A drinks manufacturer, two housebuilders, three retailers and a miner are among the stocks picked for stockbroker Liberum's newly launched Climate Portfolio.
The shares were chosen based on a proprietary ‘carbon beta’ metric that measures the impact climate risks have on share prices.
Strategists at the broker are confident that the portfolio has the potential to outperform the wider market, with back-testing of the ‘Green Minus Brown’ (GMB) risk factor showing that the performance of the 20% stocks on the market with the lowest carbon footprint versus the 20% stocks with the highest footprint, measured by the average of absolute CO2 emissions and CO2 intensity per sales.
The carbon beta, “which does not simply measure the carbon footprint of a company but how the share price reacts to changes in market pricing of climate risk”, can be calculated for any stock, whether the company discloses its carbon footprint or not, the analysts said.
It allows comparison within and between sectors, with the example given that some utilities companies that exclusively focus on energy production from renewable sources may still have a lower carbon beta than a company in the technology sector with a substantial carbon footprint.
Using a couple of additional risk management filters, the initial portfolio is made up of 20 stocks, ranging from three from the FTSE 100 to more than half a dozen from AIM.
The junior market contingent includes Avacta Group PLC (LON:AVCT), Blue Prism Group PLC (LON:PRSM), Clipper Logistics PLC (LON:CLG), Circassia Group PLC (LON:CIR), Dotdigital Group PLC (LON:DOTD), Eurasia Mining PLC (LON:EUA), Fevertree Drinks PLC (LON:FEVR), Gamma Communications PLC (LON:GAMA) and Luceco PLC (LON:LUCE), a Liberum corporate client.
The larger names include Admiral Group PLC (LON:ADM), B&M European Value Retail PLC (LON:BME) and Persimmon PLC (LON:PSN) among the blue chips, along with mid caps like AO World PLC (LON:AO.) and Gamesys Group PLC (LON:GYS).