[URGENT] Portfolio Coverage Phrasing

Would these be acceptable portfolio coverage targets:
[For Corporates] “Company A commits to 35% of its corporate loans by total company revenue setting SBTi validated targets by 2025”
[For bank bonds] “Company B commits to 30% of its bonds portfolio by total assets setting SBTi validated targets by 2025”?

The guidance is unclear because it says “using a weighting approach in the SBT Finance Tool” (which includes AOTS and ROTS) but the SBT Finance Tool doesn’t work for the Portfolio Coverage Approach so it’s not possible to test it. It would be great if you can confirm the phrasing can be a simple % like those above rather than using the formulae for the Temperature Rating Approach listed in Table E1.

Hi there,

is there any update on the querry above, please?

Thank you very much,
Ligia

Hi @Nettie,

What do you mean that the SBTi Finance Tool doesn’t work for portfolio coverage?
You are presented with portfolio coverage alongside the temperature rating when you run the tool.

There is currently a tiny bug in the Google Colab version, but if you simply replace the very first line of code

%pip install sbti-finance-tool

with

!pip3 install git+https://github.com/ScienceBasedTargets/SBTi-finance-tool.git@main

it works as expected. The GitHub version should also work as expected.

Having said this, portfolio coverage is a fairly simple calculation, as it only takes into account SBTi-approved targets. You can then simply apply one of the accepted aggregation methods for the CDP-WWF Temperature Rating method manually, instead of running the SBTi Finance Tool.

Regarding target language, this is really a question for the target setting process, and something that you develop together with the SBTi, but please see the guidance document for examples of language, or indeed the already approved targets, based on portfolio coverage. Filter on As an example it could read like:

Investment Firm A commits that 30% of its equity portfolio within the asset class/sector by total assets will have science-based targets by 2025.

or as in Carnegie Fonder’s target

Carnegie Fonder commits to 32% of listed equity and bonds portfolios setting SBTi validated targets by 2025

Hi Donald, in terms of the tool not working for portfolio coverage targets, see my question here: Companies with approved SBTs but no ISIN number (Portfolio Coverage approach) - Tools - Science Based Targets for Financial Institutions. Because the ISIN number is used to define whether the company has a target, and it doesn’t exist for all companies, plus is outdated, the tool doesn’t provide an accurate baseline for PCA.

I’m not sure if you’ve completely answered my question about the method for PCA. The formulas in Table 8 of the link you sent refers to formulas for the temperature rating approach not the PCA (it contains Ts in each formula). My main question is, for the PCA, do we use these formulae but remove the Ts? I.e. for ROTS, if we used the formula, the baseline would look like ((𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒/𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 × 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠) of all companies with SBTs)/ 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑜𝑤𝑛𝑒𝑑 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 of all companies in the portfolio.
Or can we simply use:
revenue of companies with SBTs/ revenue of all portfolio companies
This latter approach doesn’t use the Table 8 but seems more inline with some of the target phrasing

Hi there,

is there any update on the querry above?

Thanks,
Ligia