Climate and Nature report 2023 1
Climate and Nature report 2023 CONTENTS
Climate and Nature report 2023 Foreword by the CEO
Climate and Nature report 2023 We are committed to
Net Zero
Climate and Nature report 2023 Governance
Climate and Nature report 2023 Strategy
Climate and Nature report 2023 Risk management
Climate and Nature report 2023 Metrics and targets
Climate and Nature report 2023 Nature
Climate and Nature report 2023 Glossary
HANDELSBANKEN FONDER – GLOSSARY 34 CONTENTS Forew
ord by the CEO We are committed to Net Zero Governance Strategy Avoided Emissions Avoided emissions, sometimes informally called “Scope 4” emissions, refer to the reduction in greenhouse gas emissions that occurs when a low-carbon product, service, or project is implemented compared to a business-as-usual scenario. While not an official category in the GHG Protocol, this concept is increasingly used in sustainable investing to assess the positive climate impact of investments beyond direct emissions reductions. Risk management Metrics and targets Nature Glossary Net zero Net zero, in the context of an asset manager, refers to achieving a state of balance between the greenhouse gas emissions associated with an investment portfolio and the removal or offsetting of those emissions. This concept is central to aligning investment strategies with global climate goals, particularly the Paris Agreement’s objective of limiting global warming. The Net Zero Investment Framework (NZIF) and Science Based Targets initiative (SBTi) provide guidance on implementing this concept. They emphasize the importance of setting clear, measurable targets for emissions reduction that align with scientific consensus on climate change mitigation. These frameworks also stress the need for a comprehensive approach that goes beyond simple offsetting, instead focusing on real-world emissions reductions and support for the transition to a low-carbon economy. About risk Past performance does not predict future returns. The value of the money invested in the fund can increase or decrease and there is no guarantee that all of your invested capital can be redeemed. Note that a fund with risk level 5-7 as stated in the fund’s key information investment document (KIID) can vary greatly in value due to the fund’s composition and management methodology. A summary of investors’ rights as well as a prospectus, fund rules and KIID are available for each fund at handelsbanken.se/fonder. Enterprise value including cash (EVIC) EVIC is calculated as the sum of the market capitalisation of a company, without the deduction of cash or cash equivalents. It is used in the method to calculate carbon footprint as proposed by the EU Technical Expert Group on Sustainable Finance (TEG). Note that the carbon footprint can thus, even if the absolute emissions are the same, increase or decrease depending on how the market values a company. Portfolio metrics Financed Emissions Financed emissions refer to the total greenhouse gas emissions associated with the companies in which the firm invests. These emissions are attributed to the asset manager based on the ownership in each company, calculated by comparing the size of the investment to the enterprise value including cash (EVIC). In the context of the Sustainable Finance Disclosure Regulation (SFDR), financed emissions are covered under Principal Adverse Impact (PAI) indicator 1.1. Also called: Absolute emissions or total emissions, or just greenhouse gas emissions (in SFDR). Carbon Footprint The carbon footprint in the context of portfolio emissions is the normalized measure of financed emissions, usually expressed in tonnes of carbon dioxide equivalent (tCO2e) per million euros (or any other currency) of enterprise value including cash (EVIC). As such, it is interpreted as financed emissions per million euros invested. To convert carbon footprint to financed emissions, one would multiply the carbon footprint by the actual assets under management (AUM), expressed in millions of the chosen currency. Under SFDR, the carbon footprint is addressed by PAI indicator 1.2, using EVIC expressed in the terms of million euros as a denominator. Also called: Greenhouse gas footprint. Greenhouse Gas Intensity Greenhouse gas intensity is a metric that expresses the greenhouse gas emissions relative to a specific unit of financial output, typically revenue generated from investments but for some sectors the actual product output such as tonnes of steel is used. In the context of SFDR, greenhouse gas intensity is covered under PAI indicator 1.3 using revenue expressed in the terms of million euros as a denominator. Also called: Carbon intensity, or weighted average carbon intensity (WACI) for portfolios. Physical Value at Risk (PVaR) Physical Value at Risk (PVaR) quantifies potential financial losses due to physical climate risks, such as extreme weather events (e.g., hurricanes, floods, droughts) and long-term climatic changes (e.g., rising sea levels, changing precipitation patterns). PVaR helps assess the potential damage to assets, disruption to operations, and other financial impacts resulting from these physical climate risks. Transitional Value at Risk (TVaR) Transitional Value at Risk (TVaR) measures potential financial losses associated with the transition to a low-carbon economy. This includes risks from policy and legal changes (e.g., carbon pricing, emissions regulations), technology shifts, market changes (e.g., changing consumer preferences), and reputational impacts. TVaR helps quantify the potential financial impacts of these transition risks, such as stranded assets, increased operating costs, or reduced demand for carbonintensive products. Science Based Targets Initiative (SBTi) The Science Based Targets initiative (SBTi) is a collaborative effort between CDP, the United Nations Global Compact, the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The initiative aims to help companies set ambitious greenhouse gas emission reduction targets that are in line with the latest climate science and the goals of the Paris Agreement. By setting science-based targets, companies demonstrate their commitment to reducing their carbon footprint and contributing to the global effort to limit global warming to well below 2°C above pre-industrial levels, with efforts to limit warming to 1.5°C. The SBTi provides a framework and methodology for companies to set emission reduction targets for their operations (scope 1 and 2) and value chain (scope 3). The initiative offers sector-specific guidance to help companies in various industries set targets that are consistent with the decarbonization pathways required to meet the goals of the Paris Agreement.