Canadian companies among the most carbon intensive in the developed world

New report reveals performance of carbon-intensive investment portfolios negatively impacted by 9.2 per cent over past seven years

VANCOUVER, BRITISH COLUMBIA--(Marketwired - June 28, 2017) - Genus Capital Management today released "The Carbon Emissions Report: The Effect of Carbon Emissions on Investment Returns," which concluded that an investment portfolio's carbon intensity negatively impacted returns by 9.2 per cent over the past seven years, after adjusting for other variables and risk factors.

A company's CO2 emissions, or carbon emissions, is a particularly significant measure for those investors who are concerned about climate change and the environmental impact of their investments. Genus' inaugural carbon report examines the relationship between carbon emissions, carbon intensity and investment returns. The research team at Genus applied factor analysis to isolate the impact of carbon intensity on a portfolio of global investments (35% S&P/TSX Composite/ 65% MSCI World) between 2010 and 2017.

The research indicated that carbon intensity had a 9.2 per cent cumulative drag on portfolio performance during the seven-year period ending March 31, 2017. Carbon intensity refers to the volume of a company's carbon dioxide emissions for every million dollars in revenue (USD).

Moreover, the report concluded that Canadian companies tend to be among the worst offenders when evaluated based on carbon intensity when compared to other developed world equity markets, owing to the Energy sector's significant weighting in the Canadian market.

"Canadians are seeing an opportunity to tackle climate change through their investments while reducing the risk they're assuming," says Wayne Wachell, the CEO and chief investment officer of Genus Capital. "High intensity emitters tend to be penalized by the market because their businesses are neither efficient nor forward facing. Divesting from fossil fuels is one way to minimize the carbon intensity of a portfolio. By conducting this research, we're pleased to see that the results support the case for divestment and sustainable investing."

Genus Capital was the first investment management firm to develop a 100 per cent fossil free fund family, Genus Fossil Free, for Canadian investors interested in fully divesting from fossil fuels while reaping the same, and in some cases slightly higher, returns as conventional investments. Known for developing innovative investment strategies for 25 years, Genus services some of Canada's leading purpose-driven institutions and foundations, including the David Suzuki Foundation, one of Genus Fossil Free's early adopters.

"10 per cent of Canadian companies account for 80 per cent of emissions, which means that screening out only the top carbon emitters are needed to have a significant reduction of carbon presence in a portfolio," says J.P. Harrison, president of Genus Capital. "With recent research also showing that the Paris Accord's climate targets pose significant financial threat to energy companies as early as 2025, investors need to find ways to get ahead of the curve."

Genus' fossil free and high impact portfolios exclude companies directly involved in extracting, processing and transporting oil, gas or coal as well as high carbon emitters.

The suite of Genus Fossil Free funds has a carbon intensity that is significantly below the carbon intensity of the S&P/TSX Composite. For example, the Genus Fossil Free CanGlobe Equity Fund and Genus Fossil Free Dividend Fund both have carbon intensities that are more than four times lower than their benchmark.

One of the financial risks associated with climate change is stranded asset risk, which refers to the premature devaluation of stocks value in industries in which governments are looking to regulate or cap activity on. With 195 signatories, including China, India and the European Union, committed to meeting the targets of the Paris Accord, stranded asset risk is a growing concern for investors with holdings in fossil fuel companies.

To download the Carbon Emissions Report, please click here.

For more information on Genus Fossil Free funds, please visit their web site.

About Genus Fossil Free funds

The Genus Fossil Free funds' live performance results are substantiated by back-testing research going back almost 20 years. The funds were developed using Genus' Total Equity approach, which combines Canadian and international funds together to emphasize the top industries in each region. The five funds are as follows:

  • Genus Fossil Free CanGlobe Equity: low-carbon, high-ESG Canadian and international stocks across the top industries in each region
  • Genus Fossil Free High Impact Equity: more than 50 per cent revenue exposure to sustainable themes, including renewable energy, water and waste management
  • Genus Fossil Free Dividend Equity: low-carbon, low-risk Canadian and international stocks
  • Genus Fossil Free Corporate Bonds: low-carbon, high-ESG Canadian corporate bonds
  • Genus Fossil Free Government of Canada Bonds: Canadian government bonds

About Genus Capital Management

Genus Capital Management is an independent investment management firm based in Vancouver, founded in 1989. We are passionate about creating innovative investment solutions that meet our clients' changing needs. With more than $1.2 billion in assets under management, Genus' clients include leading environmental organizations, foundations, and individuals across Canada. Today, Genus Capital is at the forefront of Canada's Divest-Invest movement with a complete suite of fossil fuel free funds that are tailored to meet the needs of investors who wish to invest in a sustainable, clean energy future.

About the Carbon Emissions Report

Genus Capital's inaugural Carbon Emissions Report examines the risks that carbon intensity can pose to an investor's portfolio. The report findings indicate that over the course of seven years ended March 31, 2017, carbon intensity had a 9.2% cumulative drag on portfolio performance. This further underscores that Genus' offerings can deliver investors superior risk-adjusted performance across asset classes while providing a positive environmental impact.

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