For an investor or an asset manager, measuring the impact of financial investments on climate change is a vital stage of portfolio construction which contributes to the transition towards a low-carbon economy.
Carbon Impact Analytics is an innovative methodology which measures the carbon impact of an investment portfolio, by:
- Measuring greenhouse gas emissions produced or avoided by the companies held in a portfolio, throughout their entire value chain (scope 1, 2 and 3). Carbon Impact Analytics also measures emissions produced or avoided by products and services sold;
- Assessing a portfolio’s contribution to energy and climate transition.
Carbon Impact Analytics thus measures greenhouse gas emissions associated with investment assets and their contribution to emission-reduction, which is now a regulatory requirement under article 173 of the Energy Transition for Green Growth law. It is also a decision-making tool which can be used to rotate investments towards companies which are contributing to energy and climate transition, via their “green” business activities.
Asset managers are provided with a detailed analysis of the carbon impact of the companies held in their portfolio and the results can be consolidated across the entire portfolio. The methodology used in the initial version, covers global equities and bonds issued by listed companies. The analysis, which is carried out on a company-by-company basis, aims to encourage dialogue with the companies over time.
Carbon Impact Analytics has been developed in partnership with Mirova, the responsible investment subsidiary of Natixis Asset Management and with the support of MAIF.
Carbon Impact Analytics methodology
The carbon impact analysis of a portfolio begins with a detailed assessment of each individual investment. An aggregate weighting of the results is then established for the entire portfolio. The Carbon Impact Analytics evaluation thus differentiates between companies within the same business sector and assesses the efforts they have undertaken to integrate climate issues into their strategies, in order to implement a stock-picking approach based on carbon impact criteria.Sectorial approach with specific insights for “high stakes” sectors
The challenges for low-carbon transition vary according to economic sector, both in terms of leverage to reduce emissions and also in terms of innovation. For this reason, Carbon Impact Analytics proposes a specific approach for the most challenging sectors, using a different methodology adapted to each sector.
The quantitative emission assessment (produced or avoided) is complemented by a qualitative trend score. On the basis of these elements, a global score is attributed to each company, providing an evaluation of its contribution to climate transition.
A detailed presentation of the Carbon Impact Analytics results feeding through to reporting and investment strategy
The results of the Carbon Impact Analytics evaluation are consolidated across the entire portfolio and provided for each company. The results include a range of quantitative and qualitative indicators, as well as statistical data for the entire portfolio.
About Carbone 4
Founded by Alain Grandjean and Jean-Marc Jancovici, Carbone 4 is a leading independent consulting firm specialised in energy transition that offers its expertise to private or public players. Convinced that anticipation of the constraints of climate change is the best option, Carbone 4 assists its clients to help them transform these constraints into a tremendous innovation accelerator, a commercial differentiator and a motivation for teams. In the financial sector, Carbone 4 develops methodologies and tools adapted to each business to enable them to measure and highlight the carbon impact of investments and their contribution to the energy transition. www.carbone4.com
Mirova offers a global responsible investing approach involving Equities, Fixed Income, General and Renewable Energy Infrastructure, Impact Investing, and Voting and Engagement. It has €5.6 billion in assets under management and €42.9 billion in Voting and Engagement. Its team of circa 50 multidisciplinary experts include specialists in thematic investment management, engineers, financial and environmental, social and governance analysts, project financing specialists and experts in solidarity finance.
(1) Source : Mirova – 30/06/2015.
Mirova is a subsidiary of Natixis Asset Management
Limited liability company - Share capital € 7 461 327,50
Regulated by AMF under n°GP 02-014
RCS Paris n°394 648 216
Registered Office: 21 quai d’Austerlitz - 75 013 Paris
The analyses and opinions referenced herein represent the subjective views of the author as referenced, are as of the mentioned date, and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material.
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