Weighting approach in the Portfolio Coverage Method

Methods
1

Hi :slight_smile:

If a FI use the SBT Portfolio Coverage approach to set a target for the portfolio, it says in the “Financial Sector Guidance” that the company should use the weighting approach in the SBT Finance Tool.

However, I saw this comment in the forum:
“The 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 manually, instead of running the SBTi Finance Tool.”

Hence, I understand that the company could use one of the accepted aggregation methods manually.
Where can I find these methods? I see in appendix F in the standard that the weighting options below are listed. Are these the accepted aggregation methods?

a. Invested value (holdings)
b. Market capitalization
c. Enterprise value
d. Cash and equivalents
e. Total assets
f. Revenue

The company want to set a portfolio coverage target on the their listed equity and bonds portfolio. If they know the percentage asset under management (AUM) under listed equity and bonds that has a validated SBT at a set point in time. Can they use this percentage as a starting point? Or is it more complex? (weighing over a period of time?)

(Ref. this example in the guidance document:
For example, a financial institution starting with 10 percent
coverage in 2020 would need to increase coverage by 4.5 percent per year (90/ (2040 – 2020) =
4.5) and reach at least 32.5 percent (10 + [5 x 4.5] = 32.5) coverage by 2025.)

2

Hi again,

I would much appreciate guidance on this question!

Thank you

3

Hi @Jeanette_Knutsen,

Apologies for the late reply. The aggregation methods we refer to are those listed in the CDP-WWF Temperature Rating method, on p 24, so essentially what you are referring to in your post, apart for option d in your post which should be EVIC (Enterprise value + cash) and option a which should be weighted average temperature score. You have also missed Total emissions weighted temperature score, making it 7 different aggregation methods.

So, you don’t have to use the tool for this calculation, but need to follow one of the 7 aggregation methods and the temperature rating method.

Our preferred aggregation methods are the methods listed in the method but in reverse order, i.e. we prefer ROTS over AOTS over ECOTS (EVIC), etc… and the least preferred method is WATS, in the eyes of SBTi.