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Portfolio decarbonization will become an increasingly important topic. Investors need to understand the key issues involved.  

Decarbonization is, and will remain, a key environmental objective. Economies, governments and corporates are now in a process of transition towards more sustainable, lower carbon-emitting economic and business models.

 

Investors have several reasons to decarbonize portfolios, i.e. to reduce the CO2 emissions associated with their choice of investments. But how should this be implemented and managed? In this report we look at the key choices for an investor considering portfolio decarbonization. 

 

Key takeaways:

  • We discuss the importance of carefully defining the decarbonization measure, the time perspective and the type of target.
  • Portfolio construction will depend on data availability, potential compromises around investment vehicles, exclusions, switching and the available investment universe. 
  • Portfolio decarbonization will be impacted by financial, transition and other risks. Optimization will be needed to keep pace with real-world decarbonization and further regulation.      

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The CIO Special below is available to download. Please refer to the Important Information at the end of the memo for disclosures and risk warnings.

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No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive.

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Change of name: As part of Deutsche Bank’s Private Bank, the former International Private Bank also adopted this title on July 20, 2023.