Master thesis - carbon footprint and debt

All companies leave an environmental footprint, often calculated as carbon emissions in tons caused by the company itself in its production and the energy used therefore. The owners are to be held responsible for the emissions, or rather a future lowering of emissions, but who are the owners?

The common way is to divide the responsibility of emissions equally between all shareholders, but on the typical balance sheet only part of the ownership is covered by equity, the rest is debt also owned.

This thesis proposal wishes to address the issue of debt and emissions responsibility. Firstly corporate debt, secondly other types of credit, and lastly government bonds.
The easy way would be to divide the responsibility between equity and debt according to market value, but then the sensitivity is lost. I.e. the duration of the debt defined as sensitivity to interest rates and credit rating, as well as the equity’s duration defined as sensitivity to dividend yield and interest rates. Is this a factor? How do the duration measures combine between equity and debt? Is there a relevance in the context of emissions (perhaps when looking at the risk of environment scandals, read VW)?

Pension funds and governments hold large positions in government bonds, do these have an environmental footprint? Could a country’s inhabitants’ behavior, forest resources, coal production, or environmental regulation lead to a carbon emission equivalent? What would be a reasonable data source?

To conclude: how do we include debt in the fund’s emissions calculations? Is duration a factor?

Apart from the academic purpose of the study, the thesis should propose a model to evaluate the fund’s debt portfolio; consisting of corporate credit, covered bonds, quasi government bonds, and government bonds, all issued globally.

 Contact Oscar Blomquist (oscar.blomquist@ap4.se) for more information and to apply