Portfolio Construction · December 2025
The Decarbonization Frontier
How different portfolio decarbonization methods compare on tracking error, sector concentration, and real-economy emissions impact.
- Methods compared: exclusion screens, best-in-class tilts, optimised carbon-budget portfolios and engagement-weighted approaches.
- Charts show tracking error against achieved carbon-intensity reduction for each method.
- A concentration chart tracks how far sector and single-stock weights drift from the benchmark.
- Real-economy impact is separated from paper decarbonization achieved by reweighting alone.
Portfolio decarbonization targets can be met in very different ways. A portfolio that simply underweights high-emitting sectors may report a large drop in financed emissions while the underlying companies change nothing. This tool separates those effects so that headline carbon reductions can be compared on a like-for-like basis.
Each approach is assessed on the same benchmark and the same public emissions data, making the cost in tracking error and the degree of sector concentration directly comparable. The interactive version lets signed-in visitors adjust the reduction target and see how each method responds.