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Powering Data-Driven Decision Making for Financial Markets

Article Overview

Regulatory, social, and investor pressures, coupled with the realization that climate risk is financial risk, have led to an increase in financial institutions measuring their financed emissions. However, measurement alone will not drive progress towards a Paris-aligned world.  Today, we are excited to announce the upcoming release of the Persefoni Portfolio Analytics Suite that provides banks, private market investors, insurance companies, and asset managers with carbon insights for better decision-making. In addition to seven new dashboards, the suite also includes Climate Impact Benchmarking (CIB) and Portfolio Impact Benchmarking (PIB), which will allow users to measure fund or portfolio emissions with equity and fixed income indices.  As part of today’s news, we are also announcing the upcoming release of Integration Hub, a centralized space for companies to configure, deploy, and monitor data integrations across a company’s systems of record to help save teams time collecting business activity data through automation. The newly supported integrations include iLEVEL, assisting portfolio managers with the automatic collection and calculation of their financed emissions.

An often overlooked fact of carbon accounting is that financed emissions (emissions from financial services, investments, and loans) make up over 99.5% of a financial institution's total emissions on average, and according to CDP data from 2020, only 25% of the 332 financial institutions disclosing through CDP report on it. Therefore, to meet net zero targets and make progress towards decarbonization, financed emissions are the primary factor.

Over the last several years, Persefoni has been working hand-in-hand with financial institutions to help them measure the carbon footprint of their assets and portfolio companies. The gold standard for measuring financed emissions is the Partnership for Carbon Accounting Financials (PCAF). As the first company to codify the PCAF standard into our platform, Persefoni has been working with private markets investors, banks, insurance companies, asset managers, and asset owners through the Persefoni platform to calculate and report on financed emissions.

Going beyond calculating the emissions of their portfolio, company, and funds, last month we announced Climate Impact Benchmarking (CIB), which allows companies and financial institutions to compare portfolio companies’ emissions with peers who report publicly and conduct high-level due diligence. Today, our investment in this area continues, and we are happy to announce the upcoming launch of the Persefoni Portfolio Analytics Suite. Financial professionals will be able to use these seven dashboards to analyze decarbonization pathways, conduct climate due diligence, model value-at-risk, compare estimates to actuals, construct low-carbon portfolios, and more.

Portfolio Analytics Suite provides banks, private market investors, insurance companies, and asset managers with carbon insights for better decision-making

Here’s what’s included in the Persefoni Portfolio Analytics Suite:

  • Value at Risk from Transition - It is a TCFD requirement to account for risk from climate change; this dashboard allows users to account for risk associated with the transitional impacts of climate change across their funds and portfolios. Users can model companies’ revenue and EBITDA against risks based on consumer preference changes and the cost of carbon pricing.
  • Portfolio Decarbonization - Decarbonization is the most important part of meeting net zero targets; Portfolio Decarbonization allows users to model decarbonization over six decarbonization scenarios: 1) divestment, 2) active reduction of emissions, 3) changes in sector allocation, 4) addition of low-carbon companies, 5) investments in climate impact, 6) purchase of offsets. This dashboard gives users the confidence to make and stick to net zero commitments and understand the implications of doing so.
  • Estimates vs. Actuals - When investors create a climate change strategy, their financed emissions calculations are based on a mix of actual reported and estimated footprints. This dashboard will compare Persefoni estimates for the same companies that report actual emissions so users can understand the difference. Estimates vs. actuals also allow comparison between different estimation methods.
  • Portfolio Builder - Investors recognize the fundraising opportunities in creating low-carbon funds, but lack the tools to model, backtest, and construct portfolios that attract investor capital. This dashboard enables investors to construct a model portfolio based on sector and weight to understand the projected carbon emissions, take an existing portfolio (whether the investor’s or an index), and apply carbon-related filters to test screening for a low-carbon fund.
  • Carbon-Adjusted Return Analysis - To make progress against decarbonization goals, investors need to incorporate carbon emissions into the investment diligence and underwriting process. This dashboard allows users to better understand the carbon impacts of their investment returns. Using existing revenue and EBITDA projections, combined with carbon revenue at risk, carbon pricing, and decarbonization costs, this analysis tool brings a carbon perspective to IRR/MOIC return scenarios.
  • Side-by-Side Comparison - This functionality allows users to understand better why their financed emissions differ between funds, companies, or year over year. By allowing users to make comparisons between organizations or between year-over-year changes for a single organization.

We hope these new functionalities will help you recognize your decarbonization goals and contribute to fighting climate change. To learn more about the Persefoni Portfolio Analytics Suite, visit our website at Persefoni.com or schedule a demo here.

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