Emissions metrics have emerged as tools for capital owners to improve their ability to prudently manage investments and comply with mandatory climate risk disclosure. Here’s a breakdown:
Total Carbon Emissions
The amount of carbon emissions produced by portfolio companies.
Use Case: Used when determining the total carbon emissions of a portfolio, taking into consideration the percent ownership of a company but not the portfolio size.
Weighted Carbon Intensity
The volume of carbon emissions per dollar of sales generated by portfolio companies, apportioned based on portfolio weights.
Use Case: Used for portfolio decomposition and attribution analysis. Unlike the Portfolio Carbon Intensity, carbon emissions are apportioned based on portfolio weights/exposure rather than the investor’s ownership share of emissions or sales.
The total volume of carbon emissions per million dollars invested.
Use Case: Used when comparing portfolios to one another and/or to a benchmark to understand the carbon emissions per dollar invested in a portfolio.
Carbon Emissions to Revenue Intensity
The total carbon emissions of a portfolio, normalized by the ownership of sales of a company.
Use Case: Used for analyzing the carbon efficiency of the portfolio, as revenue is the best available measure of output when comparing across industries. It enables comparison between portfolios of different sizes.
Carbon Intensity by Enterprise Value Including Cash (EVIC)
The total carbon emissions of a portfolio, normalized by the ownership of EVIC of a company.
Use Case: Used when comparing the emission intensity level of different asset classes or portfolios.