This research project is both an update of the analysis on carbon emissions trajectories proposed by Le Guenedal et al. (2020) and a companion study of the climate risk measures defined by Le Guenedal and Roncalli (2022). While Le Guenedal et al. (2020) use carbon intensities, we extend the track-record projection approach by considering absolute carbon emissions. In particular, we propose a carbon budget approach that incorporates novel metrics for measuring the carbon emissions reduction targets and the relative positioning with respect to the net zero emissions (NZE) scenario. Indeed, current carbon emissions data are not sufficient to build portfolio alignment. The purpose of this paper is then to define net zero carbon metrics, which are necessary to enhance the disclosure and the debate on corporates’ emissions (Créhalet, 2021; Le Meaux et al., 2021).

These carbon metrics can be divided into two families. The static measures are NZE duration, NZE gap, NZE slope and NZE budget. They can be computed using a target scenario or the linear trend model. The dynamic NZE measures incorporate the past trajectory and the future scenarios of carbon emissions. For instance, we break down the carbon budget by error and revision time contributions. We also propose a velocity measure of the carbon emissions trend and two main dynamic NZE measures that are necessary to assess the performance of an issuer compared to the NZE scenario: the zero-velocity scenario and the burn-out scenario. These different measures can then be used to define the PAC framework, that analyzes the participation, ambition and credibility of issuers’ NZE policies. Finally, we apply this framework to the CDP database. Empirical results show that net zero carbon emissions are challenging for many issuers for two reasons. The first is that some issuers have a lack of ambition concerning their NZE scenario. The second is that some targets are not compatible with past trends.


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Quantitative Research, Amundi Technology
RC - Author - RONCALLI Thierry
PhD, Head of Quant Portfolio Strategy, Amundi Investment Institute
RC - Author - SEKINE Takaya
Deputy Head of Quant Portfolio Strategy, Amundi Investment Institute
Quantitative Research