ESG Data Guide 2023

ISS ESG - Climate Impact Report

Data category

  • Environmental data
  • Research data;

The data offers solutions for:

  • Carbon footprinting
  • Climate scenario analysis
  • Environmental impact analysis and insight
  • Investment decisions and portfolio insight
  • Reporting: CSRD
  • Reporting: SFDR
  • Reporting: TCFD

Who are the data users?

  • Corporates
  • Financial institutions
  • Government
  • Investors
  • Trustees
  • Index providers; Institutional investors; Asset managers; Asset owners; Fund managers; Banks; Universities; Research firms

Brief description of the data offering

ISS ESG’s Climate Impact Report provides a holistic analysis of the carbon footprint, climate change preparedness, and climate-related impact of a clients’ holdings, identifying reportable and actionable data for the formulation of climate-friendly investment strategies. Client portfolios are analysed for their GHG and fossil fuel exposure based on ISS ESG’s database of GHG emissions for more than 35,000 issuers as of March 2022.

The report can assist investors in fulfilling requirements for internal and global external reporting initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD), Article 173 of the French Energy Transition Law, and the PRI.

ISS ESG’s Climate Impact Report includes the following elements:

  • Carbon Footprint Metrics
    • Sector analysis
    • Attribution analysis
    • Largest contributors
  • Net Zero: There are roughly 30 standard data factors within the Climate Impact Report based on a robust and expanding selection of climate-focused datapoints. Investors can use the data to identify positive and negative performing companies against a range of individual climate-related metrics. Data can also be viewed at the portfolio level to provide an aggregated overview of a portfolio’s readiness for Net Zero
  • Physical risks assessments estimating financial impact due to increasing hazard intensity for the most likely and worst-case scenarios by 2050 across the five most costly weather hazards: floods, heat stress, wildfires, tropical cyclones, and drought. The Physical Risk assessment now includes a Value-at-Risk which estimates change in share price as a result of considering the financial impact of physical risks, leveraging proprietary valuation models based on the Economy Value (EVA) methodology.
  • Scenario analysis, assessing the alignment of a portfolio with three climate scenarios provided by the International Energy Agency (IEA), including the Sustainable Development Scenario (SDS) that aligns with the Paris Agreement.
  • Stress-testing: Analysing how different climate scenarios can impact the financial performance of a portfolio.
  • New Climate Target Assessment, which gives an indication of how well companies are aligning with international climate goals, leveraging science-based and company-specific targets.
  • Alignment with key disclosure frameworks
  • Transition risk assessments of company and portfolio exposure to transition risks and opportunities related to carbon pricing and demand changes, impacts on operating costs and revenues, fossil fuel reserves, power generation, and controversial energy extraction practices. It includes ISS ESG’s Transition Value at Risk (TVaR) analysis which helps investors with assessing their portfolio’s exposure to climate-related transition risks and opportunities. It provides forward-looking returns-based analysis, leveraging financial data and modelling via ISS ESG's EVA solution, company-specific data, and scenario inputs. The analysis is based on the International Energy Agency’s (IEA) Sustainable Development (SDS) and NZE2050 scenarios. The TVaR solution allows financial institutions to identify assets which may be most at risk from carbon pricing and demand changes, as well as those which may be better positioned to seize opportunities. TVaR reveals the company’s value at risk per scenario, and Change in OpEx and Sales. The analysis shows the change in a company’s operating costs and sales at 5-year intervals up to 2050 compared to a non-transition scenario.

Where and how do you source your data?

Emissions Data

For scope 1 and 2 carbon emissions, ISS ESG collects self-reported greenhouse gas emissions data from publicly available sources, including corporate social responsibility reports, CDP, investor relations communications, websites and others. This data is assigned with a trust metric to indicate the quality of self-reported data.

For non-reporting companies, or those who report with a low trust metric, ISS ESG uses in-house emissions modelling methodology, allowing ISS ESG to calculate GHG emissions of companies based on those criteria most relevant to their line of business.

For scope 3 emissions data, ISS ESG uses self-reported data where the data meets the ISS ESG quality standard, and approximated data for non-reporting companies using a combination of approaches to estimate the upstream and downstream Scope 3 emissions of companies.

Additional Data

The Climate Impact Report uses third party providers for the provision of key financial indicators used in the report, notably Market Capitalization (MCap), AEV, and total yearly revenue.  Most financial data used by ISS ESG comes either from FactSet or Standard & Poor's (“S&P”).

Additional data within the reports is collected from a range of sources, including:

  • Public information, including annual reports, PRI Signatory Reporting, etc.
  • Subscription databases, including data from CDP, Science Based Targets Initiative
  • Forecast data from IEA on decarbonisation pathways and market growth projections from well-respected macro-analysis forecast.

What are the key attributes that differentiates the data you offer?

  • On-trend analysis evolving with an ever-changing industry

ISS ESG has introduced several updates to its physical and transition risk data solutions including  Value at Risk and Net Zero Solutions.

  • A unique and sophisticated emissions modelling system

ISS ESG utilizes a sophisticated approximation system to estimate emissions, including approximately 800 climate-relevant sector and subsector-specific models, allowing ISS ESG to calculate the GHG emissions of companies based on those criteria that are most relevant to their line of business. 

  • Comprehensive Coverage

ISS ESG’s data base of GHG emissions contains more than 35,000 issuers across a range of asset classes  as of March 2022, including listed companies and issuers of corporate debt.  

  • Data Quality and Transparency

ISS ESG’s granular emissions modelling system was developed over three years with scientists from ETH Zurich. ISS ESG is committed to applying the highest standards of GHG accounting capabilities with unmatched breadth and depth of investments coverage, verification and approximation. Additionally, ISS ESG helps to ensure transparency by including a trust and quality rating for every data point.

  • Experience

ISS ESG has worked with financial market participants and governments to screen trillions of dollars in assets under management for their climate impact. ISS ESG partners with a wide range of other specialists on a non-exclusive base to complement our research and service with premier market offerings.

  • Expertise

ISS ESG’s dedicated team of climate specialists are industry leaders on climate change issues. Members of the team have partnered in the 2° Investing Initiative, served as resources at various workgroups on financed emissions including the United Nations Environment Programme Finance Initiative, assisted in the development of ISO standards, and contributed to the works of the TCFD.

Tweet

@ISSESG’s Climate Impact Report provides detailed analyses of Scope 1 & 2 and Scope 3 emissions, transition & physical value at risk and climate scenario analysis based on the International Energy Agency’s (@IEA) Sustainable Development Scenario: https://www.youtube.com/watch?v=btgFKF_SZDk

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Contacts

sales@iss-esg.com