Trucost Carbon Earnings at Risk Methodology

This document is a technical report detailing the methodology for Trucost's Carbon Earnings at Risk (CEaR) analysis developed by S&P Global Sustainable1. It outlines the framework used to assess the potential financial impact of future carbon pricing on company earnings, particularly focusing on Scope 1 and Scope 2 emissions. The report explains the significance of the Carbon Price Risk Premium, which varies by geography and sector, and emphasizes the importance of incorporating carbon pricing into risk management processes. The methodology allows investors to evaluate their portfolios against future carbon price scenarios, which are based on data from reputable sources such as the International Energy Agency and the World Bank. It also describes the data sources utilized, including financial and environmental datasets, and the assumptions made in calculating current and future carbon prices. The report serves as a guide for market participants to navigate the evolving landscape of carbon pricing and its implications for financial risk management.