Chapter 10. Transition planning and carbon reporting Flashcards
def transition planning
process of developing a transition strategy to deliver С targets and prepare long-term response to manage the transition R
Transition plan
Product of transition planning. Part of company strategy with targets, actions, resoutces for transition to a low carbon economy
Transition finance
Use of fin products to support companies, sovereigns and individuals with alignment with env and social sus
3 pillars of ЕЗЕ (Transition Plan Taskforce)
Ambition - transition plan should be ambitious
Action - concrete steps to achieve ambition
Accountability - internal governance + external reporting
“Paper decarbonization” example
Financial inst removes exposures to hard-to-transition industries. The balance sheet is “decarbonized”, but these companies still exist. Thus, decarb of fin inst did not lead to actual emission reduction
civil society stakeholders def + examples
Non-gov and non-business groups that represent various interests in society (e.g. greenpeace, labor unions, religiousgroups, academic institutions)
CapEx Opex example
CapEx- money spent on acquiring / upgrading / maintaining long term assets for business to grow and operate (bying machinery, constructing a building, updating servers, etc.)
OpEx - daily expenses (salaries, utilities, etc.)
Transition planning with Corporate structure (board, senior management, etc.)
Transition plan is approved and overseen by board of directors.
Below the board - management structure accountable for implementing the plan.
They together also set the culture
TPT
Transition Plan Taskforce
Def carbon reporting
Process of documenting and disclosing GHG emissions by organizations
What are Equity Share and Control approaches?
Two approaches to GHG emissions accounting (depending on consolidation method).
Equity Share - if company owns only a share of a joint ventyre (e.g. 40% of a joint factory), it reports emissions proportional to its ownership share. Drawback - cases when company has big operational control, but less ownership -> underestimate GHG. Companies can abuse by fine-tuning control and share ownership.
Control approach - reports 100% of GHG emissions from operations it has control (operational or financial).
3 types of GHGs with the most significant impact on CC
CO2 carbon dioxide
CH4 Methane
N2O Nitrous oxide
3 scopes of GHG emissions
1 - from sources directly owned / controlled by the company (e.g. emissions of the factory / boiers / vehicles of controlled factory)
2 - indirect GHG emissions from generation of purchased electricity, steam, heating, cooling consumed by the company.
- All other indirect emissions in the company’s value chain (from not owned / controlled). E.g. from outsorcing production process to another firm, or sold cars emit GHG
Financed emissions def
GHG emissions attributed to loans / investments, etc. offered by fin. institutions
Formula to calculate emissions from activity data in 600,000 MMBtu of natural gas
- Transform 600,000 MMBTu of natural gas into CO2, CH4 and N2O amounts by respective conversion factor (in mtCO2/MMBTu, mtCH4/MMBTu, mtN2O/MMBTu) to megatons of Co2, CH4 and N2O
- Multiply the mt of those gases by respective GWP (Global Warming Potential) to get the CO2 equivalent. For CO2 this is 1, for NH4 is 28, for N2O is 273. Final is emissions in megatons of CO2
Absolute & normalized approach for financial institutions to measure financed emissions
Absolute - measure financed emissions in absolute terms
Normalized - measure emission INTENSITY per specific activity units or output
Absolute emission metrics
Total GHG emissons of asset class / portfolio
Economic emission intensity
Absolute emission divided by loan [tCo2 / EUR Mill.]
Physical emission intensity
Abs emission divided by value of physical activity / output [tСO2 / MWh] or [tCO2 / tons of product produced]
WACI metric
Weighted Average Carbon Intensity - portfolio’s exposure to emission intensive companies
Financed emissions for bank accounting formula
Financed Emissions = sum_by_i(Attribution_factor_i * emissions_i), where attribution_factor for i-th borrower is outstanding_loan / (total equity + debt of the i-th borrower)
NZBA, GFANZ + what are those
Net Zero Banking Alliance, Glasgow Financial Alliance for Net Zero - voluntary initiatives, developed guidelines for fin institutions focused on financed emissions
Market capitalization
Market capitalization (or market cap) is the total market value of a company’s outstanding (meaning - held, “sold”) shares of stock. It represents what the company is worth in the stock market.
