Temperature Rating for Subsidiaries

Hi there, I have had a few questions come up regarding how to interpret company ambitions for the temperature rating method as it relates to companies that are subsidiaries of a parent/parents:

  1. In general, if a subsidiary company does not have a public decarbonization ambition, but a parent company(ies) does, should the ambition of the parent company be the basis for the temperature score of the subsidiary, or should the subsidiary company get a default score?

  2. If parent targets are allowed to be used as the basis for subsidiary company temperature scores, what should a FI do in the situation where a particular company might have multiple owners with equal ownership stakes in the business?

  3. If a parent company has specific targets related to a specific part of their business, should only the targets for a subsidiary within that business be contemplated? Or can all of the parent company ambitions be included in the calculation?

Thank you for your help!

Hi @akallin,

  1. This depends on what target you are talking about. If it is an SBTi approved target then you could use the parent’s targets as a proxy, as parents are not allowed to set targets that do not include its subsidiaries under the current SBTi framework. For any other public target where you are not sure the subsidiary is included, it would mean that you’d need to give the subsidiary a default score.

  2. With the above, this should only be an issue for a joint venture where one company has an SBTi approved target, where it needs to be a decided on a case-by-case basis. In all other cases the subsidiary shouldn’t be able to inherit the parents’ targets.

  3. If a parent has a specific target for a division of which the subsidiary is a part, it would be reasonable to use that particular target for the subsidiary and not the parent’s overall target.

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Hi @Donald

If the ghg_s1s2 and ghg_s3 for subsidiaries are not publicly available, is there any way to take a weighting of the parent company’s emissions? Or should one use the parent company’s full emissions? As of course, this information is required to get a temperature score.

Kind regards,


Hi @luke.chater,

Welcome to the community and apologies for the late response.
Just to clarify, are saying that you have securities and/or loans in your portfolio to a subsidiary without a public target and that you don’t have any interests in the parent that has a public target?

Hi @Donald,

Thank you, and no problem.
The portfolio has an investment into a subsidiary with no public Scope 1/2 emissions, however, the parent company’s emissions are public. In this case, should we enter into the data provider the ghg_s1s2 and ghg_s3 for the parent company? Or try to assign a % of the parent company’s emissions to the subsidiary?

I hope that makes sense.

Hi @luke.chater,

The absolute GHG shouldn’t matter for the company rating, but it is the relationship between S12 and S3 that matters to aggregate the rating to the corporate level. So, if you assume that the subsidiary has a similar GHG profile to the parent then you can use the parent’s absolute emissions.

Absolut levels of GHG may come into play depending on which aggregation method you later use for the portfolio. You are allowed to use estimates for GHG, which means that you could estimate the emissions of the subsidiary based on the parent’s profile adjusted for fundamental differences in the underlying businesses.

The question is though what you know about the targets for the subsidiary if they haven’t reported any GHG emissions. If you don’t have any valid targets the company will still get a default score, regardless of the current GHG emissions profile.