Oil falls 2% on Powell comments, hopes for Venezuela supply. The report reveals how at the end of 2019 the 'warming potential' of its investments stood at 2.8C - still well above the 'well below' 2C goal set out in the Paris Agreement, but a marked improvement on the 3C projection for the portfolio that was recorded at the end of 2018. Emission-reductions plans, such as net-zero pledges or corporate investments in green technologies, as well as relevant state-level commitments to cut greenhouse gases, also are taken into consideration. In theory, that means every investment portfolio can be evaluated for the warming potential of its underlying assets. use policy, Commentary and insight from leading industry specialists, Discounts for Environmental Finance events. Include punctuation and upper and lower cases. Portfolio temperature alignment metric (portfolio alignment metric) This metric compares the implied warming potential of the portfolio to established indices and indicates how the. And perhaps we should debate the repercussions of a three-degree world., Action must be immediate and decisive to cut emissions, Blood said, and that should mean changes in the way investors make decisions. The two co-chairs of the Transition Pathway Initiative, an entity supported by the likes of Pacific Investment Management Co. and UBS Group AG (SIX:UBSG) that assesses companies preparedness for the transition to a low carbon world, offered a scathing criticism of implied temperature-increase metrics last month. At Close: Today on the TSX. Ranked among Europes largest insurers, Axa stopped underwriting certain new coal projects in 2017 and last year committed to wind down its existing coal insurance contracts by 2040. `Portfolio Warming' Is the New Climate Anxiety for Fund Managers . Greenhouse gases (GHGs) warm the Earth by absorbing energy and slowing the rate at which the energy escapes to space; they act like a blanket insulating the Earth. Data collected by EPA's Greenhouse Gas Reporting Program is used in the Inventory, so the Reporting Program generally uses GWP values from the AR4. For example, for CH4, which has a short lifetime, the 100-year GWP of 2730 is much less than the 20-year GWP of 8183. Generation Investments Blood warned against nitpicking. Plug yourself into achieving your purpose. The worlds largest money managers, with holdings in every major company, might be better suited than a single government to gauge the rate at which businesses are warming the planet. This change can be due to updated scientific estimates of the energy absorption or lifetime of the gases or to changing atmospheric concentrations of GHGs that result in a change in the energy absorption of 1 additional ton of a gas relative to another. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Potential is worthless unless used. Some critics question whether its even possible to make an accurate forecast. Will coal power plants continue operating for longer? For most of the early adopters, the results are rather dystopian. any of each other's Investing.com's posts. In the U.S., meanwhile, the California Public Employees Retirement System said its global equity and fixed-income holdings, which account for 75% of its assets, are on track for a warming potential of 3.23C by 2050. For example, as of first quarter 2021, MSCI estimates the warming potential of the MSCI ACWI at roughly 3.5oC. Since youve just unblocked this person, you must wait 48 hours before renewing the block. Global warming is the unusually rapid increase in Earth's average surface temperature over the past century primarily due to the greenhouse gases released as people burn fossil fuels. By contrast, the Net Zero Asset Owner Alliance, a $5 trillion coalition of pension and insurance funds, including Axa, Aviva and Calpers, said this month it supports standardization and development of portfolio-warming metrics. Decoene said Axa, which leads the Alliances warming-potential working group, is aware of the weaknesses, but its still actively promoting temperature metrics.. Not registered? Perhaps most ambitiously, Axa has committed to reduce the warming potential of its portfolios to 1.5C by 2050. If even climate-conscious pools of capital are flashing such doomsday warnings, can this kind of data really help avoid catastrophic warming? Going forward, Axa is committed to reducing the carbon footprint of its equity, corporate debt and real estate investments by 20% by 2025, she said. Economic Events and content by followed authors, Portfolio WarmingIs the New Climate Anxiety for Fund Managers. Chlorofluorocarbons (CFCs), hydrofluorocarbons (HFCs), hydrochlorofluorocarbons (HCFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF. in assets being required to report a portfolio warming measure earlier than schemes . Axa was more open to experimenting with climate metrics than many of its global peers, in part because of pressure from the French government. Replace the attached chart with a new chart ? New York-based BlackRock Inc., with $8.7 trillion of assets, plans to do the same for some of its funds. It will not invest in companies that derive over 30% of their turnover from coal. there is a potential for "model shopping . Paris-based Axa has done more than most in the financial-services industry to reckon with its impact on the planet. With all that information, AXA's portfolio can be assessed under the same sort of temperature pathways used by scientists to estimate how much carbon dioxide can be emitted by the economy before. Measuring a companys alignment with the Paris objectives has the potential to become a regular part of investment analysis, in much the same way fund managers now scrutinize cash flows and earnings. Assessing the "warming potential" of portfolios could soon become standard practice for investors, according to Remy Briand, head of environmental, social and governance (ESG) assessment at data provider MSCI. Not by delivering higher returns, but by generating a lower level of global warming. Specifically, it is a measure of how much energy the emissions of 1 ton of a gas will absorb over a given period of time, relative to the emissions of 1 ton of carbon dioxide (CO 2 ). While the GWP is a measure of the heat absorbed over a given time period due to emissions of a gas, the GTP is a measure of the temperature change at the end of that time period (again, relative to CO2).The calculation of the GTP is more complicated than that for the GWP, as it requires modeling how much the climate system responds to increased concentrations of GHGs (the climate sensitivity) and how quickly the system responds (based in part on how the ocean absorbs heat). The question of whether portfolio-alignment scores are informative or misleading forms part of a broader question about climate models. There's big promise in taking warming potential seriously. To assess warming potential of an individual stock (company), we combine several carbon-related metrics: Forward-looking emissions reduction targets set through the Science-Based Targets . 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After a painstaking process of self-evaluation that took two years, including a significant shift away from heavy polluters, Axa concluded its assets would warm the planet by 0.8 degrees Celsius less than if it held all the companies in major global stock and bond indexes. If they dont, theres a growing risk that money managers will face a rapidly-shrinking universe of investments that can be considered Paris-aligned, the MSCI analysts said. plans to be carbon neutral by 2040, for example, and yet MSCI ESG Research LLC ascribes a warming potential of 3.9C to the retail giant. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. Exclusive-Ukraine port of Odesa not operating after Russian drone Kansas residents hold their nose as crews mop up massive U.S. oil Exclusive-Air India nears historic order for up to 500 jets -sources. From the start of 2018 through the end of 2019, Axas holdings cooled by just 0.2C to 2.8C. At that level, scientists warn of mass extinctions of animal species, large parts of the planet becoming uninhabitable due to extreme heat, rising sea levels swallowing up coastal cities, and lush rainforests turning into savannas. This is a huge undertaking, for us and also for markets, businesses and policymakers.. This week we are launching a tool for financial advisors and wealth managers that assesses the warming potential of a portfolio, using carbon metrics such as emissions intensity, reduction, and targets: Compare the warming potential of a portfolio with another portfolio or a benchmark fund Be sure to label the resulting emissions not as CO 2, but as "CO 2-equivalents" (CO 2 e or CO 2 eq). Apple Inc (NASDAQ:AAPL).s 2.9Cwarming score stands at odds with its pledge to zero-out emissions from its supply chain and products by 2030. Will societys adoption of electric vehicles go faster than expected? Photographer: Christophe Morin/Bloomberg. More data disclosure would help us to thoroughly assess companies temperature alignments and could encourage a wider adoption of the metric.. Ideas are the global currency of the 21st century. Share sensitive information only on official, secure websites. %USER_NAME% was successfully added to your Block List. Not by delivering higher returns, but by generating a lower level of global warming. This will result in immediate suspension of the commentor and his or her account. The answers are what separates successful creative influences from everyone else. For this Web page, we are presenting the range of the lowest to the highest values listed by the IPCC. 2007-2022 Fusion Media Limited. Please click here to see any active alerts. Racism, sexism and other forms of discrimination will not be tolerated. U.K. insurer Aviva (LON:AV) Plc and Japans $1.7 trillion Government Pension Investment Fund have published data on warming potential. An investors portfolio has the same warming potential as everything inside of it. provider Axa, which is a leading adopter of the climate-friendly portfolio. Secure .gov websites use HTTPS Even negative opinions can be framed positively and diplomatically. Subscribe to Environmental Finance to benefit from: Subscription and Event Terms & Conditions, Acceptable New York-based BlackRock Inc (NYSE:BLK)., with $8.7 trillion of assets, plans to do the same for some of its funds. Your portfolio has potential. Among his desired outcomes is the development of a portfolio-alignment framework that investors can use to gauge where they stand on the path to net zero. If we have 10 years of great returns and yet are locked into a three-degree world, that is a terrible outcome for all our stakeholders, he said. In addition, any of the above-mentioned violations may result in suspension of your account. If human activity is driving carbon emissions and temperatures to dangerous highs, then a giant asset owner like Axa with a 650 billion-euro ($790 billion) horde of stocks, corporate bonds and sovereign debt is one of the principal proprietors of climate change. All the GHGs measured are relative to CO 2, which has a value of 1. Two key ways in which these gases differ from each other are their ability to absorb energy (their "radiative efficiency"), and how long they stay in the atmosphere (also known as their "lifetime"). By doing so, you and %USER_NAME% will not be able to see Take a free no obligation one-month trial. That means Axa needed to determine just how much it believed each of its assets would increase global temperatures by the year 2100. The firm, part of UK life and pensions group Royal London, has been vocal in pointing out that the climate scenarios available need improvement. Thanks for your comment. Sign up to create alerts for Instruments, Yet all of these efforts, some pursued for years, have barely budged the temperature of its overall asset pool. The dire outlook has prompted hundreds of banks, insurers and other corporations to unveil net-zero emissions targets as concerns about the environment breach the walls of the capitalist establishment and force companies to change the way they conduct their business. Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.coms discretion. We do not allow any sharing of private or personal contact or other information about any individual or organization. By that year, Microsoft (NASDAQ:MSFT) expects to be carbon negative, meaning it plans to be removing greenhouse gas from the atmosphere on balance; it gets a2.1C score. Calculating the implied temperature of a portfolio is a relatively novel concept, and theres no consensus on the best way to do it. Another alternate metric is the Global Temperature Potential (GTP). Are you sure you want to block %USER_NAME%? Portfolio warming potential is a complementary gauge of a company's contribution to climate change that could be of particular interest to investors with ESG (environmental, social, governance) compliance imperatives. For many investors, a climate change-focused portfolio can also mean avoiding companies with high levels of emissionssuch as oil, gas, and chemical companies that rely on petroleum or other. The event in Glasgow also may be a significant moment for financial markets. UNFCCC guidelines now require the use of the GWP values for the IPCC's Fourth Assessment Report (AR4), published in 2007. For example, the 20-year GWP is sometimes used as an alternative to the 100-year GWP. Even with flaws in the early models, warming-potential metrics can provide insight on the gap between a portfolios constituents policies and the goals of the Paris accord, he said. The global average surface temperature rose 0.6 to 0.9 degrees Celsius (1.1 to 1.6 F) between 1906 and 2005, and the rate of temperature increase has nearly . Put simply; GWP tells us how much heat a greenhouse gas traps in the atmosphere compared to carbon dioxide. Global warming potential (GWP) measures how much heat a greenhouse gas (GHG) traps in the atmosphere. To some extent, our portfolio reflects the real economy and theres a limit to which we can disconnect from that, said Ben Carr, an analytics and capital-modeling director at Aviva, where he has led the London-based insurers work on the development of climate metrics. Amazon.com Inc (NASDAQ:AMZN). but by generating a lower level of global warming. The calculation is easy. And giant tech companies tend to be forthcoming with emissions data, which isnt the case in other sectors. A recent paper by a group of academics and climate scientists suggests financial markets may misuse them because they operate on different time horizons and with different priorities, increasing the likelihood of mispricing climate risks and even greenwashing. CO 2 stands for carbon dioxide. It has committed to have 24 billion in green investments by 2023. . Only post material thats relevant to the topic being discussed. A lock (LockA locked padlock) or https:// means youve safely connected to the .gov website. Environmental justice delayed IS Environental justice d.. Top 5 things to watch in markets in the week ahead, Energy & precious metals - weekly review and outlook, Exclusive-Ukraine port of Odesa not operating after Russian drone attack on energy facilities -minister, Week Ahead: Inflation Data, Fed Policy Meeting, 1 Stock to Buy, 1 Stock to Dump This Week: Oracle, Adobe, Vanguard Total Bond Market II Index Fund Investor, PIMCO Commodity Real Return Strategy Institutional, SG FTSE MIB Gross TR 5x Daily Short Strategy RT 18, Vontobel 7X Long Fixed Lever on Natural Gas 8.06. To access the premium content on Environmental Finance, you must first sign in to your account. . The EPA considers the GWP estimates presented in the most recent IPCC scientific assessment to reflect the state of the science. AXA has today published its fourth annual Climate Report, detailing how its efforts to align its investments with the Paris Agreement have led to a reduction in the 'warming portfolio' of its . At the same time, the company has been divesting its coal and oil sands holdings since 2015 and pledged two years ago to put 24 billion euros into green projects by 2023. At a company level, the results of this process can be surprising. If we just continue with incrementalism, we arent going to get there, Blood said. The Global Warming Potential (GWP) was developed to allow comparisons of the global warming impacts of different gases. Global warming potential (GWP) is the heat absorbed by any greenhouse gas in the atmosphere, as a multiple of the heat that would be absorbed by the same mass of carbon dioxide (CO 2).GWP is 1 for CO 2.For other gases it depends on the gas and the time frame.. Comments that are written in all caps and contain excessive use of symbols will be removed. Steam rises from the Neurath coal-fired power plant on Feb. 11near Bergheim, Germany. New metric to peg portfolio warming potential REMI Network - Real Estate Management Industry Network ENERGY STAR makes it easy for consumers and businesses to save money and protect the environment. Even negative opinions can be framed positively and diplomatically. Japans GPIF estimated 2.76C of warming for equities and 2.88C for bonds in its home market, while its foreign stock and fixed-income holdings had a warming potential of 2.97C and 2.76C, respectively. This 20-year GWP prioritizes gases with shorter lifetimes, because it does not consider impacts that happen more than 20 years after the emissions occur. We may need to rethink the allocation of capital. Different GHGs can have different effects on the Earth's warming. Axa collaborated with a Swiss fintech company called Carbon Delta, which has since been acquired by MSCI, to develop a methodology. Adopting warming ratings as a mainstream metric will take a double pronged push: "The warming-potential concept requires a far broader public-private effort that cannot be achieved by investors alone," said Ulrike Decoene, head of corporate responsibility at ins. The practice is likely to spread in the years ahead. Just like the 100-year GWP is based on the energy absorbed by a gas over 100 years, the 20-year GWP is based on the energy absorbed over 20 years. Log in to access all of your BLAW products, 2022 Bloomberg Industry Group, Inc. All Rights Reserved. The United States primarily uses the 100-year GWP as a measure of the relative impact of different GHGs. Axa needed to form the same assumptions about the future emissions associated with everything in its vast portfolio, from U.S. treasuries to Nestle SA (SIX:NESN). Providers are developing different approaches for, for instance, calculating the 'warming potential' or 'implied temperature rise' of assets, Garcia-Manas tells Capital Monitor. All good money managers expect to outperform their benchmark, and by one such metric the French insurer and investor Axa SA recently scored a market-beating success. That was good news for an early adopter of portfolio-warming metrics. Shares rebound, Treasury yields rise on stronger data It may therefore take some time before it appears on our website. If human activity is driving carbon emissions and temperatures to dangerous highs, then a giant asset owner like Axa witha 650 billion-euro ($790billion) horde of stocks, corporate bonds and sovereign debtis one of the principal proprietors of climate change. Only post material thats relevant to the topic being discussed. MSCI: Portfolio warming potential will be key metric Assessing the "warming potential" of portfolios could soon become standard practice for investors, according to Remy Briand, head of environmental, social and governance (ESG) assessment at data provider MSCI. In order to meet the 1.5 degrees global warming goal in the . 'Portfolio Warming' Is the New Climate Anxiety for Fund Managers Axa leads investors' efforts to gauge the rate at which businesses are warming the planet. Avoid profanity, slander or personal attacks. Official websites use .gov Because all GWPs are calculated relative to CO2, GWPs based on a shorter timeframe will be larger for gases with lifetimes shorter than that of CO2, and smaller for gases with lifetimes longer than CO2. This would allow to EPA and other organizations will update the GWP values they use occasionally. Note, that this is not carbon, but CO 2. These metrics may differ based on timeframe, the climate endpoint measured, or the method of calculation. It also would put Axa, despite its climate-conscious efforts, on the wrong side of the 2015 Paris Agreement in which every nation agreed to limit warming to 2C. By Alastair Marsh February 23,. The larger the GWP, the more that a given gas warms the Earth compared to CO2 over that time period. The Reporting Program collects data about some industrial gases that do not have GWPs listed in the AR4; for these gases, the Reporting Program uses GWP values from other sources, such as the Fifth Assessment Report. Were not seeing the broader economy decreasing its warming potential and thats worrying.. In theory, that means every investment portfolio can be evaluated for the warming potential of its underlying assets. The EPA's Inventory of U.S. Greenhouse Gas Emissions and Sinks (Inventory) complies with international GHG reporting standards under the United Nations Framework Convention on Climate Change (UNFCCC). In the most recent report by the Intergovernmental Panel on Climate Change (IPCC), multiple methods of calculating GWPs were presented based on how to account for the influence of future warming on the carbon cycle. This requires forward looking, robust, decision useful and comparable metrics. With all that information, Axas portfolio can be assessed under the same sort of temperature pathways used by scientists to estimate how much carbon dioxide can be emitted by the economy before the planet breaches various warming thresholds. It says that it calculates its "Portfolio Warming Potential" but doesn't report on it in any real detail. To do that, it needed reliable data on emissionsboth those produced directly by a business or a country, as well as those created by customers using the products of a company whose shares it owns. This article has already been saved in your, Bloomberg. Just 16% of an MSCI index covering 9,000 stocks globally were aligned to a 2C temperature-rise scenario at the end of November, and only 5% were on course for a 1.5C world, MSCI said, making clear just how much more needs to be done. Chart of the Day: Which Direction Will S&P 500 Break. EPA's CH4 reduction voluntary programs also use CH4 GWPs from the AR4 report for calculating CH4 emissions reductions through energy recovery projects, for consistency with the national emissions presented in the Inventory. If human activity is driving carbon emissions and temperatures to dangerous highs, then a giant asset owner like Axa with a 650 billion-euro ($790 billion) horde of stocks, corporate bonds and sovereign debt is one of the principal proprietors of climate change. Thats how Axa calculates its portfolio score, based on the size of its holdings. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc. UK insurer Aviva Plc and Japan's $1.7 trillion Government Pension Investment Fund have published data on warming potential. Avoid profanity, slander or personal attacksdirected at an author or another user. World leaders will gather later this year in Glasgow, Scotland, for what could be the most consequential moment for climate diplomacy since the Paris agreement: a United Nations conference at which signatories of the 2015 accord are expected to ramp up their ambitions for cutting emissions. But the process of avoiding the apocalypse can look quite alarming, especially when those managing trillions in assets discover they own a 3C future. For CF4, with a lifetime of 50,000 years, the 100-year GWP of 7380 is larger than the 20-year GWP of 5300. Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here However, in order to maintain the high level of discourse weve all come to value and expect, please keep the following criteria in mind: Stay focused and on track. Climate scientists do this type of modeling using whats known as temperature pathways, projecting different scenarios for the coming decades based on assumptions about greenhouse gas output. If human activity is driving carbon emissions and temperatures to dangerous highs, then a giant asset owner like Axa with a 650 billion-euro ($790 billion) horde of stocks, corporate bonds and sovereign debt is one of the . The Inventory also presents emissions by mass, so that CO2 equivalents can be calculated using any GWPs, and emission totals using more recent IPCC values are presented in the annexes of the Inventory report for informational purposes. Currently, opinion is divided. A report co-authored last year by David Blood, who startedsustainable investing firm Generation Investment Management with Al Gore,found at least seven different methods of measuring portfolio alignment from firms including MSCI Inc. and a unit of S&P Global (NYSE:SPGI) Inc. That may lead to investor confusion, and even increase the risk of greenwashing, "as the metric could be adjusted to fit different purposes," according to the paper. It would be ideal if this metric became part of the everyday lexicon of traders and analysts, said David Lunsford, co-founder of Carbon Delta who now leads climate strategy and policy at MSCI in Zurich. The higher the GWP, the more heat a gas traps, therefore, the higher the GWP the more harm it has on the climate. Theres big promise in taking warming potential seriously. The Global Warming Potential (GWP) was developed to allow comparisons of the global warming impacts of different gases. Financial Advisor Magazine created exclusively for advisors by highly experienced editorial and publishing teams. Perhaps we should be measuring returns differently?. Decoene said the slight reduction followed divestments from the most carbon-intensive sectors, with the average warming potential of companies on its exclusion list at 4.6C. Not by delivering higher returns, but by generating a lower level of global warming. These temperature readings can then help giant investors prod the companies to cool things down more quickly, fulfilling the promise of the sustainable investing movement. In theory, that means every investment portfolio can be evaluated for the warming potential of its underlying assets. A new report by the Transition Pathway Initiative determined that only 16 of 111 large publicly-listed industrial companies, such as miners and steelmakers, publish emissions projections that align with the Paris Agreement. Faith Ward and Adam Matthews said theres a lack of reliable emissions data to make the computations and the metrics rely on assumptions. Not by delivering higher returns, but by generating a lower level of global warming. Aviva recorded a warming potential at the end of 2019 of 3.2C for its equities holdings and 3C for corporate credit. All good money managers expect to outperform their benchmark, and by one such metric the French insurer and investor Axa SA recently scored a market-beating success. All good money managers expect to outperform their benchmark, and by one such metric the French insurer and investor Axa SA recently scored a market-beating success. The process is complicated. GWPs provide a common unit of measure, which allows analysts to add up emissions estimates of different gases (e.g., to compile a national GHG inventory), and allows policymakers to compare emissions reduction opportunities across sectors and gases. Carbon dioxide equivalent (CO 2 e or CO 2 eq or CO 2-e) is calculated from GWP.For any gas, it is the mass of CO 2 that would warm the . It also divested from those where we see no prospect of progress, Carr said. To access this article please sign-in below or register for a free one-month trial. Investors that have published a warming potential calculation have two notable commonalities: Their portfolios imply around 3C of warming, and they have concluded theres only so much cooling possible on their own. Are you sure you want to delete this chart? Using Honeywell Solstice technology has helped avoid the potential release of the equivalent of more than 295 million metric tons of carbon dioxide into the atmosphere so far, equal to the carbon . Aviva reduced the warming potential of its equity and credit portfolios by 0.2C between 2018 and 2019 by engaging with portfolio companies. : Spam and/or promotional messages and comments containing links will be removed. A .gov website belongs to an official government organization in the United States. The report provides a critical assessment of different approaches on a spectrum of sophistication, with a particular focus on portfolio warming metrics. Even companies making bold commitments to reduce emissions can heat up a portfolio. With all that information, Axa's portfolio can be assessed under the same sort of temperature pathways used by scientists to estimate how much carbon dioxide can be emitted by the economy before. Please note that all comments are pending until approved by our moderators. Some tools express portfolio positioning in terms of its contribution to global warming, expressed as a temperature. In science communications, the EPA will refer to the most recent GWPs. SMA's portfolio contains a wide range of efficient PV and battery inverters, holistic system solutions for PV and battery-storage systems of all power classes, intelligent energy management systems and charging solutions for electric vehicles and power-to-gas applications. Learn why EPA's U.S. An official website of the United States government. Be respectful. We provide an interactive community for the Financial Advisor, Investment Advisor . GWP = Global Warming Potential. (Bloomberg) -- All good money managers expect to outperform their benchmark, and by one such metric the French insurer and investor Axa SA recently scored a market-beating success. Please wait a minute before you try to comment again. The warming-potential concept requires a far broader public-private effort that cannot be achieved by investors alone, said Decoene, whos also responsible for corporate communications and brand management at Axa. Axa SA headquarters in Paris in 2018. Inventory of Greenhouse Gas Emissions and Sinks uses a different value. 'Portfolio Warming' Is the New Climate Anxiety for Fund Managers Axa leads investors' efforts to gauge the rate at which businesses are warming the planet. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse. Former Bank of England Governor Mark Carney, who was appointed UN Special Envoy for Climate Action and Finance in 2019, has laid out a strategy for building a net-zero world in which every financial decision is made with consideration for the climate. Measuring Portfolio Alignment | Q4 2020 | Page 7 Portfolio Alignment Team The report sets out our initial views on potential best practice for portfolio warming metrics, including the following: Scenarios that are used as inputs in these metrics should be sector- and region-/ country-specific and updated regularly. However, the scientific community has developed a number of other metrics that could be used for comparing one GHG to another. We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. And its not only Axa thats taking the temperature of its assets. Will a U.S. Dollar Decline Be Good for Stocks? All Rights Reserved. Portfolio Warming Potential. Theres also growing interest among the companys clients to show how theirbusinesses standup next to the goals of the Paris accord. AXA calculates the "warming potential" of its investments. Specifically, it is a measure of how much energy the emissions of 1 ton of a gas will absorb over a given period of time, relative to the emissions of 1 ton of carbon dioxide (CO2). While that approach may have brought some success in the past, time is running out to curb emissions and set the economy on path to net zero, according to a December report from MSCIs ESG research group. ), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. Maintaining electricity output from coal-fired power plants during prolonged periods of reduced demand is costlier than from renewables. Your status will be reviewed by our moderators. The time period usually used for GWPs is 100 years. Axa leads investors efforts to gauge the rate at which businesses are warming the planet. New metric to peg portfolio warming potential - REMI Network - Real Estate Management Industry Network | | ENERGY STAR JavaScript appears to be disabled on this computer. The Global Warming Potential or GWP is a measure of how much energy one ton of an atmospheric gas will absorb over a specific period relative to one ton of CO 2. The practice is likely to spread in the years ahead. The bad news: Axas portfolio implied a temperature increase of almost 3C above pre-industrial levels by 2100. 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