Climate-related Portfolio Analysis by Nikko Asset Management
While TCFD recognizes the challenges and limitations of current carbon footprint indicators, it recommends using weighted average carbon intensity.
The table below shows the weighted average carbon intensity (WACI) of nine funds representing major active equity strategies and their benchmarks as of December 2020, managed by Nikko Asset Management (Nikko AM).
*WACI is calculated using MSCI ESG Research and defined as Scope 1 (direct) + Scope 2 (indirect) greenhouse gas emissions normalized by sales in USD.
According to a survey by the Sustainability Accounting Standards Board (SASB), 68 out of 77 industries are significantly affected by climate change risks in some way.
However, only 21% of the companies surveyed disclose quantitative information on the magnitude and cost of estimated climate change risks, even when they have experienced physical climate change risks or are highly aware that they will be affected.
Nikko AM has been actively testing scenario analysis tools, especially those supported and introduced by PRI.
Research tools are rapidly being developed in this field to address various climate change risks, including transition risks and physical risks.
While studies by leading experts have been elucidating the macro impacts of climate change, impact as the regional or corporate level is still extremely unclear.
Scenario analysis tools can be useful at this micro level.
Nikko AM continues to explore how various scenario analysis tools can be applied to managing a variety of unique portfolios.