Almost half (49 percent) of all climate-focused funds don't use a climate index benchmark. These climate benchmarks are used to give managers objectives related to the greenhouse gas emissions in a fund's portfolio.

This insight comes from Pensions for Purpose, a company focused on asset managers, pension funds and their professional advisors who conducted research and gathered data based on climate-focused funds.

The organisation also found 73 percent of active climate-focused funds are benchmarked against the market capitalisation index rather than a climate index. A further 19 percent of active climate focused funds don’t have any benchmark at all.

The research also shows 142 different climate carbon benchmarks are being used across just 212 funds, with no commonality in the choice of benchmark used.

Karen Shackleton, chair and founder of Pensions for Purpose, commented: “We were surprised by the number of climate-focused active funds which don't benchmark themselves against a climate index. The question this raises is whether active managers could set a higher bar when considering their carbon footprint, by benchmarking against a climate index rather than comparing themselves with the market capitalisation index which has much higher carbon metrics, even if they keep the market cap index as the performance benchmark.”

The vast majority (92 percent) of active managers don't use climate benchmarks, but 81 percent of passive managers do. However, with the proliferation of climate indices the worry is that it will be difficult for pension funds and all investors to compare carbon emissions between different funds.