Use of WATS vs ECOTS

Methods
#1

Is there a preference between the use of the WATS or ECOTS weighting method for asset managers (or more broadly FIs)?

Additionally, if using the ECOTS method, where enterprise value is not available, is a standard investment intensity weighting using the WATS method applied instead?

Thanks,
Cassandra

#2

Hi and welcome Cassandra,
ECOTS (EV + Cash emissions weighted temperature score) is much preferred to WATS (Weighted average temperature score). In the case where EV (Enterprise Value) is not available we would prefer AOTS (Total Assets emissions weighted temperature score) or ROTS (Revenue owned emissions weighted temperature score). See FI Guidance p. 152 and p. 150.

#3

Thanks very much Donald! When you do not have EV, revenue or asset data, is it okay to then use WATS?

Thanks,
Cassandra

#4

Currently we allow all seven aggregation methods, so you can always use WATS. However, our preference would be for you not to use it and use ECOTS, AOTS or ROTS instead.
I wonder what a company looks like without EV, revenue or assets? So from that you should hopefully always be able to use ECOTS, AOTS or ROTS.

#5

Thanks Donald! This is for holdings where we do not have EVIC/revenue/assets, only the investment amount and the sector. For example could you confirm if the below is correct?

Holding A EVIC = $1000m Investment = $10m Attributable Emissions = 3.1t Score = 2.8
Holding B EVIC = $200m Investment = $50m Attributable Emissions = 25mt Score = 2.9
Holding C Unknown EVIC/emissions Investment = $10m Score = 3.2

In this scenario ECOTS for the 60m known EV investments = 2.89.
I would then need to use WATS to calculate a final score for the total 70m portfolio = 2.93

This is for an asset manager with a very large amount of holdings, where we have the EVIC data for around 95% of assets, but 5% of assets are very small listed companies with no financial data available in this dataset.