Metric | Description |
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Scope 1 | Direct emissions associated with the business operations e.g. a utility company’s emissions from combusting fuel. |
Scope 2 | Indirect emissions associated with the business’ heating/power requirements e.g., a software company’s emissions from buying electricity. |
Scope 3 | Emissions from: purchased goods and services; business travel; employee commuting; waste disposal; use of sold products; transportation and distribution (up and downstream); investments; leased assets; and franchises. |
Carbon Footprint | Refers to financed carbon emissions divided by the fund’s market value, expressed in tonnes CO2e/£m invested. The larger the number, the more it is contributing to the effects of climate change. CF can be used to compare across different funds. |
Weighted Average Carbon Intensity | Is the fund’s exposure to carbon-intensive issuers, expressed in tCO2e/£m sales. The larger the number, the more carbon intensive the investments currently are. WACI allows comparison across different funds. |
Climate Adjusted Value | This metric is the adjustment of the value of assets in the fund as a result of the climate scenario. A negative number denotes that under the scenario, there will be a devaluation for the fund’s underlying assets. This metric is equivalent to value at risk (VaR). Scenario model outputs are expressed as a range of outcomes, reflecting the inherent uncertainty of the underlying assumptions. We have provided the average model output of that range of results. |
Orderly Transition | This scenario assumes climate policies are introduced early and become gradually more stringent, reaching global net zero CO2 emissions around 2050 and likely limiting global warming to below 1.5 degrees Celsius on pre-industrial averages. |
Disorderly Transition | This scenario assumes climate policies are delayed or divergent, requiring sharper emissions reductions achieved at a higher cost and with increased physical risks in order to limit temperature rise to below 2 degrees Celsius on pre-industrial averages. |
Hot House World Scenario | This scenario assumes only currently implemented policies are preserved, current commitments are not met and emissions continue to rise, with high physical risks and severe social and economic disruption and failure to limit temperature rise. |
Implied Temperature Rise | Implied temperature rise estimates the global temperature increase contribution from a fund’s current greenhouse gas emissions trajectory. It is a simplified tool to assess alignment of business strategies with climate goals like the Paris Agreement target. The Aladdin Climate model used to generate this metric mainly accounts for Scope 1 and 2 emissions. However, it overlooks emissions occurring outside direct operations (Scope 3) and any avoided emissions that could have a positive environmental impact (Scope 4). These exclusions can lead to an over- or underestimation of a fund’s implied temperature rise. |