London-based data house and index provider ET Index has rebranded as part of a larger strategic overhaul, which will include a move into assessing companies’ alignment with the United Nations’ Sustainable Development Goals.
The decision comes as the ESG-specialist – now named Engaged Tracking – released its annual Carbon Rankings, scoring 2,750 companies globally on their overall carbon emissions intensity (Scope I, II and III). The rankings are based on publicly disclosed information, and the methodology penalises firms that don’t disclose – giving them a ‘worst case’ score.
The rankings show the likely suspects at the bottom of the list: non-renewable resource businesses such as coal, steel and cement companies. At the top are nine tech companies.
Notably, disclosure of Scope III emissions – those generated by supply chains – has seen a big leap, according to the findings. This is a crucial step forward for those investors interested in carbon risk, because supply chains account for a significant portion of many companies’ footprint. According to Engaged Tracking, 86% of firms’ total emissions come from Scope III emissions. Disclosure on these emissions in Europe has increased to 51% in 2016, from 39% the previous year; and in the US, this figure has risen to 39% from 24% over the same period, it claims.
The rankings are publically available and are the basis for Engaged Tracking’s index products. CEO Sam Gill said Engaged Tracking had “a number” of undisclosed investor clients in Europe and the US, and was discussing its services with stock exchanges.
Engaged Tracking is co-chaired by James Cameron, co-founder of Climate Change Capital and Chairman of the Overseas Development Institute and GE’s Ecomagination. It is currently also chaired by Chris Huhne, former UK Secretary of State for Energy and Climate Change, who will be stepping down from his position at the end of the year.
Recently, the firm made a couple of big hires from HSBC: it took on Joaquim de Lima, former Global Head of Quantitative Research at HSBC Global Banking and Markets, and head of the Green Revenues division within HSBC’s climate change index offering, which no longer exists; and Vijay Sumon, former Global Head of Indexation Research in the same division.Engaged Tracking plans to widen its coverage as part of its next step. Firstly, it will expand its carbon analysis next year, to reach 3,000 companies. It will also broaden the subject from carbon to the SDGs.
Initially, this will focus on assessing the same universe of firms for their alignment with issues including the circular economy, green revenues, water and gender – on which there is already some disclosure. The plan, Gill told RI, was to develop this to cover more sustainability topics over coming years.
The information would continue to be publicly disclosed and could form the basis of future index products, he said.
S&P Dow Jones Indices recently published a report on SDGs, stating that market players with $4trn of assets under management had made commitments to the goals so far, including APG and PGGM in the Netherlands and CalPERS and State Street in the US. However, it calls for “robust metrics” and the development of reporting frameworks in order to move the market forward, adding that many companies say they support SDGs, but on closer inspection this focuses often on single goals – particularly ones linked to providing employment and promoting well-being.
“Furthermore, many of these initiatives are aimed at mapping existing programmes to the SDGs, with few companies publically setting targets,” the authors say.
As a result, Trucost – owned by S&P – proposes ‘best practice’ criteria for action on SDGs, including comparable metrics and frameworks focused on those goals that are material to the business, and proposing measurable outcomes so that investors can track performance.
S&P acquired Trucost recently, in the first of a series of acquisitions in the ESG data provider space. South Pole was also bought by ISS, and Morningstar upped its stake in Sustainalytics. When asked if Engaged Tracking was in the market for a buyer, given the appetite from some of the larger players, Gill told RI: “At this stage of the company’s journey, a strategic investment from the right partner who can help us scale is more aligned with our ambitions than an acquisition.”