Portfolio carbon footprints and decarbonization progress of China's asset managers: a decade analysis

Abstract Despite repeated calls to reduce CO2 emissions, asset managers continue to invest heavily in carbon-intensive assets, creating hidden carbon bombs within their equity portfolios. Timely tracking of portfolio carbon footprints is essential as a dynamic tool for monitoring companies' efforts to reduce carbon reduction. However, the availability and quality of firm-level CO2 emissions data present significant challenges in measuring financed emissions. As a result, potential climate-related risks for asset managers are likely to be severely underestimated. This study analyses CO2 emissions embodied in the equity portfolios of 105 Chinese asset managers from 2010 to 2020. Results show that over 50% of financed emissions comes from carbon-intensive assets, primarily emitted by individual high-emitting companies. Positively, some managers have reallocated capital towards High-tech Industries and Advanced Services during the period, and achieved over 50% reduction in carbon intensity. Comparison between asset managers' commitments versus actual mitigation actions shows that five out of six leading asset managers in China have failed to take their mitigation actions, despite their commitment to the UN Principles for Responsible Investment (UNPRI). Our qualitative analysis provide scientific evidence for China's asset managers in measuring companies’ portfolio carbon footprints and supporting their decarbonization pathways.