Our Carbon Rating methodology.

August 4, 2020

The zero-carbon 2030 Project is on a mission to create a carbon transparent world. Our Carbon Ratings are one of these informational tools. We assess businesses on their action on climate change and publish the results on the zero-carbon 2030 website so consumers, investors, and business leaders can see how their businesses are performing against the competition. This briefing note provides an overview of our carbon ratings, and suggests how companies can improve their rating.

Our Carbon Rating methodology

The zero-carbon 2030 Project is on a mission to create a carbon transparent world. We’re calling for carbon labelling on products and services, and we’re putting reliable carbon information into the hands of consumers and investors the world over so that everyone can make informed decisions with everyday purchases and investments.

Our Carbon Ratings are one of these informational tools. We assess businesses on their action on climate change and publish the results on the zero-carbon 2030 website so consumers, investors, and business leaders can see how their businesses are performing against the competition.

We use the zero-carbon 2030 Commitments as our criteria to benchmark companies’ performance and apply our Carbon Ratings. These Commitments go beyond disclosure of historical carbon emissions, and compliance reporting. They are forward-looking, with an emphasis on businesses’ plans and targets to achieve carbon neutrality. And, in time, the focus of the ratings will shift to measuring performance against those targets.

We also consider congruency. We look at businesses’ global actions – such as their position on science, political donations, investment decision-making criteria – and ask the questions, “Are they in line with their public statements on climate?”

Each business is viewed as an eco-system that can be a force for good, by creating a carbon reduction ripple effect across their value chains (Scope 3 emissions). But also by exerting influence through their investment decisions, and interactions with policymakers – extending that ripple effect right across the global economy.

Businesses are also classified, based on a two-by-two classification system: large company[1] vs small and medium-sized enterprise (SME); and financial institution[2] vs Non-FI. This gives us four company classifications[3].

Our Carbon Ratings then capture the following:

For financial institutions, we also assess their role in enabling the transition to a low-carbon economy, or conversely, in perpetuating the carbon-intensive hydrocarbon economy.

Should a business’ commitment fail to adequately address Scope 3 emissions, we won’t recognise the validity of its commitment to be carbon neutral. For a financial institution, this includes indirect (Scope 3) emissions associated with its financial services (including lending) and investing activities.

Carbon Rating codes and categories.

The zero-carbon 2030 Carbon Rating codes and categories are set out below. The rating system operates on an aggregated points basis. Descriptions are therefore indicative only. They reflect the path that a business would usually take to address climate change: starting with disclosure and reporting compliance, then stepping up to commitments on adopting renewables and achieving carbon neutrality. And, ultimately, taking leadership through carbon pricing in decision making, carbon labelling, positive policy influence and adoption of the zero-carbon 2030 Commitments.

carbon rating methodology

How to improve your Carbon Rating.

The simplest way you can enhance your company’s Carbon Rating is to adopt the zero-carbon 2030 Commitments. This will improve your scoring across almost all aspects of our rating system.

For example, in an extreme scenario where a company has made no, or very limited, prior disclosure or commitment (initial rating of D or E), that company could potentially elevate itself to a B+ or A rating merely by adopting our Commitments (outcomes will vary depending on classification).

An even higher rating could be achieved if this were done in tandem with immediate measurement, disclosure, and reporting initiatives, coupled with strong climate policy engagement. And to maintain this improved rating, the company will need to follow through and meet the interim targets set out in the Commitments.

You can also contact the zero-carbon 2030 team at carbonratings@zero-carbon2030.org for guidance on the actions your business can take to improve your carbon ratings and profile

Footnotes

[1]Companies with revenues or market caps greater than US$ 1 billion (or equivalent), or employing more than 1,000 staff.

[2]Financial institutions include banks, diversified financials, insurance companies as well as investment managers (asset managers and asset owners).

[3]Large non-FI, SME non-FI, large FI and SME FI.

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