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Investors outline six asks of net zero data vendors to improve engagement

Investors outline six asks of net zero data vendors to improve engagement

This IIGCC guide outlines six expectations that would improve the overall quality and usability of data used in net zero alignment assessments and target setting. Members can also use the accompanying disclosure templates to support their vendor assessments.

Vendors working towards these asks would better support investors in assessing net zero data and foster better engagement with data vendors. The guide is open to all, with the disclosure template reserved for IIGCC members.

Read – Improving net zero data provision: Six asks for data vendors.

This builds on our recent Net Zero Data Catalogue, which assessed 16 leading data vendors and included close to 100 different data products.

It provides a consistent assessment and compares data sets against the core criteria outlined in the Net Zero Investment Framework (NZIF) – the most widely-utilised framework by investors that have set net zero commitments.

The catalogue found that none of the corporate alignment indicators offered by any one vendor overlapped with all six “core” NZIF criteria, including short and medium-term decarbonisation targets, greenhouse gas emissions, and decarbonisation plans.

To help close the gap, this guide outlines six asks that would improve the provision of data for investors aligning their portfolios to net zero. It’s important to note that these are not hierarchical – each ask is as important as the other.

The six asks

1. Offer multidimensional data: Investors need multiple data points beyond greenhouse gas emissions and decarbonisation targets to fully assess the net zero alignment of an asset.

This includes data covering the alignment of transition plans and capital expenditure, which helps investors to better assess the credibility of a company’s stated emissions targets.

Our recent sector-neutral guidance on transition plans, From A to Zero, offers more detail to support investors and companies alike.

2. Improve data granularity: As well as scores that represent the net zero alignment of an asset, such as Implied Temperature Rise, investors need access to the input data which underpins it. This is important for engaging with companies, as well as for aggregating scores up to portfolio or sector-level.

And importantly for vendors, not all investor approaches to net zero alignment are the same. Some use both asset-level and portfolio-level data, making the input data behind alignment scores critical.

3. Support converging methodologies: Data vendors could better support investors by disclosing their methodological choices, especially with the variety of standards and best practices available today. This is to highlight where they align with and, when relevant, where they deviate from guidance, and why.

NZIF recommends several credible public data sources which are often investors’ first port of call, including the Climate Action 100+ Net Zero Company Benchmark and Transition Pathway Initiative. It’s vital that other data sources are aligned to these, or clearly identified when they do not.

4. Enhance data quality and regular updates: For investors, ongoing data management is as important as sourcing it in the first place. Clearly explained methodological updates, as well as regularly updated scenario and input data, are vital to building a complete picture.

Input data should be updated at least yearly where possible, with the values of historical fields kept.

5. Increase coverage: IIGCC’s Net Zero Data Catalogue highlighted that corporate equity had by far the most data available, with sovereign asset and real estate data scarce by comparison. While investors expect this today, data vendors should aim to increase their coverage over time.

New approaches should consider different asset class specificities when expanding coverage, following consistent methodological principles.

We recently released an infrastructure component for NZIF, with guidance for private equity to follow in 2023. Investors will need new data to inform their stewardship of these additional asset classes.

6. Ensure robust monitoring: In keeping with the need for regular updates, investors expect vendors to help their clients understand year-on-year changes in climate and net zero performance by developing monitoring frameworks and tools.

The full guide outlines the minimum drivers of change which should be monitored, as well as highlighting that vendors should develop tools to help attribute changes on all four NZIF targets.

An ongoing conversation

Our hope is that these six asks will support investors’ conversations with vendors, and in doing so, better equip both parties with the information they need to develop the most useful, accurate and robust data.

As the most popular methodology, the Net Zero Investment Framework should be the starting point for any vendor offering their services to those who have made net zero commitments. We are encouraged to see several new data products, inspired by NZIF, already coming to market.

Members can access the full report here.

If you’d like to take part in our working groups and be the first to see insights and analysis, why not speak to our investor relations manager today to find out more about becoming a part of IIGCC.