ESG Data Guide 2022

Catalysing the Net Zero transition

Environmental Finance: What are the latest trends are you seeing in emissions data?

Girish Narula: Urgentem has been collecting detailed granular company level emissions data across Scope 1,2 & 3 for many years, establishing a database extending back 10-years. This gives us a unique insight into the evolution of climate data dynamics.

Girish NarulaOver the past couple of years, we have been encouraged by the acceleration in disclosure of emissions data by corporates globally and the latest year is no exception, with our analysis finding an unprecedented number of companies publicly reporting full and complete emissions data.

We are also seeing companies increasingly publishing temperature and carbon reduction targets, which is an exciting trend and an area where demand for such data is growing among our customers. We have found that the financial industry is expressing an interest in both the targets themselves as well as our Temperature Score metric which allows direct comparisons between companies and portfolios, following the SBTi methodology.

EF: What are the significant climate data methodology advancements over the past year?

GN: Urgentem has always had a particular focus on Scope 3 emission data and we are excited about the advancements taking place in this area, and proud to be taking a leading role. We have recently announced innovative, new methodology for Scope 3 emissions data modelling, which allow for more detailed analysis of companies’ supply and value chain emissions. The new methodology has the ability to address issues often associated with Scope 3 data with more accurate and robust data.  

Using techniques from economic input-output analysis applied to life-cycle assessment, the new methodology creates opportunities for developing new metrics and standards within emissions data reporting for financial institutions.

EF: What are the key issues that your new Scope 3 models are trying to solve?

GN: Our new Scope 3 estimation methods bring together an exciting set of opportunities, including the ability to estimate portfolio-level Scope 3 emissions without double-counting, and the ability to develop company-specific analyses based on activity data.

These new Scope 3 models are gaining attention as increasing focus is placed on the quality of emissions data. Several large multi-national corporates are also expressing interest in learning more about our approach to gain a better understanding of their supply chain emissions.

Having good quality Scope 3 emissions data is essential, not just for footprint analysis and reporting, but for business and investment decision making.

EF: How is Urgentem helping customers meet their Net Zero alignment ambitions?

GN: Urgentem has developed a series of tools to allow customers to assess, measure and track their performance against their Net Zero or other climate scenario ambitions. We have assembled these and our other climate risk tools and metrics on our Element6 Climate Risk Platform.

Element6 gives asset managers and owners the ability to instantly see how their portfolio is aligned to various climate pathways, such as NGFS, IPCC and IEA scenarios and identify areas of misalignment and the decarbonisation rates needed to meet their chosen 1.5 degree or Net Zero scenario.

Our forward-looking alignment analysis provides portfolio, sector and company level analysis, and when used in combination with our Temperature Score metric provides a powerful tool for understanding the climate position of a portfolio. The Element6 platform is used by asset owners for strategic allocation and regulatory climate risk reporting, such as TCFD, as well as by asset managers for incorporating climate risk into their portfolio optimisation and stock selection.

EF: How is Urgentem’s bank climate stress testing approach being received?

GN: We are receiving increasing interested in our climate stress testing expertise from banks globally as financial regulators introduce measures for banks to assess climate-related risks which may affect global financial stability.

At Urgentem we are proud of our contributed to the European Central Bank’s climate stress testing framework, which uses our models and data to project future emissions of more than four million public and private companies, up to the year 2100. The projected future emissions of companies take into account, regional and global emissions pathways from NGFS climate scenarios as well as the emission reduction targets set by companies.