Carbon Footprinting In Shorting: Greenhouse Gas Reporting And The Complexity That Arises For Long-short Funds

The question of whether short selling is compatible with the spirit of responsible investing is a topic that has come under scrutiny in recent years. This article examines the different concepts used today to operationalise carbon footprinting, including the idea of netting as a tool to achieve net-zero emissions, as well as the impact that buying and selling short positions might have on the cost of capital.

Overview

We have leveraged our experience working with alternative asset managers on topics such as climate change regulation and strategy implementation in order to clarify questions related to transparency in carbon reporting and how this might be affected by potential inconsistencies in relation to "netted" disclosures. So far, limited guidance on this topic from the regulators has raised many questions with regards to disclosures and a proper evaluation of risk exposure.