life-cycle savings to be taken into account.

Nonetheless, we plan to repeat this exercise regularly to monitor our overall footprint and how we compare against the benchmark and other funds. We are therefore also pleased to support the Montreal Pledge[vi] as part of our commitment to drive further carbon reductions in the fund.



[i] Center for Social and Sustainable Products (http://www.cssp-ag.com/)

[ii] Carbon Dioxide Equivalents (CO2e)

[iii] Carbon footprinting was originally developed to measure the carbon emissions associated with products. It was first applied to investment funds by members of the WHEB team in 2005.

[iv] Perse Comm CSSP

[v] http://www.whebgroup.com/is-it-right-to-invest-in-an-ffff-fossil-fuel-free-fund/

[vi] http://montrealpledge.org/