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2° investing @ MSCI NYC, Feb 2014

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Stanislas Dupré

on 11 March 2014

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Transcript of 2° investing @ MSCI NYC, Feb 2014

STATE OF THE ART OF 'FINANCED EMISSIONS' METHODOLOGIES
2012
2020
2030
locked-in emissions
Unbalanced investments
+6° scenario
+2-3° scenario
2009
Annual average 2010-2035
2040
2050
Overinvestment in fossil-fuel assets
CO2 content of proven
fossil fuels reserves: 2900 GT

Budget: 975 GT of CO2
Clean energy investment
vs needs
Source: BNEF 2012
Short version (50 pages)
Long version (100 pages)
Material risks for investors
Stranded assets
Climate litigation
Long term
financing gap
No carbon budget
left for capex
THE SHORT STORY OF FINANCED EMISSIONS
Gaps in carbon reporting
CDP reporters among listed cies
25%
p17
p31
February 25th • MSCI headquarters • New York City
Stan Dupré (Executive director)
Jakob Thomä (Program manager China)

NGOs campaigns
Innovation
from FIs
Response from FIs
GHG Protocol standard
x 7
Core team
x 30
x 70
Non-profit think tank

Since 2012
France

Germany

UK

The Nederlands

Belgium

 Finland Swiss

 Luxembourg

USA

Canada

 India

China

Australia
Members
Financial & technical partners
Short term policy risks
The role of financial policy-makers
Pushing capital
via incentives

Helping investors to 'unsmog' long-term risks
Measurement: where do we stand?
CORE PRINCIPLE: TRACEABILITY
CO2
CO2
CO2
CO2
$
$
$
Allocating investees' GHG emissions to investors
Scopes covered: suppliers ? products ?
Types of assets covered: Governments? Households?
Equity funds rankings
Source: Trucost
Savings/investment products labeling
Source: Inrate
Ranking banks
Source: Profundo
Screening & footprinting tools
Sources: South Pole, Cross Asset Footprint, Trucost
Cost is not an obstacle
Cost for data providers
R&D
CO2
Financial data
Cost for users
Data
(annual)
Implementation
(one shot)
Bulk data processing
Sector-average data
p34
Other key questions for financed emissions accounting principles
Scopes
Annual or lifetime emissions?
Which types of assets?
Off-balance sheet items?
Investment horizons
Allocation rules
Scopes of reporting (investee)
Time boundaries (investee)
Lifetime of capital stock
Allocation rules
p26
Equity share
Share of investment
(equity +debt)
Emissions factors based on volume of output
Input/output models
Trucost, Inrate, CAF, MSCI
Inrate, CAF, Profundo, CTI
Regression models & smart averaging
BofA ML, South Pole Carbon, MSCI
Uncertainties with estimates
Company
level
Small
fund
FI
5-200%
10-20%
5-10%
p33
Types of assets
& off-balance sheet items
2°C
Scenarios

Financial Regulation
Metrics
Investment Processes
Exploring the future of carbon metrics

Fuels CDP and GHG Protocol/UNEP-Fi workstreams

6 months research project

Starting in June 2014

Working group with issuers and analysts

Benchmarks study

Understanding the rational & irrational of using indices as investment guidelines

Implications for risk explosure and financing

6 months research project

Started in January 2014


Forthcoming 2014-15
Concept
Nov 2012
Mapping regulatory tools
Nov 2013
Feasibility study
tax incentives
on savings for French gov.
June 2014

Action plan for European Commission Nov 2014
History
Obstacles & responses
Remaining challenges
Next steps
2° investing regulation:
integrating carbon goals in financial regulatory regimes
Measuring climate litigation risks exposure
Translating the IEA 2° investment roadmap
into targets for banks and investors
Exploring the future of carbon/climate metrics
Uncertainty level for LCA-based emission factors
Risk-based approach
Impact of a 2° policy scenario Discounted Cash Flows

Climate litigation & 'off-balance sheet' carbon liabilities
Carbon is only one piece
in the puzzle of risk
Risk
p38
Measuring 'climate-friendliness'
2° scenarios
2° investment roadmaps
(e.g. IEA)
carbon
emissions
Economic contribution
Portfolio allocation
Indirect financing
direct financing
Non productive
2012 2020
2030 2040
MSCI’s estimation model is based on a data set of historical emissions from which we derive intensity factors. Emissions are either reported, based on company specific intensity, or based on GICS sub-industry intensity. We indicate the confidence we have in the estimates, depending on factors such as number of data points and variance within industry.

, MSCI
Programme
Training session: state of the art of financed emissions methodologies (2°Investing)
Roundtable: implications for standard setters
(CDP, GHG Protocol, UNEP, MSCI)


Workshop 1 - Landscaping carbon risks
(moderated by 2°ii & JPMorgan Chase)
Workshop 2 -The use of indexes as investment guidelines: implications for long-term investors (moderated by 2°ii)

MORNING
AFTERNOON
Carbon metrics for investors:
Why?
How?
What's next?

Feb 25th 2014,
MSCI, 7 World Trade Center, New York City
with:
Full transcript