Carbon Disclosure Working Group
Investors are increasingly aware of the impact of climate change on their portfolios but to date have primarily been focused on equity investments. With nearly 200 countries committing to taking action to limit climate change to 2 degrees Celsius, it is also imperative that investors understand the effect of climate change on the $40-trillion sovereign bond market. This need is particularly acute in France, which was the first country to require institutional investors to disclose the carbon exposure in all asset classes, starting in 2016.
Global Footprint Network and South Pole Group created the Carbon Disclosure Working Group to support asset owners and managers by developing a clearer framework for climate assessment and carbon disclosure in sovereign debt and facilitating greater disclosure to improve risk management. While methodologies have been developed to measure and manage the carbon footprint for corporate equity and debt, no standards for carbon disclosure of sovereign bond investments exist yet. The Working Group addressed this gap by outlining a recommended approach for carbon disclosure and dashboard of indicators. The results are detailed in the Carbon Disclosure and Climate Risk in Sovereign Bonds report released in December 2016.