Zerolytics to Track CA100+ Firms’ Transitions

The data-driven platform aims to help asset owners and managers evaluate high-emitting companies’ transition readiness and identify commitment shortfalls.

Norwegian tech company Zerolytics is preparing to launch a platform offering forward-looking indicators to assess the credibility of Climate Action 100+ (CA100+) focus companies’ net zero transition plans. 

The data-driven platform will measure companies’ transition readiness by quantifying the gap between their forecasted emissions and stated reduction targets. It will also provide net zero emissions pathways by analysing what it takes to reach net zero in terms of actions and capital allocation. 

“We think companies’ CO2 estimates are based on very simplistic models, looking at their history rather than how they will transform,” Per-Otto Wold, CEO and Co-founder of Zerolytics, told ESG Investor. “People we’ve talked to have been unable to find a good platform that actually looks at plans and assesses the credibility of companies’ transition plans. We’re doing this in greater depth and detail than what we’ve found on the market so far.” 

According to Zerolytics, the transition to net zero is “inherently non-linear“, meaning traditional financial models are generally ill-suited for capturing its dynamics. The new platform seeks to provide inputs to investors that can support their engagements with high-emitting companies, as well informing capital allocation. 

“If you look at the ability of CA100+ companies to deliver returns and net zero alignment, there are there are some great opportunities there,” said Wold. 

CA100+ was established in 2017 as an investor-led initiative aiming to collectively support the goals of the Paris Agreement by challenging the large corporate greenhouse gas (GHG) emitters to take action on climate change. Today, the initiative counts 700 investors, responsible for a combined US$68 trillion in assets under management.  

A total of 170 firms representing a total market capitalisation of US$10.3 trillion have been engaged through the initiative to date, across sectors including oil and gas, aviation, mining and consumer goods. 

Last year, CA100+ acknowledged focus companies had illustrated a continued increase in ambition but flagged most still lacked detailed action plans to reduce emissions. The initiative also noted the majority of these companies were not moving sufficiently fast to align with the goals of the Paris Agreement and reduce risks to investors. 

An analysis of votes on climate strategies at the AGMs of nine oil and gas firms last year, seven of which are CA100+ focus companies, by NGO Reclaim Finance found shareholders had “failed to push companies to adopt effective climate strategies”. 

Mapping net zero costs 

Since its launch in late 2022, Zerolytics – which now counts 20 employees – has met with asset owners and managers regularly to discuss its purpose and methodology. 

“We have received enthusiastic feedback,” said Wold. 

The platform utilises advanced modelling in the form of system dynamics and financial ‘digital twins’ – virtual models that replicate and analyse businesses’ financial operations – to simulate complex business scenarios, and forecast costs related to reaching net zero. They can also offer an evaluation of the financial effects of various scenarios and decisions. 

System dynamics is a methodological framework used to understand, model, and analyse complex systems. In the context of business analytics, it helps capture the interdependencies and non-linear behaviours of various components, including market dynamics and internal processes among other. 

The platform will help investors with forecasting whether companies are likely to achieve their net zero targets, what the financial implications of doing so are, enabling them to distinguish “leaders from laggards” among CA100+ companies. 

“Zerolytics has so far made 50 digital twins for CA100+ companies, and is aiming to reach 150 by summertime,” Wold said. He added the platform gets the majority of its inputs from information made public by the focus firms, but Zerolytics has also met with around 20 of these companies to get critical inputs and more detail on their operations, beyond information that is publicly available. 

The meetings, which started to take place a month after Zerolytics’ launch, provided the firm with feedback on its methodology from focus companies. 

Although a firm release is yet to be confirmed for the tool, it is ready for use. Earlier this week, Zerolytics released an AI assistant to assist users.  

“To pilot-test the tool, a large handful of select asset managers and owners at the forefront of developing this space have been given access to the platform,” he said. 

Wold noted the industry has been requesting a tool to identify leaders in the space, and their discussions with Zerolytics revealed that while many NGOs are asking for investment in oil and gas to stop, managers still need the higher financial returns. 

Striking the right balance between making sustainable investments aligned with net zero goals, and delivering competitive returns, poses a considerable challenge, Wold highlighted. 

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