Gold can have a positive impact on portfolio performance from a climate transition perspective if investors include it as an asset.
That’s the claim of a new report from the World Gold Council, which believes the carbon footprint of gold has been overstated by many.
It states that in practice, gold is sourced from plentiful above-ground stocks not from a newly mined supply as many investors believe. This means that investors would not inherit the embedded carbon footprint of including gold as an asset if it had to be mined from scratch.
In its report, it lists the environmental benefits of holding gold in a portfolio. These include a reduction in the portfolio’s carbon footprint without sacrificing returns, increasing a portfolio’s net zero alignment and saves more money for investors as they will then have to pay less of a carbon tax.
The World Gold Council says that gold investment will not only benefit the climate but also improve performance and risk of a portfolio.
John Mulligan, Director, said: “Our new research clearly highlights the significant role that gold can have in making a positive impact on portfolio performance from a climate transition perspective.
“Gold typically outperforms when markets are stressed, and climate-related risks are going to challenge all markets more often and more severely. Gold’s diversification potential is going to be increasingly relevant and this research reinforces its strategic benefits as a risk mitigation asset.
“But investors also need to be confident that their holdings can contribute to the decarbonisation of the global economy and that their portfolios are increasingly aligned to net zero pathways. Our analysis strongly suggests that gold can help support this transition.”