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Which Climate Metrics Suit Your Investment Goals Best?

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September 12, 2023

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Rida Khan

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The following content is sponsored by MSCI

Which Climate Metrics Suit Your Investment Goals Best?

According to PwC, 44% of investors believe that companies should prioritize reducing greenhouse gas emissions across their own operations and supply chain.

In this graphic from our sponsor, MSCI, we break down climate metrics and provide valuable insights to help build sustainability-aligned portfolios without the fear of falling for greenwashing.

Essential Climate Metrics for Investors

Here are some widely-used climate metrics, as categorized by MSCI:

Climate Metric Description
#1 Carbon Emissions EVIC Intensity Measures greenhouse gas emissions per $1 million of financing.
#2 Potential Carbon Emissions Estimates emissions from fossil fuel reserves owned by a company.
#3 Implied Temperature Rise (ITR) Assesses alignment with global warming scenarios.
#4 Carbon Emissions Revenue Intensity Quantifies emissions per $1 million of revenue.
#5 Fossil Fuel Revenue Determines revenue percentage from fossil fuel-related activities.
#6 Cleantech Revenue Determines revenue percentage from environmental and climate opportunities.
#7 Low Carbon Transition (LCT) Score Evaluates a company’s exposure to climate transition opportunities.
#8 Transition Climate VaR Assesses costs from carbon pricing and low-carbon opportunities.
#9 Physical Climate VaR Evaluates costs from increased exposure to physical hazards.

Choosing the Right Metrics

Climate investing requires selecting the right measurement tools. For that, it is important to consider your purpose, the applicability, and acceptability of the climate strategy, and the availability of historical data for analysis, among other factors. The infographic above contains a flowchart designed to guide you through several key questions.

For example, do you want to:

  1. Measure your portfolio’s impact on the climate or the climate’s impact on your portfolio?
  2. Analyze present or forward-looking data?
  3. Assess direct impact or indirect impact via supply chains?
  4. Evaluate potential future emissions or projected temperature rise?
  5. Focus on climate risks or opportunities?

MSCI’s climate metrics toolkit can help investors confidently measure, manage, and report their climate risks and opportunities.

Download MSCI’s climate metrics toolkit now.


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Related Topics: #net zero #msci #climate metrics #green portfolio #temperature rise #greenhouse gas emissions #carbon transition #climate change #transition climate risks #sustainable investing #physical climate risks #fossil fuels #carbon emissions #GHG emissions

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