Adding toes to the carbon footprint

In this analysis we demonstrate the application of the ‘look-through’ methodology, which allows the user to enrich an investment portfolio with indirect investments. In the context of climate change-related risks, including these indirect investments results in a markedly different and more realistic picture of the carbon footprint of financial institutions, and the transition risks4 that are associated with this footprint. This study is an important step towards a more complete and accurate overview of financial institutions’ carbon footprints. To accurately assess climate risk, we stress the importance of having detailed portfolio information and recommend the implementation of the look-through methodology.