Carbon Impact Analysis: the key to Successful Investment in the Energy Transition
Sustainable investment keeps growing: 34% from 2016 to 2018 reaching 30 trillion dollars in assets. Impact investing grew by 79% and sustainability themed investing grew by 269% over the same period(1). La Francaise is well placed to take advantage of this growing trend thanks to the Equity and Fixed Income carbon-impact strategies.
Both rely on a proprietary carbon impact methodology:
- Sector materiality
- Carbon footprint
- Operational carbon assessment
- Carbon impact assessment of products and services
- Forward-looking assessment with the low carbon trajectory models
HOW ALIGN OUR PORTFOLIO WITH THE 2° C WARMING SCENARIO
A 2° C carbon budget:
The International Energy Agency (IEA) has estimated a global carbon budget, or cumulative carbon emissions, which can be emitted from 2014 to 2100 to keep global warming below 2° C. This carbon budget is then allocated to the sectors of the economy (agriculture, buildings, industry, transport, power and others). Each sector gets its own emissions reduction path to reach the 2° C levels based on certain technology assumptions.
La Francaise has developed its own low carbon trajectories (2° C aligned) for eight industries(2) and three more(3) will be ready by the end of the year.
The confidence corridor:
We analyse companies’ targets, strategy, capex, opex and other initiatives and determine a confidence corridor, which depicts our estimated companies’ emissions trajectory. This allows us to forecast the company’s performance versus the 2° C pathway.
We then add up each holding’s performance versus the low carbon pathway for the respective sector to measure where our portfolios stand in the 2° C transition and how the portfolio managers could invest in each sector to support the low carbon economy.
(1) The Global Sustainable Alliance
(2) Electric Utilities, Autos, Airlines, Steel, Cement, Aluminium, Pulp & Paper and Oil & Gas.
(3) Shipping, Railroads, Freight.