Sustainable and Responsible Investing (SRI) is a fast-growing trend in the investment world. Major investment banks are reworking their investment strategies to incorporate environmental, social, and governance (ESG) factors into their portfolios, while investors are also growing more socially responsible and are keen for financial securities rooted in sustainable principles. The client, MainStay Investments, is a subsidiary of the largest US mutual life insurance company, New York Life. MainStay is preparing to leverage the world-class SRI methodology of another New York Life subsidiary in Europe, Candriam, by raising investor awareness in the U.S. before launching new products in this field.
This project was carried out with the objective of informing the client’s SRI strategy. The report built on the ESG methodology developed by Candriam, wherein companies go through micro, macro, and norms-based analyses. As part of the macro analysis, sectors were assessed on their performance with respect to six sustainability trends: climate change, resource depletion, health and wellness, demographic evolutions, developing economies, and interconnectivity. This analysis focused on the methodology for the climate change trend.
The analysis looked at the GHG levels in CO2-equivalent terms (CO2-e) for commodities in the energy and the metals and mining sectors. Based on The Greenhouse Gas Protocol’s methodology, GHG levels were separated into three scopes:
1. GHG emitted during the extraction of the commodity
2. Emissions that are generated by the consumption of electricity during the extraction and refinement processes
3. GHG emitted from final product usage.
Data on emissions for each of the scopes were collected from reports published by companies, governmental agencies, and research articles. It was then used to rank each commodity within each sector in terms of emissions. The suggested rankings for each commodity either corroborated or differed from the client’s ranking, informing them of new ways of assessing the climate change impact of companies within their SRI solutions.