Despite the rapid expansion of ESG data, financial institutions across the globe still struggle to obtain transparent and comparable climate data. This absence of high-quality data is a major hurdle to understanding climate risks and impacts within financial portfolios – and it severely constrains decision makers in identifying and taking the steps necessary to address them.
This white paper explores a physical asset-based data methodology for assessing climate risk and impact. This bottom-up approach, which measures emissions in the real economy and links them to their owners in the financial economy, is transparent and comparable by design and can revolutionize the way financial institutions address climate change. By integrating data from many different sources and linking physical assets in the real economy to their owners in the financial economy, this approach, pioneered by organizations like Asset Impact, can equip financial institutions with far more detailed climate-critical insights for decision-making than are available from high-level company-level emissions disclosures or estimates.
An asset-based approach to decoding climate impacts within a financial portfolio starts with collating a range of data points from a wide range of sources on the physical assets within the real economy that are responsible for greenhouse gas emissions.
In combination with contextual data, each asset’s production profile is then run through proprietary models that estimate the carbon emissions associated with its activities. Crucially, all of the data gathered on physical assets is normalized and standardized at the outset to facilitate cross-company and cross-sector comparability. Then, to allow users to analyze financial portfolios, each individual asset is linked to a corporate ownership structure – from direct owners up to parent companies.
Asset Impact’s comprehensive Physical Assets Matched with Securities (PAMS) database spans nine high-emitting sectors, encompassing a vast array of emissions-intensive activities from coal mining and power generation to heavy-duty vehicle and steel manufacturing. Covering 75% of global emissions, the datasets paint a comprehensive picture for investors, spanning 334,000 assets and over 65,000 companies.
Asset Impact’s detailed, bottom-up solutions are underpinned by asset-based data. Available at the asset level and the company level, they are designed to help financial institutions and managers of financial portfolios make decisions that have a positive impact on real economy emissions. The approach is informed by a commitment to maximizing clarity and transparency, as well as the reality that decarbonization strategies must go beyond portfolio alignment to drive the necessary real-economy transformation.
The Asset Impact methodology proceeds in four key stages:
Asset Impact’s rigorous and sub-sector-specific methodologies have been specifically developed to equip decision-makers with actionable and easily interpretable insights that not only help optimize financial outcomes but also drive tangible, positive impact on emissions in the real economy.
Asset Impact’s bottom-up approach to understanding portfolio emissions by scope links over 334,000 physical assets in the real economy with over 65,000 direct and indirect corporate owners across nine of the world’s highest-emitting sectors, covering 75% of global emissions. At present, the Asset Impact database covers physical activities, emissions, and emission intensities across upstream oil & gas, coal mining, power generation, aviation, shipping, light- and heavy-duty vehicles, and cement and steel production.
BBVA is implementing its commitment to achieving net-zero emissions in close collaboration with Asset Impact. The bank was an early adopter of the Paris Agreement Capital Transition Assessment (PACTA) methodology and a key participant in the Katowice Commitment published ahead of COP24 pledging to align lending portfolios with global climate targets.
For BBVA, integrating Asset Impact's data into their systems allowed the bank to not only to estimate its financed emissions with a high degree of precision, but also to develop sophisticated portfolio analysis tools that enabled the formulation and implementation of sector-specific plans and corresponding investment strategies.
The firm’s TCFD reports showcase these sector-specific targets and significant reductions in emissions across industries like power generation, automobile manufacturing, cement, and steel. They highlight BBVA's goals of phasing out coal exposure by 2030 in developed countries and by 2040 globally. Leveraging asset-based data internally for portfolio alignment and externally for client engagement, BBVA sees its partnership with Asset Impact as a cornerstone of its data-driven strategies for financing a sustainable future.
"The accurate and reliable asset-based dataset provided by Asset Impact has allowed us to develop sector plans, set investment strategies, and track progress towards our global targets. With the insights gained from this data, we have successfully reduced emissions, aligned our portfolio with climate goals, and made significant strides towards contributing to a net-zero world." – Gerardo Echave Pita, Sustainability Risk Manager at BBVA
KLP, a Norway-based asset owner and the country’s largest pension fund, is on a mission to achieve net-zero emissions. Partnering with Asset Impact allowed KLP to address important data gaps within its portfolio of companies, which is proving crucial for analyzing the climate profiles of portfolio companies and implementing measures to improve performance. With granular company-level insights from Asset Impact, KLP is tracking the pace of transition in its portfolio. It achieved a 54% Paris Agreement alignment portfolio-wide in 2022, attributed to a combination of investment strategy shifts and improved data quality supported by asset-based data.
Engaging with investors and coalitions like Climate Action 100+ and Nature Action 100, KLP also helped push some of its portfolio companies, such as Yara, to develop more robust climate action plans. The fund’s proactive, data-driven stance helps KLP position itself as a leader in responsible investment and offers a blueprint for others to follow in combating the climate crisis.
"To effectively gauge the progress of the companies within our portfolio, especially concerning their climate goals, granular company-level data was imperative. Asset Impact's forward-looking data and company-level transition insights fulfilled our need for comprehensive data for portfolio companies in high-emitting sectors." – Gjermund Grimsby, Chief Advisor, Climate Change at KLP
Explore how asset-based data can help reduce your financed emissions by linking your portfolio to companies and underlying assets in Asset Impact’s dataset and tracking sources of emissions over time.
Fill out the form below to access a video providing an overview of Asset Impact’s data and products.