Carbon Impact Analytics: An innovative method for measuring the carbon impact of investment portfolios.

For an investor or asset manager, measuring the impact of financed activities on climate change is a necessary step in building portfolios that contribute to the transition to a low-carbon economy.

Carbon Impact Analytics is an innovative methodology for measuring the carbon impact of an investment portfolio, specifically:

- To measure the greenhouse gas emissions caused and avoided by the companies in a portfolio, across their entire value chain (Scopes 1, 2, and 3). Carbon Impact Analytics also measures the emissions caused by and avoided through the products and services sold

- To assess a portfolio’s contribution to the energy and climate transition

Carbon Impact Analytics thus makes it possible to measure the greenhouse gas emissions associated with held assets and their contribution to reducing emissions—a regulatory requirement introduced by Article 173 of the Energy Transition for Green Growth Act. It is also a decision-making tool that makes it possible to redirect investments toward companies that contribute to the energy and climate transition, particularly through the “green” portion of their business.

The method provides asset managers with a detailed analysis of the carbon footprint of companies in a portfolio and allows them to consolidate the results at the portfolio level. In this first version, the methodology covers the stocks and bonds of publicly traded companies worldwide. The analysis, conducted on a company-by-company basis, aims to foster an ongoing dialogue with companies over time.

Carbon Impact Analytics was developed in collaboration with Mirova, Natixis’s subsidiary dedicated to responsible investing, and with the support of MAIF.

The Methodological Principles of Carbon Impact Analytics

• A "bottom-up" analysis The analysis of a portfolio’s carbon impact begins with a detailed assessment of each security, followed by a weighted aggregation of the results at the portfolio level. Carbon Impact Analytics’ analysis thus distinguishes between companies within the same industry and recognizes efforts to integrate climate issues into their strategies, enabling the implementation of a “stock-picking” strategy based on carbon impact criteria.
• A sector-based approach with a detailed analysis for “high-stakes” sectors The challenges of the low-carbon transition vary by economic sector, both in terms of levers for reducing emissions and innovations. That is why Carbon Impact Analytics offers a tailored approach for sectors facing significant challenges, with a methodology adapted to each sector.

The quantitative assessment of emissions (both generated and avoided) is supplemented by a qualitative trend rating. Based on these factors, an overall rating is assigned to each company to evaluate its contribution to the climate transition.

• A detailed presentation of the results of the Carbon Impact Analytics analysis, which can inform both reporting and investment strategy The results of the Carbon Impact Analytics assessment are provided on a consolidated basis at the portfolio level, as well as for each company. These results include several quantitative and qualitative indicators, as well as statistical representations at the portfolio level.

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References:

• Euronext Launches the New Version of Its Low Carbon 100 Europe® Index
• CNP Assurances uses Carbon Impact Analytics to measure the carbon footprint of its equity investment portfolio and its contribution to the energy transition
• Sample Results: The Carbon Impact of Mirova’s Equity Investments

Documentation:

• "Carbon Compass – An Investor Guide to Carbon Footprinting," published by Kepler Chevreux

Regulations:

• Decree under Article 173 regarding new requirements for asset managers and institutional investors