Last month, Climate-KIC-supported Climetrics—the world’s first climate rating for investment funds by CDP—won the SInv17 Innovative Climate Finance Tool competition. Leveraging the increased visibility from awards and media coverage, the organisation plans to commercialise their product ideas as well as expand geographically.
“We want to offer asset managers the right to use the Climetrics trademark; their teams can also use that in their advertising. There are a couple of other products, like a fact sheet with a detailed analysis that we want to offer for a fee. We’re also speaking with asset managers who might be interested in the underlying Climetrics data,” says Nico Fettes, Project Manager at CDP. “Furthermore, the work is underway to increase the universal funds we can rate. Then, the next step is expansion into the US market, which is the biggest market for mutual funds worldwide and is obviously a key target.”
Climetrics was created by CDP—a global disclosure system that enables companies, cities, states, and regions to measure and manage their environmental impacts—about three years ago in order to add some clarity around the issue of climate change in the context of investment. CDP emphasises that Climetrics is unique in its data integrity and data depths, consulting with renown climate NGOs like Oxfam and WWF. Furthermore, Climetrics is independent and transparent.
Using a one to five leaf rating (five being positive), Climetrics evaluates the climate impact of various funds, empowering investors, including retail investors, to make informed decisions immediately and on a daily basis. Their methodology grants 85 per cent weight to the portfolio holdings score, 10 per cent to the asset manager score, and 5 per cent to the investment policy score.
“CDP is rating over 3,000 listed companies around the world and represents 80 per cent of European and US market capitalisation on average,” says Steven Tebbe, Managing Director at CDP. “From our findings, we’ve seen that there are some funds that don’t label themselves as being green or low carbon impact, but actually have a very low carbon impact by the makeup of their companies. So it’s very interesting to shine a light on that to say, well, it’s not because it says climate on the fund that it’s necessarily the best climate fund… We need to mainstream this if we really want to have an impact on the economy and financial markets.”
The landscape for ratings is changing and growing constantly as climate change becomes a more urgent topic at both a regional and global level. This means a shift in the motivation of investors as well as a push for increased availability of data.
“What has changed—a little bit with our help, hopefully—is that investors realise there’s a material risk in climate change for the investments and that there are opportunities they’re missing if they don’t take this into consideration,” says Tebbe. “The request for something like that has been there for a while and it has been growing, so I think Climetrics is a way to make the market for sustainability investing more dynamic because it’s basically in the retail area. Research shows that a lot of people would like to integrate sustainability criteria into their decision making.”
The long-term goal of Climetrics? To get as many players as possible to use the data, to work with the data, and to create their own products: “Asset managers, for example, could create their own products and pay us a tiny royalty fee… a whole ecosystem of services and products can be created out of the data and that’s of course our mission as CDP—to promote it and help it to grow as much as possible,” says Tebbe.
Shirin Reuvers, Cities Manager at CDP, will be taking part in Climate-KIC’s Climate Innovation Summit panel “Dealing with climate risk and adaptation” taking place on 30 October at 13:30-15:00 in Milan. Register now!