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2° investing @ MSCI NYC, Feb 2014
Transcript of 2° investing @ MSCI NYC, Feb 2014
Annual average 2010-2035
Overinvestment in fossil-fuel assets
CO2 content of proven
fossil fuels reserves: 2900 GT
Budget: 975 GT of CO2
Clean energy investment
Source: BNEF 2012
Short version (50 pages)
Long version (100 pages)
Material risks for investors
No carbon budget
left for capex
THE SHORT STORY OF FINANCED EMISSIONS
Gaps in carbon reporting
CDP reporters among listed cies
February 25th • MSCI headquarters • New York City
Stan Dupré (Executive director)
Jakob Thomä (Program manager China)
Response from FIs
GHG Protocol standard
Non-profit think tank
Financial & technical partners
Short term policy risks
The role of financial policy-makers
Helping investors to 'unsmog' long-term risks
Measurement: where do we stand?
CORE PRINCIPLE: TRACEABILITY
Allocating investees' GHG emissions to investors
Scopes covered: suppliers ? products ?
Types of assets covered: Governments? Households?
Equity funds rankings
Savings/investment products labeling
Screening & footprinting tools
Sources: South Pole, Cross Asset Footprint, Trucost
Cost is not an obstacle
Cost for data providers
Cost for users
Bulk data processing
Other key questions for financed emissions accounting principles
Annual or lifetime emissions?
Which types of assets?
Off-balance sheet items?
Scopes of reporting (investee)
Time boundaries (investee)
Lifetime of capital stock
Share of investment
Emissions factors based on volume of output
Trucost, Inrate, CAF, MSCI
Inrate, CAF, Profundo, CTI
Regression models & smart averaging
BofA ML, South Pole Carbon, MSCI
Uncertainties with estimates
Types of assets
& off-balance sheet items
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
Understanding the rational & irrational of using indices as investment guidelines
Implications for risk explosure and financing
6 months research project
Started in January 2014
Mapping regulatory tools
on savings for French gov.
Action plan for European Commission Nov 2014
Obstacles & responses
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
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
2° investment roadmaps
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.
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)
Carbon metrics for investors:
Feb 25th 2014,
MSCI, 7 World Trade Center, New York City