Quantis joins BNP Paribas and Sycomore AM in Paris on November 6th at the Positive Investors Forum to showcase how using credible science and robust metrics can help capture a full spectrum of environmental risks in finance and support decision making. Dedicated to investors looking to increase the positive impact of their assets, the conference provides an opportunity for thought leaders, investors and rising voices in ESG (environmental, social and governance) to explore the trends and responsible investment strategies shaping business and sustainable finance.
Ahead of the event, Quantis CEO Emmanuelle Aoustin shares her take on the step-change taking shape in the financial sector, the Net Environmental Contributions indicator and how environmental metrics are the future of climate finance.
Much like financial indicators or ratings, environmental metrics guide decision making by providing investors with insight into the risks and opportunities that lie in their portfolios
Question: What is the current state of climate finance and how has it evolved over the years?
Emmanuelle Aoustin: The financial sector has come to terms with the risks and opportunities presented by climate change and recognizes its important role as an agent of change in accelerating the transition to a 1.5°C future. Coal divestment is an example of this — environmental considerations are now viewed as integral to asset evaluation. This shift has the real potential to foster transformational change in the real economy.
Green finance has therefore moved beyond the inception phase, transitioning from a mere concept into a set of actionable tools, including impact investing and dedicated instruments such as Green Bonds. However, we still have a long way to go and environmental metrics, in particular, will have a critical role to play in getting us there.
Q: How would you describe Quantis’ entry into the field climate finance?
EA: Quantis provides organizations with robust environmental metrics to drive innovation and guide intelligent, sustainable investment decisions. Investors and other financial sector actors are powerful decisionmakers. Though relatively new to the sector, Quantis has distinguished itself in the area of climate finance through the environmental analysis of investments and the evaluation of the environmental benefits of projects financed by Green Bonds.
Recently, we’ve been working through the EIT Climate-KIC financed COMBI 3 project, in partnership with l4CE, to develop a Scope 3 estimation methodology to better inform investment decision-making by providing enhanced transparency on climate-related risks.
Q: It seems that there is a significant paradigm shift underway, with investors placing greater emphasis on increasing the positive impact of their assets rather than simply maximising their profitability. What sparked this shift and why is it really gaining steam now?
EA: It really stems from the increasing correlation between an asset’s long-term profitability and its impacts. A variety of different drivers — regulation, competitiveness, etc. — are making low or positive impact assets more attractive to investors as a result of the “future-proof” benefits they provide. The development of frameworks, taxonomies, etc. that bridge the gap between financial product and impact have also provided a nudge in the right direction by offering investors greater insight into their portfolios.
Q: Robust metrics are an important tool in helping companies define and implement intelligent sustainability strategies. How can investors use metrics to identify and mitigate risk?
EA: As sustainable finance flourishes, different shades of “green” have emerged. Much like financial indicators or ratings, environmental metrics guide decision making by providing investors with insight into the risks and opportunities that lie in their portfolios. On the risk side, metrics can be used to identify and understand what is at stake in different sectors of activity and support asset evaluation. Environmental metrics can also be used to pinpoint the most advanced assets — the “solution providers” who are providing new opportunities in the low-carbon transition.
Q: Your session at the Positive Investors Forum will focus on the Net Environmental Contribution (NEC) indicator, an advanced metric that assesses the strategic alignment of a company’s overall activities with the energy and ecological transition. What is the value of using a tool like this?
EA: The Net Environmental Contribution indicator is a metrics-based environmental assessment methodology that Quantis developed with Sycomore AM to advocate for more transparency in the financial sector. It was built with the ambition to be as holistic as possible with regards to environmental impacts and considers a wide range of environmental indicators beyond carbon across the entire value chain. As such, the NEC gets as close as possible to evaluating a company’s alignment with the energy and ecological transition and is therefore able to help investors identify potential winners and losers.
Q: As holders of the purse strings, investors are in a unique position to drive change. How can they use data about their portfolios’ net environmental contribution to influence the companies they invest in?
EA: The NEC indicator’s activity-specific approach, in which diversified companies are evaluated across their various activities and not as a single block, allows investors to focus the discussion with the companies they invest in and challenge them to make improvements on their most misaligned activities. It can also help shed light on the potential discrepancies between strategic choices and the energy and ecological transition, thereby providing a powerful engagement tool.
Q: How are companies responding to the responsible investor stakeholder shift?
EA: Investors are one of the stakeholder groups companies are regularly challenged by. As they become more well-versed in environmental issues, investors are putting sustainability at the center of their engagement with companies and expectations are on the rise. Businesses are responding with greater transparency, both on current performance and long-term strategies to build resilience. The growth of science-based goals is one way companies are responding to shifting investor demands.
Q: Where do you see climate finance heading next? What are the opportunities and challenges that lie ahead?
EA: Climate finance will continue to capitalize on the development of environmental metrics and we expect to see investment flow towards even more “green” projects. Two key challenges ahead will be for the concept to move towards the mainstream without losing its differentiation factor and the potential for a growing investor appetite for this type of investment to dilute its meaning and power.
Q: Where will Quantis fit in a green finance future?
EA: Quantis will continue to help the most advanced investors identify climate finance opportunities and support investment decisions with robust science-based metrics. Looking ahead, one of our main goals will be to establish the Net Environmental Contribution indicator as a shared standard for green investment. We invite financial industry players and investors to join the NEC Initiative and work with to drive positive change.