The climate crisis has provoked a debate about whether asset managers should disinvest from the most polluting companies or use their influence as shareholders to persuade firms to curb their carbon emissions. Unfortunately, the paucity of reliable and standardized data makes assaying the likely profit and loss of greening portfolios a thankless task, as two conflicting reports in recent weeks highlight.

For the sake of the planet, there is one conclusion I hope is correct.

Analysts at UBS AG have analyzed the shareholdings of more than 10,000 institutions including pension funds, mutual funds and hedge funds, with combined assets of more than $50 trillion. They’ve screened that pool for investors with large stakes in low carbon-intensity firms, as measured by the ratio of carbon emissions to sales.

The analysis then cross-referenced those results to identify companies mostly owned by long-term investors with a preference for greener assets, deeming them to be “more likely to be influenced by their shareholders and improve their carbon intensity.” The dissection found that companies most likely to come under shareholder pressure reduced their carbon intensity by 18% in the five years to 2020, compared with an 8% decline for those under the weakest institutional clout.

And there’s money to be made in backing the companies most exposed to institutional cajoling over their polluting behavior. UBS estimates buying a portfolio comprising those stocks would have delivered 40 basis points a year more than the MSCI World Index in the past decade, and outpaced a basket of shares under weaker pressure to change their planet-harming ways.

As ever in the world of environmental, social and governance standards, it’s not hard to find opposing evidence to the UBS findings. The EDHEC Business School’s Risk Institute, for example, argued last month that institutional ownership has little effect in curbing greenhouse gas emissions by companies.  

The EDHEC study used carbon-intensity data on more than 7,000 companies between 2007 and 2018, examining the relationship between their carbon footprints and their ownership by fund managers with combined assets of more than $70 trillion who participated in the 2018 United Nations’ Principles for Responsible Investments survey.

Across the sample universe, the researchers found institutional ownership had almost zero influence; each 1% increase in ownership by institutional investors was calculated to reduce the carbon intensity of firms by just 0.1%. Even among what the report called “heavy polluters,” each 1% ownership increase produced a “limited” 0.4% decline in carbon intensity. “These results suggest that climate-driven responsible investors can complement but not substitute national and international climate policies,” the report concluded.

Perhaps one argument in favor of asset managers building greener portfolios – apart from the obvious point that superior returns are useless if there’s no planet left to enjoy the fruits of harvesting alpha – is that the trend may well become self-reinforcing.

If the biggest allocators of capital are all overweighting companies transitioning to smaller carbon footprints, their share prices should benefit from those flows and outperform their less environmentally friendly competitors. Until the statistics measuring ESG can match the efficiency and ubiquity of risk and return data, enlightened self-interest may be the best guide to what portfolio managers should do with our money.  

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”

More stories like this are available on

©2021 Bloomberg L.P.