Gold In Portfolio To Lower Carbon Footprint Intensity: WGC

According to the research 'Gold and climate change: Decarbonising investment portfolios,' increasing gold allocation in an investment portfolio has a significant impact on the carbon footprint and emissions intensity of the total portfolio's market value.

According to a study conducted by the World Gold Council (WGC) and specialist climate risk consultancy Urgente, adding gold to an investment portfolio can reduce carbon emissions intensity while also increasing portfolio resilience to climate transition risks.

Furthermore, the council claims that decarbonizing the economy is such a high priority that it is influencing practically all policy, corporate, and investment decisions right now.

Climate change is both a physical reality and a rapidly expanding systemic and existential threat that everyone in society is learning to deal with. It is now commonly accepted that, in order to prevent potentially catastrophic consequences, greenhouse gas (GHG) emissions must be reduced rapidly - ultimately to 'Net Zero.'

The multi-asset portfolios were back-tested using varied percent asset allocations to see how the addition of gold at increasing weights would affect the portfolio's risk-return profile and overall carbon footprint.

Increased gold allocations have a significant influence on the total portfolio's carbon footprint and emissions intensity. A 10% allocation to gold (and equal reductions in other asset holdings) reduced the emissions intensity of a portfolio of 70% equities and 30% bonds by 7%, while a 20% allocation to gold reduced it by 17%.