- As described in the AiLA methodology, the AiLA indices are characterized by a carbon footprint, calculated as a daily value based on the portfolio weights together with the capital allocated.
- The footprint value represent the CO2 equivalent green-house-gas emissions in metric tons (MT) associated with the commodities underlying the portfolio assets.
- Without implying what is a better/worse use case for such a footprint, there are different scenarios one could imagine where a footprint estimate could be included in an investment portfolio, e.g.
- Hold an equivalent amount of CO2 emission rights as the portfolio footprint.
- Restrict positions for certain commodities in order to reduce the portfolio footprint.
- In this short analysis we investigate the impact on the AiLA product performance from the scenario where a long EUA futures position would have been maintained, to equal the portfolio footprint over time.
- Given the significant rise of emission prices in recent years it is naively expected that a long position would improve the overall performance, however, the question we try to address here is also how much?
(* Note that in this document CO2 will be used in the sense of CO2 equivalent green-house-gas emissions)