Today we have a great new enhancement to our Carbon Diagnostics product: the integration of reported emissions data for public equities and fixed income investments. Now that this is done, we’ve hit a significant milestone in providing financial institutions with the accurate and comprehensive emissions data needed for total portfolio analysis.
Carbon Diagnostics now delivers a sophisticated blend of reported emissions data and estimated emissions, offering unparalleled accuracy and coverage across public markets universe. Our integration was in response to the industry's need for more reliable emissions data in bottom-up planning and analysis, while maintaining Emmi’s market-leading breadth in coverage for total portfolio analysis.
"Our clients have emphasized the importance of having access to reported emissions data for low level portfolio analysis," said Michael Lebbon, CEO at Emmi. "By incorporating these reported numbers alongside the data produced by our proprietary machine learning models for private assets classes we're providing our clients with the most comprehensive and accurate emissions analysis tool available in the market."
The Emmi approach to incorporating reported emissions
Why Scope 3 matters in Carbon Intensive sectors
Some companies have a business model that rely on intensive Scope 3 emissions. These companies hold fairly high transition risk in a carbon constrained economy.
For instance, a company, like Rio Tinto, that sells iron ore that requires coal to make steel, will see demand plummet as their downstream consumers decarbonise their manufacturing.
Similarly, an industrial machine manufacturer that sells products that have long, carbon intensive lives will suffer from reduced demand for their products (or, alternatively, require huge capital injections to design and build modern low-carbon options).
And one more for good measure: Consider a manufacturer with many industrial suppliers (for example a car manufacturer). If or when their upstream suppliers go through decarbonisation exercises to reduce their Scope 1 emissions, it will result in a cost pass-through.
And so, particularly in high materiality sectors, Scope 3 emissions are important for understanding the risk profile of the company.
When a company reports their emissions, it’s common to exclude many of the Scope 3 categories of emissions. Two identical companies can look quite different:
Taking those reported emissions at face value would give a company that reports its emissions properly a dramatically bigger risk profile vs that of a company that under-reports it’s Scope 3.
Advanced Scope 3 Quality Control for Enhanced Accuracy
So, we took a deep look at how we could solve for this data integrity problem. We have implemented quality control measures for Scope 3 emissions, in high-carbon sectors.
How we do it:
Sector based intensity models, using reported data that meets high quality standards
Sector-specific analysis on reported Scope 3 emissions to spot under-reporting
Replacement of questionable reported data with carefully calibrated estimates, before risk algorithms are run.
Sectors affected
Integrated Oil
Insurance
Motor Vehicles
Industrial Machinery
Electrical Products
Electric Utilities
Banks
Aerospace & Defense
Trucks/Construction/Farm Machinery
Auto Parts: OEM
Oil Refining/Marketing
Steel
Key Benefits for Financial Institutions
Our enhanced Carbon Diagnostics emissions data, now with both reported and calculated emissions estimates enables financial institutions to:
Conduct both top-down portfolio analysis and bottom-up emissions reduction planning using a single, comprehensive dataset
Improve their Partnership for Carbon Accounting Financials (PCAF) scores, with many holdings moving from score 3 to score 2
Access the most complete and accurate emissions data available in the market, combining reported data with sophisticated estimation models
This update reinforces Emmi's position as a leading provider of climate risk analytics and demonstrates its commitment to delivering the highest quality data solutions for financial institutions navigating the transition to a low-carbon economy.
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