S&P has launched a tool to help companies “get ahead of carbon regulation” and perform scenario analysis in line with the high-level Taskforce on Climate-related Financial Disclosures (TCFD).
The service has been created by Trucost, the carbon data house which S&P Dow Jones Indices acquired last year. It aims to determine firms’ exposure to carbon pricing and “help companies better understand the potential business case for greener products and business models”, according to a statement from S&P.
Investors can also use the tool in cases where they have access to sufficient data, such as fundamental equity managers or banks with loan portfolios, Trucost told RI.
The tool looks at a company’s emissions and financial performance, and then uses existing and potential regional carbon pricing information, such as carbon regulation, emissions trading schemes and fuel taxes to identify risks. It looks at three set scenarios, assessing risk exposure to 2030. It includes asset-level analysis and risk attached to supply chains.
“Companies are trying to make sense of the pace at which legislators in different countries, states and cities are implementing carbon regulations,” said Libby Bernick, Global Head of Corporate Business at Trucost.“Because these regulations could drive up the cost of fossil-fuel-based energy and carbon-intensive raw materials, increasing operating costs and reducing profit markets, companies need robust data and analytics to help inform financial decisions over investments in energy efficiency, low-carbon innovation and renewable energy.”
“Companies need robust data and analytics to help inform financial decisions”
Mike Wilkins, S&P Global Ratings’ Head of Environmental & Climate Risk Research, is a member of the TCFD, which released its final recommendations earlier this summer. The group proposed, among other things, that companies and investors should perform forward-looking analysis to show how their business model might cope under different plausible future climate scenarios. S&P Dow Jones Indices functions independently of the ratings arm, but both are owned by the S&P Global.
The latest issue of ESG Magazine focuses on the TCFD: May the Task Force be with you