Greenhouse Gas Emissions
Hard requirements:
- Inclusion of scope 1, 2, and relevant scope 3.
- Inclusion of scope 3 emissions must at a minimum be aligned to the schedule described in the EU benchmark regulation 2019/2089.
Exposure to Fossil Fuel Activities
Hard requirements:
- The threshold of 5% of revenues applies both to activities directly linked with the exploration and production of fossil fuels and, if data is readily available, activities financing such production (for coal, according to the global coal exit list or similar).
- The scope of activities includes the whole value chain, ranging from exploration, extraction, and production (upstream) to transportation and storage (midstream) and refining, marketing, and electrification (downstream).
Verified Commitments to Net-Zero
Hard requirements:
- Companies must have publically communicated a pledge to reach net-zero and have near-term targets be certified by one of the following providers:
- Science based targets initiative (SBTi).
- Science based targets initiative (SBTi).
Management to Net-Zero
Hard requirements:
- To include portfolios as being part of a third-party verified commitment to net-zero, they must be part of the publicly communicated net-zero targets under one of the sector-specific alliances of the Glasgow Financial Alliance for Net-Zero (GFANZ).
- If the claim is made that the investment strategy includes a goal to reduce the portfolio’s greenhouse gas emissions, or those of its underlying investments, included scope 3 emissions must at a minimum be aligned to the schedule described in the EU benchmark regulation 2019/2089.
Credible Climate Stewardship
Hard requirements:
- Votes/proxy votes should be consistent with the ambition of reaching net-zero by 2050.
- Any linked climate engagement strategy should be consistent with the ambition of reaching net-zero by 2050. An example for a climate engagement initiative is Climate Action 100+.
- The escalation procedure is clearly defined and made transparent.
Global Warming Alignment (optional)
Hard requirements, for data providers
Important, but not hard requirements, for data providers
- Be guided by the goal to achieve net zero emissions by 2050, consistent with the 1.5°C warming limit of the Paris Agreement and in line with the latest IPCC findings.
- Comply with the technical considerations of the TCFD 2021 PAT report “Measuring Portfolio Alignment – technical considerations”. In particular, comply with:
- Select a 1.5°C scenario that complies, at a minimum, with the scenario selection criteria set out by the Science Based Targets initiative (SBTi) in their document Foundations of Science-Based Target Setting (consideration 7).
- Prioritize granular benchmarks when they meaningfully capture material differences in decarbonization feasibility across industries or regions (Consideration 8).
- Include Scope 3 emissions for the sectors for which they are most material and for which benchmarks can be easily extracted from existing scenarios (fossil fuels, mining, automotive) (Consideration 11).
- Select a 1.5°C scenario that complies, at a minimum, with the scenario selection criteria set out by the Science Based Targets initiative (SBTi) in their document Foundations of Science-Based Target Setting (consideration 7).
- Allow the Swiss government to disclose aggregate implied temperature scores based on your methodology on the following indices, to compare them with other providers: SMI, MSCI World, MSCI World Materials, MSCI World Industrials, MSCI World Utilities, MSCI World Real Estate.
Benchmark used:
- At a minimum, a sub-industry level approach based on external, replicable, scientific sources to benchmarking should be used for high-emitting sectors, with companies allocated a ‘fair share’ of the global carbon budget based on their mix of activities.
- Climate solutions, especially for the electricity sector should also be covered and compared with the respective scenario, as the scale up of renewable power is a key factor to transition according to the IEA.
Company long-term targets, near-term action and data sources:
- Assess the credibility of companies’ emission reduction plans and take into account whether they are externally validated (such as by SBTi) to be science-based, in line with the goal of achieving net zero by 2050.
- Include near-term CapEx plans and validate, if the long-term commitments match with the short-term action.
- Use third-party validated data on asset level base where possible. Be as transparent as possible on data sources.
- Inclusion of scope 3 emissions must at a minimum be aligned to the schedule described in the EU benchmark regulation 2019/2089.
- Do not allow for avoided emissions data at corporate level, given the lack of standards around corporate level avoided emissions reporting and the technical challenges and issues related to such calculation. Instead, account for climate solutions, at minimum for renewable power.
To calculate portfolio alignment:
- Implied temperature scores should be calculated using a confidence level of 66%, rather than 50%.
- Calculate warming scores on a cumulative-emissions basis until 2050, in order to accommodate appropriately the physical relationship between cumulative emissions and warming outcomes.
Last modification 29.06.2022