The Carbon Report provides carbon-related information to asset managers. YvesBlue provides a comprehensive portfolio-level Carbon Report, and a Report Card for carbon performance at the company and fund levels.

The Portfolio Carbon Report Card provides quick reference and context for portfolio performance. The invested companies represent risk or opportunity amidst various climate related drivers such as a price on carbon, science based reduction targets, whether the portfolio is invested in climate aligned businesses, climate leader status, etc.

These high-level metrics are compared to the performance of the benchmark to give an asset manager a quick comparison. These metrics can be analyzed in further detail to find opportunities for improvement by exploring the carbon report modules below the report card.

The Holding Carbon Report Card provides quick reference and context for entity level climate related performance. These metrics represent risk or opportunity amidst various drivers such as carbon footprint and intensity, progress towards achieving zero emissions by 2030, climate leader status, and the annual cost of carbon.

To view a Holding Carbon Report Card, navigate to any company page on YvesBlue.

The Fund Carbon Report Card provides quick reference and context for the fund’s climate related performance. These metrics use the S&P 500 as a benchmark and represent risk or opportunity amidst various drivers such as carbon footprint and intensity, the number of climate solution companies in the fund, annual carbon cost, and average renewable energy usage.

To view a Fund Carbon Report Card, navigate to any fund page on YvesBlue.

The following sections are included in the Carbon Emissions Ownership & Intensity:

A portfolio manager does not own 100% of a company's shares, nor do they own 100% of the company's annual carbon emissions. Rather, the portfolio manager owns a small portion of outstanding shares. That portion also applies to the company's annually reported carbon emissions.

The portion of portfolio total emissions refers to the portion of scope 1, 2, and 3 GHG emissions owned by a company relative to the total scope 1, 2, and 3 GHG emissions of the entire portfolio. This value considers the company's ownership ratio in your portfolio.

The owned carbon intensity of a holding includes the portfolio ownership ratio of the holding company to reflect the ratio of carbon emissions to holding revenue owned by your portfolio.

A ratio of the holding company’s carbon emissions to the $M revenue reflects the company’s carbon intensity. This is not specific to the weight of the holding company in the portfolio. Rather, it is an indication of the company’s intensity relative to its revenue.

The company's carbon intensity is compared to the average carbon intensity of the industry group to which the company belongs, resulting in a percent difference between the two values. If the company’s carbon intensity is higher than the average carbon intensity for its industry group, the value will be positive, followed by a red up arrow. If the company’s carbon intensity is lower than the average carbon intensity for its industry group, the value will be negative, followed by a green down arrow.

In conventional portfolio attribution analysis, the portfolio manager can see how their sector allocation and company selection decisions contribute to better returns vs the benchmark.

YvesBlue uses the same attribution method to demonstrate how the portfolio's sector allocation and company selection decisions resulted in lower carbon emissions compared to the benchmark.

A portfolio can differ from the benchmark in carbon performance by sector weight decisions or by selecting certain companies within those sectors relative to the benchmark.

First we provide:

Sector Allocation shows how the portfolio compares with the benchmark for carbon intensity (tonnes CO2e per mUSD). This is the difference in the sector weights multiplied by the benchmark's carbon intensity

Company Selection shows how way that the portfolio's company selection within each sector compares for carbon intensity vs. the benchmark's company selection (tonnes CO2e per mUSD). This is the difference in the carbon intensities for a sector multiplied by the benchmark's weight.

Combined Effect measures the difference between portfolio weight and benchmark weight for a sector multiplied by the difference between the portfolio carbon intensity and the benchmark's carbon intensity for that sector.

Total Effect adds the three previous columns together. A negative number would indicate that through sector allocation and company selection decisions, the portfolio is more carbon efficient.

For further reference, click here.

Any type of financial product sold in Europe will soon be classified as to how much it has invested in climate solutions. What once was the province of a few venture capitalists has evolved to a broader base of investors both in private equity and public equity.

In public markets, we have companies like Hannon Armstrong Sustainable Infrastructure ringing in at the New York Stock Exchange in 2017 and Enphase which has had a precipitous rise in its price since 2017 among many others with characteristics like a dividend or a disruptive technology making it a target for acquisition.

YvesBlue started with a coverage set of 10,000 stocks and is increasing its coverage over time. So far we have identified companies in the following categories:

For more information about climate solutions, you can visit Project Drawdown or The EU Taxonomy.

Power company decarbonization is critical to avert runaway global warming and they are announcing their transition goals. However, careful inspection of these plans raises questions about how serious some power companies are and whether as investors, we need to be asking tougher questions and getting more involved in moving things forward.

Power companies common to US portfolios such as AEP, Duke Energy, Dominion, Xcel, etc. have recently made bold commitments but the details raise questions. For example, in 2020 AEP executives announced "aspirational" goals to transition to 100% renewable energy by 2050 but that seems to include quite a lot of natural gas. According to its own sustainability report, AEP projects adding 1,607 MW of natural gas, a fossil fuel, to its generation mix over the next ten years, with nearly half that new gas planned for 2028-2030*.

More broadly in the US, there is a known glut of natural gas plant capacity. At least 200 new gas plants are planned or in development across the U.S., totaling nearly 70,200 MW of additional capacity*. While it is seen as a solution to the intermittency of renewable assets, others are saying that this could be a stranded assets situation with many of them already operating well below capacity. Meanwhile wind and solar assets have never been cheaper to install and operate. Utility scale battery storage that would address the intermittency issue is also getting more economical. Finally, rate payers are saying that they want more renewable energy.

With the growing number of new gas plants in the works, it goes beyond being a "bridge" to being a real climate change problem. In Europe, the situation is even more complex as many countries push for net zero. So the details matter. A company's decarbonization plan shouldn't be shifting around so much that you can't detect what is actually happening and the power companies in your portfolio are not adding more natural gas in the face of much cheaper wind and solar prices.

The Leaders and Laggards model takes in six indicators and scores for each holding in your portfolio and classifies them as "Leader", "Ally", "Under Performer", or "Laggard". The result is a color-scaled chart indicating the portfolio percentage in those four categories.

The greater the weight of the holdings in your portfolio that meet these criteria, the bigger the LEADERS segment of the portfolio will be.

The following is the methodology used to score companies across the six indicators and the distribution of scores for each indicator.

Distribution of Scope 1 and 2 Carbon Emissions Scores:

Distribution of Scope 3 Carbon Emissions Scores:

Distribution of Carbon Emissions Reporting Scores:

No modeled data were used in these calculations.

Distribution of Percent Renewable Energy Produced Scores:

The ~48k companies scoring 0 in this category are not shown in this distribution.

No modeled data were used in these calculations.

Distribution of Percent Renewable Energy Purchased Scores:

The ~48k companies scoring 0 in this category are not shown in this distribution.

If a company is designated as a Carbon Solutions company, it has more than 50% of its revenue in a market segment that will be important to the carbon transition economy. A full list of the Carbon Solutions companies can be filtered by Positive Badges in the Research Center.

The ~47k companies scoring 0 in this category are not shown in this distribution.

Distribution of Sum of Scores:

Companies, if they bother at all, tend to set absolute emission reduction targets with no real benchmark in mind. While this was laudable in the past, it is more important now to align the reduction goal according to the budgets that are consistent with the level of decarbonization required by science to limit warming to less than 1.5ºC / 2°C compared to preindustrial temperatures.

The Science Based Targets Initiative (SBTI) is a joint initiative by CDP, the UN Global Compact (UNGC), the World Resources Institute (WRI) and the World Wildlife Foundation (WWF) intended to increase corporate ambition on climate action by mobilizing companies to set science based reduction targets.

The SBTI Sectoral Decarbonization Approach (SDA) sets the expected levels of emissions for broad segments of industrial activity e.g. Energy, Iron & Steel, Pulp and Paper, etc.. and then helps companies set reduction targets based on the relative contribution of the company to the total sector activity and their carbon intensity. YvesBlue has permission to bring in the list of companies that have signed up to work with SBTI to set targets this way.

If your portfolio companies are on this list, then your portfolio is more likely to be on its way to being properly aligned with 1.5ºC / 2°C. If you have companies in your portfolio that do not have an SBTI commitment, encourage them to do so using the YvesBlue engagement portal.

Each of your holding companies has its own carbon budget. You can learn more about that here. The 2030 Budget Projection groups all the companies in your portfolio by:

Ideally one might want to be heavily invested in companies that are ready for the transition, especially if this is a buy and hold strategy. That said, companies that are badly over budget and not doing anything about it are targets for turnaround.

Many countries are already implementing a price on carbon for certain industries or for certain regions. According to Carbon Credit Capital, the weighted carbon price is $34.99 (as of June 2021), which is up from around $20 near the end of 2020.

The EU Emissions Trading System (ETS), which had never consistently traded for more than €30 before December 2020, nearly reached €100 in 2021 and 2022. Our list of prices in countries, either in the form of a tax or a trading scheme, comes from The World Bank.

Twelve U.S. states that are home to over a quarter of the U.S. population and account for a third of U.S. GDP have active carbon-pricing programs and are successfully reducing emissions. In the Carbon Tax Exposure table, YvesBlue uses California Cap-and-Trade ETS 2022 price of $30.82.

A link for net zero countries here.

To provide context we multiply the price per tonne times the holding's emissions (owned by the portfolio) and take this as a percent of owned enterprise value and owned revenue based on the percent of shares the portfolio holds. This will be a regular part of the company's operational expenses and may be increasingly material for some industries.

More than 62 percent of total renewable power generation added last year had lower costs than the cheapest new fossil fuel option according to a 2021 report by International Renewable Energy Agency (IRENA).* That is a doubling in 2020 of the share of renewable energy that achieved lower costs than the most competitive fossil fuel option.

With companies continually under pressure to cut costs, contribute to national net zero goals in many countries and with ever cheaper battery storage support, the decision to purchase renewable energy or install on-site becomes much easier. Companies in your portfolio that are doing this are strategic, pragmatic and resilient. Moreover, this will eventually lower your overall portfolio carbon footprint as companies are able to reduce their emissions over time as they increase the percent of renewables in the total energy mix.

The data from this comes from Refinitiv and the level of reporting is still low. Use the Engagement Portal to contact your holding companies about this and encourage them to disclose how much renewable energy as a percent of total energy use they have. Track that over time in the portal and hopefully, your companies will gradually improve.