For the portfolio decarbonisation reference objective, investors are recommended to include sovereign bonds of all maturities issued in domestic or foreign currencies.
Please revert to the recommendations for listed equities, corporate fixed income, real estate, infrastructure, private equity and private debt.
Investors are recommended to calculate the apportioned financed emissions of the portfolio. IIGCC endorses PCAF’s financed emissions metrics as a suitable standard for apportioning ‘financed emissions’ for sovereign bonds.
These calculations should cover GHG emissions from key sectors and categories such as energy, industrial processes and product use, agriculture, forestry, other land use, and waste. One of the principles of PCAF for reporting on financed emissions from sovereign debt is the reporting including and excluding LULUCF.
When it comes to the attribution of sovereign bond emissions, absolute country emissions must be normalised to allow for comparison. The Standard uses GDP adjusted for Purchase Power Parity (PPP) in international USD as a normalisation factor; this is to ensure a fairer comparison considering the size of the economies and the exchange rate effect.
Consumption-based data is recognised as best practice, however current data is limited. Investors may therefore apply the holistic or consumption emissions view on a best effort basis.
Investors are recommended to use regional and country decarbonisation pathways to set the portfolio decarbonisation reference objective, in an effort to account for the regional composition of the portfolio and the fact different regions are expected to decarbonise at different rates.
The concept of ‘fair share’ recognises that different countries have different levels of responsibility and capability in the transition to net zero, and should therefore not be treated identically.
Regional pathways account for the different rates at which geographical regions need to decarbonise to contribute to global net zero emissions by 2050, as per below.
Gross emissions and removals, and net emissions reductions by aggregated region in the NZE Scenario, 2010-2050
The appendix in the guidance outlines regional net zero pathways available to investors when setting the portfolio decarbonisation reference objective, as well as details on custom pathways.
Investors are encouraged to set:
A five year stocktake is recommended to facilitate assessment of progress.
Investors can consider the approaches outlined in the guidance for listed equities, corporate fixed income, real estate, infrastructure, private equity and private debt:
Investors are to further decide on how the objective will be quantified:
To ensure complete transparency, investors are recommended to:
To further progress the sophistication of net zero pathways available, investors are recommended to seek to understand the assumptions behind the pathway models and avoid implementing strategies that lead to rebalancing away from emerging markets that are making efforts towards a fair low carbon transition.
For the portfolio decarbonisation reference objective, investors are recommended to include sovereign bonds of all maturities issued in domestic or foreign currencies.
Please revert to the recommendations for listed equities, corporate fixed income, real estate, infrastructure, private equity and private debt.
Investors are recommended to calculate the apportioned financed emissions of the portfolio. IIGCC endorses PCAF’s financed emissions metrics as a suitable standard for apportioning ‘financed emissions’ for sovereign bonds.
These calculations should cover GHG emissions from key sectors and categories such as energy, industrial processes and product use, agriculture, forestry, other land use, and waste. One of the principles of PCAF for reporting on financed emissions from sovereign debt is the reporting including and excluding LULUCF.
When it comes to the attribution of sovereign bond emissions, absolute country emissions must be normalised to allow for comparison. The Standard uses GDP adjusted for Purchase Power Parity (PPP) in international USD as a normalisation factor; this is to ensure a fairer comparison considering the size of the economies and the exchange rate effect.
Consumption-based data is recognised as best practice, however current data is limited. Investors may therefore apply the holistic or consumption emissions view on a best effort basis.
Investors are recommended to use regional and country decarbonisation pathways to set the portfolio decarbonisation reference objective, in an effort to account for the regional composition of the portfolio and the fact different regions are expected to decarbonise at different rates.
The concept of ‘fair share’ recognises that different countries have different levels of responsibility and capability in the transition to net zero, and should therefore not be treated identically.
Regional pathways account for the different rates at which geographical regions need to decarbonise to contribute to global net zero emissions by 2050, as per below.
Gross emissions and removals, and net emissions reductions by aggregated region in the NZE Scenario, 2010-2050
The appendix in the guidance outlines regional net zero pathways available to investors when setting the portfolio decarbonisation reference objective, as well as details on custom pathways.
Investors are encouraged to set:
A five year stocktake is recommended to facilitate assessment of progress.
Investors can consider the approaches outlined in the guidance for listed equities, corporate fixed income, real estate, infrastructure, private equity and private debt:
Investors are to further decide on how the objective will be quantified:
To ensure complete transparency, investors are recommended to:
To further progress the sophistication of net zero pathways available, investors are recommended to seek to understand the assumptions behind the pathway models and avoid implementing strategies that lead to rebalancing away from emerging markets that are making efforts towards a fair low carbon transition.
