Finance Glossary
Carbon footprint
What is the carbon footprint?
The carbon footprint corresponds to the greenhouse gas (GHG) emissions released over the course of a year by a human activity. It should be noted that most activities of individuals and companies result in generating a more or less significant carbon footprint.
The six greenhouse gases defined in the Kyoto Protocol are accounted for, including the well-known carbon dioxide (CO2), the most frequently encountered gas.
The carbon footprint is expressed in tons of CO2 equivalent (tCO2e).
For a company, its carbon footprint corresponds to the greenhouse gas emissions it releases directly or indirectly over the course of a year. This thus measures the impact of its activities on the planet.
The carbon footprint covers 3 levels of emissions (called scopes).
Scope 1 corresponds to greenhouse gas emissions directly related to the company's activities.
Scope 2 includes indirect emissions from the company's energy purchases.
Scope 3 covers indirect emissions that come from upstream or downstream activities in the company's value chain. It is generally the largest share.
How to measure the carbon footprint of a company and an investment fund?
To measure the carbon footprint of a company in which the fund is invested, three data points are needed:
- First, the company's emissions according to the three scopes described above.
- Then the value of the company's stock.
- And finally, the share held by the fund.
To calculate the carbon footprintof a fund, simply perform this calculation for each company held in the portfolio and sum them up. The carbon footprint is expressed based on one million euros invested.
This is also what is done for benchmark indices. It allows for easy comparison of the fund's footprint relative to that of the index.