Low Carbon Transition Alignment

ESG ratings, data, and research provider Morningstar Sustainalytics announced today the launch of its Low Carbon Transition Ratings, aimed at providing investors with an assessment of a company’s alignment with a net zero pathway, based on an evaluation of its strategy and actions as well as scenario analysis.

Launched after nearly two years of development, the new ratings are expressed as an Implied Temperature Rise, indicating a company’s exposure to low carbon transition risks and opportunities, based on an analysis of its business model, emissions and management performance.

The ratings also draw on scenario analysis from the UN Principles for Responsible Investment’s (PRI) Inevitable Policy Response’s Required Policy Scenario (RPS), which considers policies and actions needed to keep global warming below 1.5 degrees Celsius, such as ending deforestation by 2025, decommissioning coal in China by 2035, and phasing out new fossil cars in almost all markets by 2040. The rating reconciles the RPS scenario to a company-specific net zero budget, with consideration given to the company’s location of operations and business activities.