by Barnabas Acs PHD.
The current heat-wave in the UK and related national disasters in the Northern Hemisphere –Sweden, Greece, and United States – are once again putting climate change and the constantly increasing average temperature of our Globe to the forefront of public attention.
As greenhouse gas emissions (including CO2) are one of the main contributors to global warming, we expect higher scrutiny into CO2 emissions of corporations in the near future.
BlackRock’s letter to CEOs on strategy for long-term growth, and the wider adoption of the TCFD should enforce more climate risk related reporting, and a more thorough consideration of the CO2 emission and energy usage factors within ESG related investments.
The challenge is to put the nominal emission and energy usage figures into perspective owing to differences in industry characteristics, company size, operational efficiency, and the usage of clean technologies.
The Corporate Emissions Index, discussed in the attached article, provides a framework that takes all these concerns into consideration, and:
The CEI is the microeconomic adaptation of the modified Kaya Identity. It is calculated as the fraction of the corporate CO2 emissions and the number of personnel the corporate employs. It is a product of three factors – employee productivity, energy intensity and CO2 intensity -, that if improved can contribute to more sustainable, and effective corporate operations:
To assess the feasibility of index we analysed the constituents of the STOXX Europe 600 (STOXX600) index. We compared the performance of the industrial sectors across all CEI factors and scrutinized the companies of the Oil & Gas Sector between 2014 and 2016 using Thomson Reuters Datastream data.
We found amongst all, that:
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