[Sustainalytics logo slides into screen. Screen then switches to Jonathan Smith]
My name is Jonathan Smith, and I lead oil and gas research here at Sustainalytics.
Today I'll be speaking about carbon as a material ESG issue, focusing specifically on products and services.
The carbon impact of products and services refers to greenhouse gas emissions that are released during the use stage of either a product or service life.
Although not all products and services produce greenhouse gas emissions, those that do tend to be responsible for a significant portion of emissions released globally.
Companies whose business models rely on the sale of fossil fuels generally face the most exposure to this issue, and, as a result, are most exposed to risks relating to the energy transition. However, other types of companies also face
exposure to this issue. Examples include natural gas utilities, automotive manufacturers, and aircraft manufacturers.
Although progress has been made in a number of these sectors, much remains to be achieved as such Sustainalytics assesses the management of carbon products and services through one individual material ESG issue.
Our approach to assessing the management of product or service related carbon risk focuses on how companies are improving either the efficiency or design of their offerings in a way that mitigates the release of greenhouse gas emissions
depending on the industry, this specific assessment will look different.
For instance, in the automotive industry, a key metric that we look at is the average greenhouse gas emissions associated with a company's vehicle fleet.
This also includes looking at the trend of fleet emissions, so whether vehicle emissions are going up or down as the years go by.
Our approach to this issue also includes accounting for differences and exposure to risk based off of a company's specific business model. So, for instance, for oil and gas producers, we acknowledge that companies who primarily focus on
natural gas relative to oil face somewhat less exposure to transitional risks in the near term given that the carbon impact of natural gas is less than that of oil.
Given the growing urgency of addressing climate change, companies who don't manage these risks can face significant business risks and the loss of competitiveness in the market, this makes the carbon impact of products and services a key
ESG issue that investors should be mindful of.
Thank you for listening.
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