2016 ET CARBON RANKINGS REPORT

ET CARBON RANKING METHODOLOGY
49
DISCLOSURE REQUIREMENTS, CURRENT
EMISSIONS AND INTENSITY
From a technical point of view, the ultimate
metric for investors to consider when
incorporating carbon risk into their valuations
of companies would be the net present value
of emissions over time. That is, the expected
discounted value of the change in cash flows,
relative to business as usual, of a company
due to its GHG emissions exposure.
The current emissions-intensity of a company
is a key input into the equation for this
net present value of emissions, just as an
estimate of a company’s current dividend
amount is a core parameter in the dividend
discount model of stock prices. 46 While
analysts may debate the right dividend
growth rate number or the right emissions
cost growth rate, the current dividend
amount and the current emissions-intensity
of a company are observable. These
observable quantities set the starting point
for forecasts of future dividends and future
emissions amounts, respectively.
ET Index Research asserts that the process
of calculating and publishing Scope 1, 2 and
3 emissions-intensities is consistent with
the seven fundamental principles identified
by the FSB Task Force on Climate-related
Financial Disclosures to: 47
• present relevant information;
• be specific and complete;
• be clear, balanced, and understandable;
• be consistent over time;
• be comparable among companies within a
sector, industry, or portfolio;
• be reliable, verifiable, and objective; and
• be provided on a timely basis.
The ET Carbon Rankings seek to enhance
the disclosure of accurate Scope 1, 2 and 3
emissions data to an ever-higher standard
each year across all public companies.
To assess the current emissions-intensity
of a company, information on the current
emissions of that company is required. This
must include all relevant Scope 1, 2 and 3
emissions, so that both direct and indirect
costs can be estimated.
2016 CARBON RANKINGS REPORT
ET INDEX RESEARCH