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2° investing @ MSCI Beijing, Nov 2013

S.Dupre. Presentation of the financed emissions metrics study. 2h. For further info, see www.2degrees-investing.org
by

Stanislas Dupré

on 25 November 2013

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Transcript of 2° investing @ MSCI Beijing, Nov 2013

BEIJING FINANCE WEEK
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)

www.2degrees-investing.org
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%
Measuring 'climate-friendliness'
2° scenarios
2° investment roadmaps
(e.g. IEA)
carbon
emissions
Economic contribution
Portfolio allocation
Indirect financing
direct financing
Non productive
p17
p31
Carbon is only one piece
in the puzzle of risk
Risk
p38
Jakob Thomae, Stan Dupré
NGOs campaigns
Innovation
from FIs
Response from FIs
GHG Protocol standard
x 4
Core team
x 30
x 50
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?
Risk-based approach
Impact of a 2° policy scenario Discounted Cash Flows

2012 2020
2030 2040
7 years of pilot-testing
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
p17
Cost is not an obstacle
Cost for data providers
R&D
CO2
Financial data
Cost for users
Data
(annual)
Implementation
(one short)
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)
Types of assets
& off-balance sheet items
Emissions factors based on volume of output
Input/output models
Trucost, Inrate, CAF
Inrate, CAF, Profundo, CTI
Regression models
BofA ML, South Pole Carbon
Uncertainties with estimates
Company
level
Small
fund
FI
5-200%
10-20%
5-10%
p33
Types of assets
& off-balance sheet items
2° investing challenge
2° investing regulation
2° investing metrics
Why financed emissions methodologies matter?
Metrics: what do we need?
Climate litigation & 'off-balance sheet' carbon liabilities
Dealing with double counting
Full transcript