Include gold in investment portfolio to reduce carbon footprint: WGC

An increase in the allocation of gold to an investment portfolio has a significant impact on the emissions intensity of the carbon footprint and market value of the overall portfolio, according to the title report. ‘Gold and climate change: decarbonizing investment portfolio’.

“For a portfolio of 70% equities and 30% bonds, the introduction of a 10% allocation to gold (and reducing other asset holdings by similar amounts) reduced the emission intensity of the portfolio value by 7%, and gold by 20%. % stake reduced to 17%,” the report said.

The WGC derived these numbers by back-testing data on five-year weekly returns on multi-asset portfolios using different percentage allocations of assets.

The effects were studied without significant compromise on the risk-return profile of the portfolio. In fact, the report suggested that gold allocation would improve the performance and risk profile of the portfolio, in addition to its climate change benefits.

“Gold generally outperforms when markets are under pressure, and climate-related risks are going to challenge all markets more frequently and more severely. Gold’s diversification potential is going to be increasingly relevant, and this research reinforces its strategic benefits as a risk-reducing asset,” said John Mulligan, Director, Climate Change Lead.

“Investors also need to be reassured that their holdings can contribute to the decarbonization of the global economy and that their portfolios are increasingly aligned along the Net Zero pathway. Our analysis strongly suggests that gold is supporting this transition. can help.”

The analysis in the study considered the embedded carbon footprint associated with gold mining, assuming that an investor would receive a substantial proportion of the embedded carbon footprint.

“In practice, gold would be derived from a lot of above-ground stocks, so our findings likely outweigh the embedded emissions associated with holding gold in a portfolio.”