Leading-Edge Tools for Investing in a Carbon-Constrained Economy

“Carbon beta” is a term coined by Innovest, now part of RiskMetrics Group, borrowing from the traditional finance lexicon. It is quite simply, a “shorthand” measure of a company’s net financial and competitive risk exposure to climate change and the regulatory, public, and consumer responses to climate change, relative to its same-sector peers.

Carbon Beta provides investors a complete climate risk management tool combining analysis of carbon emissions, corporate strategies and compliance cost exposure.

The Carbon Beta™ analytical framework represents a significant advance in carbon finance, by evaluating the key dimensions of a company's net climate risk beyond a simple measurement of its carbon footprint. The framework addresses the different financial impacts of carbon emissions, based on national and regional regulatory contexts, and calculates company-specific compliance cost scenarios as a percentage of EBITDA.

In addition to risk exposures driven by industry sector, individual companies' net carbon risks are assessed using the following key factors:

• Strategic governance
• Product mix - direct, indirect and embedded carbon intensity
• Geographic distribution of production assets
• Technology trajectory
• Energy intensity, consumption patterns and electricity source mix
• Ability to identify and monetize new revenue opportunities
• Business regimes that determine the ability of companies to recoup carbon-driven costs

Carbon Beta Benefits:

• Quantifies companies’ carbon emissions relative to sector peers and calculates regulatory compliance costs
• Consideration of a full-spectrum of climate risks and opportunities - not just carbon footprinting
• Ratings are assigned on a AAA – CCC scale comparing global sector peers on a relative basis
• Searchable online platform for company ratings and in-depth profiles with spreadsheet downloads available
• Industry-leading global team of over 50 sustainability analysts
• An experienced and dedicated climate change research team with sector and policy expertise

Please contact us for more information on Carbon Beta.