Since the post-pandemic economic recovery, the carbon intensity - the ratio of CO₂ emissions to revenue - of the equity and bond portfolios of Belgian insurance companies, pension funds and investment funds has fallen. This is mainly due to a decrease in absolute CO₂ emissions and revenue growth of portfolio companies. This welcome development points to a structural shift towards more sustainable business activity, although economic factors such as inflation are also playing a role.
Decrease in CO₂ emissions and decline in carbon intensity
The reasons for the decline in carbon intensity vary depending on the type of financial institution. For insurance companies and pension funds, the decisive factor has been a decrease in absolute CO₂ emissions by companies in the services and energy sectors in Italy, France, Belgium and the Netherlands. In addition, inflation, caused in part by rising energy prices in recent years, has been a relatively significant factor as it has markedly pushed up the revenue of companies in the energy sector and, in turn, contributed to lower carbon intensity.
Investment funds, on the other hand, have followed a different pattern. The decline in the carbon intensity of their portfolios is mainly due to revenue growth, independent of price increases, at portfolio companies in an array of sectors - particularly in the Anglosphere and France. A drop in absolute CO₂ emissions also contributed to the decline, but to a lesser extent.
Company-driven change
It is noteworthy that, since 2021, strategic shifts in portfolio composition have played only a limited role. The recent decline in carbon intensity is due primarily to changes within portfolio companies rather than to a reorientation of investments by financial institutions. This highlights the importance of corporate sustainability strategies and data transparency for the identification of impacts and risks.
This analysis is based on climate-related statistical indicators that have been published by the ECB since 2023 and to which the NBB actively contributes. There are three categories of indicators: carbon emissions, physical risks and sustainable financing. All indicators are calculated for companies in which euro area financial institutions invest; they provide a harmonised set of tools to facilitate a better understanding of climate impacts and risk exposure.