Low Carbon Transition Rating
Low Carbon Transition Ratings
Glossary of Terms
March-April 2024
| Term | Explanation |
|---|---|
| Advanced Post Investment GHG Emissions | The future GHG emissions projection between the current year and 2050 considering both the impact of investments and the STEPS adjustment. |
| Baseline GHG Emissions Gap | The absolute difference between the company’s projected emissions from all scopes and its net zero-aligned emissions budget to 2050. |
| Baseline GHG Emissions Gap Percentage | The percentage difference between the company’s baseline emissions from all scopes and its net zero-aligned emissions budget to 2050. |
Baseline GHG Emissions Projection | The company's baseline emissions from all scopes from now until to 2050. The baseline emissions assume that the company has not taken any steps to actively manage its emissions. |
| Cumulative Baseline GHG Emissions Gap | The absolute difference between the company’s baseline GHG emissions and its GHG emissions budget for all years until 2050. |
| Cumulative Baseline GHG Emissions Gap Percentage | The percentage difference between the company’s baseline GHG emissions and its GHG emissions budget for all years until 2050. |
| Cumulative Baseline GHG Emissions Projection | The company’s baseline emissions for all years until 2050. The baseline emissions assume that the company has not taken any steps to actively manage its emissions. |
| Cumulative Expected GHG Emissions Gap | The absolute difference between the company’s expected GHG emissions and its GHG emissions budget for all years until 2050. |
| Cumulative Expected GHG Percentage | The percentage difference between the company’s expected GHG emissions and its GHG emissions budget for all years until 2050. |
Cumulative Expected GHG Emissions Projection | The company’s expected emissions for all years until 2050. The expected emissions accounts for management adjustment to the company’s cumulative baseline GHG emissions. |
| Cumulative GHG Emissions Budget | The company’s budgeted GHG emissions for all years until 2050. |
| Expected GHG Emissions Gap | The absolute difference between the company’s expected GHG emissions and its GHG emissions budget. |
Expected GHG Emissions Gap Percentage | The percentage difference between the company’s expected GHG emissions and its GHG emissions budget. |
| Expected GHG Emissions Projection | The company’s projected emissions from all scopes of emissions for any given year after accounting for management. |
| Exposure | An assessment dimension that reflects the extent to which a company is sensitive to low carbon transition risks. The Low Carbon Transition Rating exposure assesses the implied temperature rise, expressed in degrees Celsius, for a company if it simply follows current stated policies and takes no additional management actions that would increase or decrease emissions. It specifies to what degree the world would warm if all companies’ GHG emissions differed from their net-zero budgeted GHG emissions to the same degree as this company. |
| Exposure Category | A categorical description of the company's Exposure. |
| GHG Emissions Budget Projection | The company’s budgeted emissions from all scopes of emissions to 2050. The company’s budgeted emissions are determined by combining information on the company’s location of operations, starting point of emissions and the trajectory specified by a specific pathway (within the LCTR, this is the IPR Net-Zero Pathway). |
| GHG Emissions Gap | The difference between GHG emissions projections as compared to the GHG Emissions budget. There are two types of GHG Emissions Gap: the Baseline GHG Emissions Gap and the Expected GHG Emissions Gap. |
| Global Emissions Budget | The company’s budgeted emissions from all scopes of emissions to 2050. The company’s budgeted emissions are determined by combining information on the company’s location of operations, starting point of emissions and the trajectory specified by a specific pathway (within the LCTR, this is the IPR Net-Zero Pathway). |
| IEA Stated Policies Scenario | A pathway developed by the International Energy Agency that is based on policies that are already put in place by governments but also those that are currently under develop. It is considered a conservative benchmark for our current trajectory because it does not rely merely on government stated targets. |
| Investment Alignment Indicator | A management indicator with a score between 0 and 100 that indicates to what degree the company is expected to manage its emissions through its investments in production technologies. |
| IPR Net-Zero Pathway | The Inevitable Policy Response (IPR) Pathway is a pathway to net-zero that was modelled based on the premise that future policy developments must accelerate emissions reduction to hold global temperature increases to a 1.5° outcome. The pathway model was commissioned by the UN Principles for Responsible Investment and forms the basis of the GHG emissions budgets in the Low Carbon Transition Rating. |
Low Carbon Transition Rating Category | A categorical description of the company's Low Carbon Transition Rating. |
| Low Carbon Transition Rating | An implied temperature alignment that specifies what degree the world is expected to warm if all company’s emissions differed from their net-zero budgeted emissions to the same degree as this company. |
Low Carbon Transition VaR - Value at Risk - Overall Risk | A measure of the potential absolute loss in value the company may experience from a transition to a low carbon economy. It is calculated as the sum of the present value of cash flows at risk, related to market and policy risks to the year 2050 and the present value of the terminal value at year 2050. |
Low Carbon Transition VaR - Value at Risk - Policy Risk (LCT-VaR Policy Risk) | A measure of the potential absolute loss in value the company may experience from policy risk from a transition to a low carbon economy. The sum of the present value of cash flows at risk, related to policy risk, to year 2050 and the present value of the terminal value at year 2050. |
Low Carbon Transition VaR - Value at Risk - Market Risk (LCT-VaR – Market Risk) | A measure of the potential absolute loss in value the company may experience from market risk from a transition to a low carbon economy. The sum of the present value of cash flows at risk, related to market risk, to year 2050 and the present value of the terminal value at year 2050. |
| Management | A score that indicates the strength of the company's management systems in regard to managing its exposure to the low carbon transition. |
| Management Category | A categorical description of the company's Management. |
| Management Score | A score that indicates the strength of the company’s management systems for managing its exposure to the low carbon transition. |
| Pathway | A trajectory of the amount of GHG emissions that will occur based on specific assumptions about the economy, population, energy consumption and land use. Technically, they are referred to as Representative Concentration Pathways (RCPs). |
| Post Investment GHG Emissions | The future GHG emissions projection for a company based on the Technology-based GHG emissions. |
| Scope 1 | Scope 1 refers to direct emissions that are from company-owned and controlled resources. |
| Scope 2 | Scope 2 refers to indirect emissions that are from the generation of purchased energy, from a utility provider. |
| Scope 3 Downstream | Scope 3 Downstream refers to indirect emissions that are generated downstream from the company's production of goods and services (when the company's products are used). |
| Scope 3 Upstream | Scope 3 Upstream refers to indirect emissions that are generated upstream from the company's production of goods and services (in the supply chain). |
| Scope of Emissions | The Scope of GHG emissions under consideration, includes Scope 1 (direct operations), Scope 2 (indirect operations), Scope 3 Upstream (supply chain) and Scope 3 Downstream (products and services). |
| STEPS GHG Emissions Projection | The future company GHG emissions based on alignment to the IEA Stated Policy Scenario (STEPS), which is applied for all years where technology based GHG emissions cannot be calculated. |
STEPS GHG Emissions Projection Factor | A factor based on the IEA Stated Policy Scenario (STEPS) which is applied as a default to total company GHG emissions where asset data does not exist to determine future company GHG emissions. |
| TCFD Disclosure Sufficiency | A percentage that indicates what proportion of TCFD-related indicators the company is disclosing upon. |
| TCFD Management Quality | A score that indicates the strength of the company's management systems in managing its exposure to the low carbon transition. At the Overall level, the score is the same as the company's Management - All Scopes score. |