Traditional sustainable investment approaches rely on data that reflects what's happening today, like the carbon emissions and fossil fuel activity of a company. This alone doesn't tell us whether a company is advancing on its sustainable performance.
Forward-looking data such as implied temperature rise, science-based targets, and physical and nature risk help us assess whether companies are actually transitioning to a low-carbon economy. For example:
Implied Temperature Rise estimates the global temperature increase that would occur if all companies operated at the same emissions intensity as the company.
Science Based Targets identifies companies committed to emissions reductions.
Physical Risk shows a company's vulnerability to damages increasingly caused by climate change like flooding, drought, and extreme weather events that could disrupt operations or damage assets.
Nature Risk shows what percentage of a company's activities pose very high risks to natural ecosystems
By combining both current state and forward-looking data, we can better understand our portfolios and build investments positioned for long-term sustainable and financial performance.
Illuminate's investment methodology combines current state metrics, like a minimum 50% carbon emissions reduction from the investable universe and fossil fuel activity exclusions, with forward-looking metrics, including a 7% year-on-year decarbonization progress and increased portfolio weights for companies that set evidence-based targets.
On the app, we divide these two categories, naming them What's happening now and What could happen. The What's happening now section shows you current state metrics like carbon emissions and fossil fuel activity, while the What could happen metrics are forward-looking indicators like science-based targets and implied temperature rise.