Should it be necessary to input reduction targets for those companies who already have a SBTi approved target?
I can see that although the tool identify companies with an SBT, they are still being assigned the default score in the tool.
It would really simplify the data collection process if we could focus on those companies without SBTs.
Hi Henrik,
This is a very good question and I’ll try to shed some light on the subject.
The temperature rating method doesn’t care if a target has been approved by the SBTi or not. It currently treats all targets equally. Even if there indications that this is the case, we currently don’t have enough data to suggest that SBTi approved targets are better at achieving real world emissions reductions. Hence, we can’t make any special allowance for SBTi approved targets.
Also, the temperature rating is a quantitative measure, whilst an SBTi approved target is a more in-depth qualitative and quantitative assessment of a company’s emissions reduction target, as is described in this FAQ “What is the difference between a temperature rating and a science-based target (SBT)?”
The SBTi Finance Tool identifies SBTi approved targets, as it is not only calculating temperature scores, but also portfolio coverage. In the portfolio coverage methodology (see Guidance p 81), only SBTi approved targets are considered. Therefore, the tool needs to know which target have been approved by SBTi.
/Donald
Thank you Donald.
As the approved target is more in-depth and is monitored and reported on regularly, wouldn’t it be possible for the SBTi to publish the datasets required for the temperature rating tool on the “companies taking action” page for companies with an SBT?
This basic data should be readily available to the SBTi - but not easy to assess for any financial institution. I am concerned that the data process will take up too much time that should be used for more forward-looking actions by the financial institution.
Hi Henrik. The SBTi does have this information, but our current contractual obligations with the companies mean that we dont publish any detailed target information. We are working to fix this so that we can make a public dataset available in the format required by the SBTi tool. We are developing a new MRV framework and target tracking protocol which will be released next April as part of our annual resource update - we will work to have the target datasets public as part of that process
In the meantime, companies must disclose this information publicly, and report on annual progress. The majority of them do this through CDP, but others do so in their public reports.
Hi Henrik,
Interested to know which data you’re using for the data provider, as it is not available in the “companies taking action” yet.
Thanks !
Domitille
Hi Domitille
Our first five-year investment target is based on portfolio coverage only, hence removing the need for the massive data collection and verification in the near term.
I have engaged both MSCI ESG Research and Bloomberg to either prepare datasets aligned with the requirements of the temperature rating tool and/or implement the model in their own offerings. I would also still like SBTi to publish datasets for the companies with targets verified by the initiative.
MSCI ESG Research have their own temperature rating calculation - but not aligned with the methodology of SBTi. Recently Bloomberg have implemented nine temperature rise calculations covering combinations of scope 1+2 and 3 as well as short-, medium- and long-term using the methodology of SBTi.
Finally, we are also participating in the ILPA ESG Data Convergence Project. Hope is that data requirements to GPs could evolve to include data needed for the temperature scoring tool for unlisted investments.
Let me know if that answered your questions. If not, please reach out…
Henrik
Thanks Henrik,
That is very helpful as I understand that there is no standardized data collection approach so far to run the tool. And so it remains a huge task jumping between several data providers. How can we know if / when / where Bloomberg / MSCI ESG / ILPA ESG Data Convergence are publishing datasets matching the need of the tool ? I’d be very interested to know !
I currently don’t have access to all of those providers, but will definitely engage with them if necessary.
Lastly, what do you mean by portfolio coverage ?
Thanks again,
Domitille
Exactly - no standardized approach, yet. This has been a major obstacle to our work setting a SBT but we took a leap of faith and believed that it would be in place for our next portfolio target.
Portfolio targets should be made for a period of maximum five years. Leaving out the very sector-specific decarbonization approach, you have to set a target for investment activities (scope 3, cat. 15 emission) using either the temperature rating or the portfolio coverage approach.
Portfolio coverage is simply looking at the share of investments with a SBT, i.e. no (huge) task in finding and verifying data - basically data is here: Companies taking action - Science Based Targets.
Targets must be set so we are on a linear path from our baseline coverage to be 100% by 2040 (and in short-term targets of five years).
The 100% is most likely not achievable either, so somewhere between now and 2040 we must be able to set portfolio targets using the temperature rating as well.
In terms of data collection, there are a number of data providers that have calculated and published temperature ratings (TR) that use the CDP-WWF Temperature Rating (CWTR) method (which is the method SBTi has approved for TR), such as Bloomberg, CDP and Urgentem. You can use these to quickly calculate TR for portfolios, using one of the aggregation methods in the CWTR to get to your portfolio TR from the company TRs from one of these providers. The aggregation should be a fairly straight forward calculation with data (GHG, revenue, assets, EV, cash, etc) that you should find in most MDSs (market data system) and your PMS (portfolio management system).