Hi, I’m Hyerin and I’m supporting an FI to submit SBTs.
I have a question on the following.
It is noted that the required minimum coverage for corporate bonds is 100%. Does this include both listed and unlisted companies? Or does it only include listed companies?
Thank you and hope I could get the answers from you soon.
Best regards,
Hyerin
The boundary coverage is 100% when using the portfolio coverage and temperature rating methods for equities, corporate bonds and loans. This is the default principle. For private equity/debt assets we currently have a separate guidance document.
Hi @Donald - Could you clarify if the coverage is indeed 100% for loans as well? The criteria (V2.0,Table 5.2 page 60) says for corporate loans only fossil fuel sector shall have both listed and private companies in scope, while for all other sectors only listed companies are in the scope of target setting with 67% coverage needed.
Hi @Nikunj,
You are correct. However, the design of the portfolio coverage and temperature rating methods mean that you can easily cover 100%, as either the company has a target or not. If it does not have a target (SBTi validated for portfolio coverage and any public target for temperature rating) you get 0 in the portfolio coverage method for this company and a default score (currently 3.2C) in the temperature rating method. Not having data for a company equals having no target, as we don’t know anything else, applying a conservative approach, thus triggering 0 and default score respectively for aggregation purposes. Thus you can easily aggregate these to portfolio level and include 100% of corporate loans when you use these two methods.