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Corporate Environmental
Impact Valuation

The purpose of a corporate environmental impact valuation through calculating risk exposure is to best determine and account for the business operational and financial value of impacts from emissions and use of natural resources across the enterprise.

Schedule Evaluation

Cross-industry Emerging Risk Factors

Environmental

Corporate voluntary action is rapidly increasing around the issue of climate change. Increasing priorities for GHG emissions accounting and cross-industry involvement in standards-making is proportionately illuminating emerging risks. Examples: fiduciary duty and whether consideration of environmental and social impacts, such as climate change, can be considered in investment decision-making.

Companies, even those within the same sector or industry, can have very different risk exposures, because of their individual characteristics, operating conditions, and management strategies.

Policy & Legal

Direct policies or regulations that establish carbon-pricing systems (for example, cap-and-trade programs or carbon taxes) or directly limit GHG emissions. Some policies or regulations that do not directly target GHG emissions can nevertheless impact GHG-emitting assets. Example: a policy that imposes limits on non-GHG air pollution from fossil-fuel-fired power plants; a policy that impacts industrial water use and discharge, or an energy efficiency standard.

Market & Economic

Factors include the type of asset or company and what it produces; whether an asset or company is in an industry where barriers to entry are high; and whether demand for a product or service is inelastic/not price-increase sensitive. For example, oil and gas companies have found it more challenging to pursue higher cost development projects in a low-price environment. Weaker demand for coal in the United States - a result of lower natural gas prices and tighter pollution regulations, and the consequent retirement of many coal power plants - has similarly impacted many coal companies.

Reputational

Concerns surrounding the nature of corporation environmental activities and impacts. Examples: a significant number of fossil-fuel companies have been targeted by a growing divestment campaign, where some investors have argued for fossil-fuel divestment on moral or ethical grounds and their concerns about climate change and potential environmental damage. Some companies have also been publicly criticized over particular types of carbon projects or the GHG-intensive nature of their business in general.

In addition, financial intermediaries and investors might also face reputational risk stemming from financing.

Credits Glossary

Tax Credits- related to tax reduction and incentives provided by governments

Carbon Credits- related to environmental initiatives and are used to offset greenhouse gas emissions

Investor Tax Credits (ITCs)- designed to encourage private investment in specific sectors or activities. Investors receive tax credits as a percentage of their investment amount, providing a financial incentive to support targeted industries or projects.
Production Tax Credits (PTCs)- aimed at encouraging the production of specific goods or services. They are often used to promote activities that have broader economic or environmental benefits.