Methodology

Scoring Morningstar Low Carbon Designation™ Mutual Funds

Overview

The scoring methodology accounted for the percentage of each fund invested in pure play renewables as well as the projected effectiveness of the investments to achieve carbon abatement over 10 years.

Funds are listed based on their positive climate change impact measured as carbon savings delivered by investments in pure play renewable energy companies. These companies are key to meeting a 1.5 scenario, however, we acknowledge that they are not the only players in climate solutions.

 
 

Further Defined: Implications, Assumptions, and Limitations:

Morningstar Methodology

The ranking universe was defined as Morningstar® Medalists with the Morningstar Low Carbon Designation™ in six diversified equity categories — Diversified Emerging Markets, Foreign Large Blend, Large Blend, Large Growth, Large Value, and World Large Stock—as published on May 17, 2018.

Funds were ranked using an asset-weighted Carbon Abatement ROI score of the equity holdings in the fund from September 30, 2017 through September 30, 2018.  Each fund was assigned a quarterly score that was then averaged. To calculate the fund scores, Canetic first identified equity holdings in renewable and cleantech companies defined as pure play – the majority (50% or more) of the firm’s activity must be focused on climate impact. Data on fund holdings was not always available on a direct comparison basis. impact is defined by Canetic as business operations that actively and directly reduce Greenhouse Gas emissions and where CO2 reduction capability can be reasonably, sensibly and quantitatively defined and projected.

This series of rankings is meant to identify which vehicles in a specific group can provide additional climate benefits by effectively and impactfully investing in climate solutions such as renewable energy and cleantech.  The Vested Impact initiative is not meant to generate an overall ESG ranking and is not an overall ranking of how vehicles use the multitude of investor tools that are available to actively address climate change along with associated risks and opportunities.

 
 

Major Oil Company Investments in Climate Solution

Overview

Carbon Abatement ROI is based on:

  • The firm’s carbon savings contribution determined by its position in the value chain

  • The ability of the firm to deliver carbon abatement

  • CO2 savings values from Canetic’s worldwide proprietary database of emissions factors

Major Oil Study Methodology Further Defined

The universe of companies was determined by Canetic using various independent sources. The compilation compared seven separate publications including S&P Global Platts, Forbes and Oil & Gas IQ. These rankings use financial parameters including revenue, assets, profits and return on investment as well as annual oil production. Canetic’s list was narrowed to a top 10 based on activity in renewables and cleantech (our defined Majors). This study used published data updated through year-end 2018 adjusted for announced or reported plans for 2019.

Vested Impact analysis is meant to identify which Majors within the universe can provide the greatest relative climate benefits over the coming ten years. Only those Majors where the ‘pure play’ renewable spend (defined as 50% or more going toward activities such as solar, wind etc.) could be identified were considered.

The first element of the study looked at the percentage of total capital spending going into renewables and cleantech and the implied net overall spend in these key areas. The second level of analysis looked at exactly what technologies and where spending was occurring. The next level defined the net CO2 abatement for current years and then projected levels for future years based on implied, announced and planned renewable and cleantech spending. The analysis applies Canetic’s proprietary data analytics that look at both the role of each technology in the value chain as well as a global emissions factor database.

Climate impact is defined by Canetic as business operations that actively and directly reduce Greenhouse Gas emissions and where CO2 reduction capability can be reasonably and sensibly quantitatively defined and projected. The Vested Impact initiative is not meant to generate an overall ESG ranking. These rankings are not meant to asses how any one Major may best reduce GHG emissions or a critique of any particular non-conventional and yet to be commercialized technologies (which certain Majors are pursuing). There are a multitude of un-proven and non-commercial technologies that Majors are considering which Canetic determined have too many risks and barriers to include at this time. These technologies are future oriented and very difficult to measure and simply don’t compare with proven and commercial investments in currently impactfully climate solutions.

The Vested Impact initiative is not meant to generate an overall ESG ranking and is not an overall ranking of how vehicles use the multitude of investor tools that are available to actively address climate change along with associated risks and opportunities.