We are happy to present India’s first Green Portfolio.
First, why do we need it? Here is why…
Problem of Large Carbon Footprint:
- 1. CO2 emission has increased by >35% between 1990 to 2010
- 2. The decade from 2000 to 2009 was the warmest decade on record worldwide
Carbon budget: To avoid facing most damaging climate changes we must remain within the carbon budget, which is max amount of GHG emission that v can make without raising the global temperature more than 2 degree Celsius above preindustrial levels.
How much is carbon budget: 1 trillion metric tonne out of which more than half has already been exhausted. At current rate of emission entire carbon budget will be exhausted by 2045.
How does it impact our portfolio management? One might ask what the environmental protection gotta do with portfolio management???
I’d say everything. One key assumption in equity investing/fundamental valuation is assumption of perpetuity, i.e. practically, the assets will keep on producing cash for foreseeable future at least next 60 to 80 years or so.
The carbon problem can lead us to a situation where many of our productive assets could become stranded assets and these assets would belong to fossil fuels and industries or commercial activity highly dependent on fossil fuel. Hence these companies will either stop being productive or will have to change their technology whereby they could do without using fossil fuel (for instance transition to E vehicle from Petrol/diesel vehicle).
With this problem in our mind we have created first Green Portfolio for investors that they could invest in and profit from it.
We have taken due care to omit any fossil fuel company and even Automobile companies. We have avoided companies engaged in mining activities as well.
Thus, I present to you India’s first Green Portfolio:
Constituents of the portfolio are
N.B. to know the stocks of the Green Portfolio, pls write us at firstname.lastname@example.org
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Characteristics of Portfolio:
- Variance < 0.1%
- Beta ~0.9 i.e. the portfolio is less risky than NIFTY itself
- Expected Return 21.9% Vs 12.9% for NIFTY and 5.75% for BSE Greenex
- Our Green Portfolio has higher (almost 2x) return than that of NIFTY despite having lower Beta, this is the dream of every investor/fund manager
- Treynor’s Ratio of DVSCC’s Green Portfolio is 16.67, while that of NIFTY is only 6, hence on risk adjusted basis DVSCC’s Green Portfolio is expected to beat NIFTY by 2.77x
BSE Greenex Vs DVSCC Green Portfolio:
BSE Greenex has included many auto stocks and energy stocks
Stocks like Eicher, M&M, Maruti, are good as companies but a No-No for Green Portfolio as they cause lots of environmental damage by burning fossil fuel
The cost they have to incur for environmental damage and regulatory change is evident in BS-VI transition
The auto stocks are replaced by Auto Ancillaries like Schaeffler and Wendt, both the companie have exposure to auto industry but create much lesser carbon damage Both the cos are having German promoters and fundamentally v v sound
GAIL is all about fossil fuel and the heavy carbon footprint, we can't include a Carbon Black Stock in a Green Portfolio
A bad PSU bank (PNB) is replaced by much better managed SBI
No telecom company is in our Green portfolio because of price war and intense competition created by Rel Jio
Ending Note: Hope you could understand the necessity of including the Green in your investments, by going Green with your portfolio, whether you protect environmental health or not but you’ll sure protect your financial health.
You can watch the video on the same as well…