Europe

New Venture Offers Sectoral Scrutiny of Net-Zero Paths

Research house to provide investors with greater visibility of risks and opportunities in ‘hard-to-abate’ industries.

A new research house launched by the team behind Carbon Tracker aims to provide investors with decision-useful insights into climate impacts and net-zero transition paths across industry sectors.

Industry Tracker intends to produce research on sectors facing particularly challenging decarbonisation journeys, including steel, cement and chemicals. The research will help asset owners to understand the carbon footprints of processes and products across complex value chains, in order to allocate capital more effectively in line with their sustainable investment strategies.

Its first piece of research, to be published this summer, will focus on the European steel industry and its scope to adopt hydrogen technology to transition from carbon-intensive blast furnaces.

According to Industry Tracker, sectors in most need of investor support for transformation are often overlooked by sustainable investment vehicles, which can instead favour client firms in downstream industries with higher ESG ratings.

The three highest emitting sectors – utilities, materials and energy – represent 13.7% of the MSCI All Country World Index, but on average only 2.34% of holdings in global sustainable funds, according to a 2020 analysis cited by Industry Tracker.

By providing research into these sectors and others, Industry Tracker hopes to provide investors with the information needed to engage with firms and redirect capital toward solutions that could accelerate the transition away from high-carbon processes.

Industry Tracker is being launched by the Investor Watch Group whose founders, Mark Campanale and Nick Robins, created the Carbon Tracker Initiative and Planet Tracker. It will be led by Managing Director Carole Ferguson, who previously headed investor research at CDP, the non-profit climate and environmental disclosures platform.

“Current tools both at the portfolio and ESG scores level often fail to capture the risk and opportunities of companies transitioning, and where the deployment of capital has the potential to transform current industrial processes, such as through electrification or the hydrogen economy,” Ferguson told ESG Investor.

“At the same time, products and materials from these sectors are used across a broad range of end-industries so investors may be allocating funds to higher-rated ESG sectors, without having proper visibility of the potential climate impact incurred across the full value chain.”

Noting a lack of scrutiny and understanding of the steadily increasing number of net-zero targets and strategies from companies, Ferguson said Industry Tracker would provide evidence-based investment research linking financial metrics to the actions needed for low-carbon transition. “The research will evaluate what businesses need to do to meet net-zero targets and the implications for current asset portfolios and capital allocation plans,” she said.

For process-intensive, asset heavy sectors, Industry Tracker will assess transition risk by creating metrics around assets at risk using asset level data, while for transition opportunities, it will look at the technologies to innovate and transition including capex.

Industry Tracker’s research team will cover the largest and most impactful companies globally, conducting bottom-up analysis to assess alignment with 1.5 degree pathways and the implications for business models, earnings and balance sheets.

The research will be provided on a subscription basis, with users receiving quarterly reports designed to support corporate engagement, portfolio positioning and stock selection.

Industry Tracker said it hopes to work collaboratively with shareholder groups such as Climate Action 100+ to drive more engagement and inform shareholder resolutions.

The Carbon Tracker Initiative is a non-profit financial think tank that seeks to promote a climate-secure global energy market, while Planet Tracker was established to help investors to analyse the risk of market failure related to the non-alignment of investor capital with environmental limits.

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