Key findings:
- The energy sector was found to have the highest carbon footprint, with around 12 billion tonnes of CO2 emitted each year.
- The transport sector was revealed to be the second least eco-friendly sector, releasing around 8 billion tonnes of annual carbon emissions.
- The machinery and paper sectors are the industries with the smallest carbon footprint, with 0.24 and 0.29 billion tonnes of CO2 emitted per year.
Q1 2022 hedge fund letters, conferences and more
| S.no | Sectors | Annual CO2 Emission (in Billions) |
| 1 | Energy use in Industry | 11.955 |
| 2 | Energy use in Buildings | 8.645 |
| 3 | Transport | 8.003 |
| 4 | Road Transport | 5.879 |
| 5 | Residential Buildings | 5.385 |
Fig: Sectors with Highest Carbon Footprint
| S.no | Sectors | Annual CO2 Emission (in Billions) |
| 1 | Machinery | 0.247 |
| 2 | Paper and Pulp | 0.296 |
| 3 | Food and Tobacco | 0.494 |
| 4 | Rice Cultivation | 0.642 |
| 5 | Waste Water | 0.642 |
You can view the press release below or see the full report on the following link.
Strong CSR policies will reflect on yearly stock returns, new report finds
- The machinery sector has the smallest carbon footprint with 0.247 billion tonnes of CO2E emitted each year
- Report reveals the stocks in environmentally-friendly sectors with the highest returns
- Strong CSR policies will reflect on yearly stock returns, making eco-conscious investing more popular
Tackling Climate Change
October 2021, London— Efforts to tackle climate change have extended to the world of investment; recent years have given rise to socially responsible investing (SRI) in which investors utilise a strategy that will not only reward them in financial returns but also instigate positive environmental and social change. A new study by IG Prime reveals which sectors have the lowest carbon footprint and how this reflects on their yearly stock returns.
The institutional trading and prime brokerage solutions provider analysed over 600 companies listed in the S&P 500 or FTSE 100 to determine the carbon footprint of the sectors they work in.
Eco-conscious investment is defined by the carbon footprint of investors’ portfolio.
According to the Alternative Investment Management Association, which surveyed 135 institutional investors, hedge fund managers and long-only managers, 84% reported a spike in ESG-orientated funds and strategies in 2019, with this expected to grow in the coming years.
It is important to remember that any investment still comes with risk, but eco-conscious investments come with the added benefit of knowing stocks are being bought in companies who have a key focus on corporate social responsibility, and in the case of this report, climate change and CO2 emissions (CO2E).
The machinery sector, which covers Machinery, Tools, Heavy Vehicles, Trains and Ships has been revealed to have the lowest annual CO2E out of the 32 industries researched by IG Prime. Every year, a comparatively low 0.247 billion tonnes of CO2E is produced by the machinery sector.
Reducing Greenhouse Gas Emissions
The main goals in terms of a more sustainable line of production in this sector lies in reducing greenhouse gas emissions.
The Paper and Pulp industry, including Materials and Containers & Packaging sectors, was found to be the second most eco-friendly sector based on CO2E for investors aiming to create a sustainable portfolio.
With 22 of the companies listed in the FTSE 100 and S&P 500 falling under the category of ‘Food and Tobacco’, investors will be pleased to know that this sector is one of the most eco-friendly industries.
0.494 billion tonnes of CO2E is produced by the food and tobacco sector annually, which pales in comparison to the likes of road transport (8 billion) or residential property (5.3 billion).
When looking at other industries besides the main low-emission ones discussed within this report, companies in the sectors of wastewater and shipping perform well.
0.64 billion tonnes of CO2E is produced by the wastewater sector annually, followed by the shipping industry which accounts for 0.83 billion tonnes of CO2E annually.
Within each of these sectors there are certain stocks that perform well and offer good returns, as detailed in the report, however markets can be volatile, so it is important research is always conducted.
Whilst CO2 emissions are the main environmental impact that is often looked at, it is however not the only way to measure the sustainability of an investment. Despite there still being a long way to go and many targets lying decades ahead, some industries have already seen great success in the reduction of their carbon footprint.
Although by nature some sectors are likely to be higher CO2 emitters, some companies within these sectors can look at more eco-conscious sectors in a bid to improve their sustainability plans and offerings. Some companies are paving the way to a greener future by greatly reducing their CO2 emissions and having ambitious sustainability plans in place.
It is likely that companies with strong CSR policies will see this reflected in yearly stock returns with more and more emphasis being placed on environmental factors. This in turn will encourage investors to put money into eco-conscious stocks, and potentially steer away from those industries who are shying away from the issue.
About IG’s Institutional Business IG Prime
IG is bringing a new focus to its institutional offering by targeting family offices and small hedge funds, utilising the IG’s platform capability, range of markets and depth of liquidity to gain market share in this segment.
IG Prime’s prime brokerage business gives clients access to a range of synthetic, custody, trading and financing solutions. The worldwide network provides global market access and IG Prime’s technology is cutting edge.
IG Prime provides web-based trading, mobile apps, and own proprietary execution systems. The company also supports third-party trading access via FIX, MT4, API and Bloomberg EMSX.
About IG
IG empowers informed, decisive, adventurous, people to access opportunities in over
17,000 financial markets. With a strong focus on innovation and technology, the company puts client needs at the heart of everything it does.
IG’s vision is to provide the world’s best trading experience. Established in 1974 as the world’s first financial derivatives firm, it continued leading the way by launching the world’s first online and iPhone trading services.
IG is an award-winning, multi-platform trading company which allows retail, professional and institutional clients to trade 24 hours a day, 7 days a week*. IG is the world’s No.1 provider of CFDs** and a global leader in forex. It provides leveraged services with the option of limited-risk guarantees and offers an execution-only stock trading service in the UK, Australia, Germany, France, Ireland, Austria and the Netherlands. IG has a range of affordable, fully managed investment portfolios, which provide a comprehensive offering to investors and active traders.
IG is a member of the FTSE 250, with offices across Europe, including a Swiss bank, Africa, Asia-Pacific, the Middle East and North America. IG Group Holdings plc holds a long-term investment grade credit rating of BBB- with a stable outlook from Fitch Ratings.
*Excluding 10pm Friday (GMT) to 4am Saturday (GMT)
**Based on revenue excluding FX (from published financial statements, June 2019)
Sources And Methodology
A seed list of the top companies from the FTSE 100 and S&P 500 was created. We then found the percentage of total global emissions belonging to each sector, and used that with figures for total global emissions per year to work out how many tonnes of CO2 equivalent each sector creates. We also tracked 1-year returns for each company and its current share price to allow for comparison between the more eco-conscious companies and their value to investors.
Emissions categories are based on appropriate sectors. Where companies that crossed over sectors have been used, the best estimates were selected. Where other industries didn’t apply, “Commercial Buildings” has been assigned to reflect office usage and similar.
