Attribution for Implied Temperature Rise

Research Paper
Xinxin Wang, Guido Giese, Drashti Shah
June 3, 2024
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MSCI Implied Temperature Rise (ITR) is a climate metric designed to show the temperature alignment of companies and portfolios with global climate goals. Beyond climate disclosures, investors may use ITR to set decarbonization targets and support engagement on climate risk. In this paper, we develop an attribution framework to understand what causes a portfolio's ITR to change over time. The six driving factors are:
  • changes in the portfolio composition,
  • changes in the global emissions budget,
  • changes in companies' emissions budgets,
  • changes in companies' projected future emissions,
  • changes in the portfolio's ownership share in the portfolio holdings, and
  • the interaction effect among these drivers.
We can show this attribution in the form of a tree. To illustrate this, we considered a hypothetical portfolio based on the MSCI ACWI Index from Jan. 31, 2020, to Jan. 31, 2022. The MSCI Implied Temperature Rise attribution can be analyzed both as a percentage (as shown) as well as by degree Celsius (see report).
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ITR attribution tree (%)
This chart illustrates the ITR attribution for a hypothetical portfolio based on the MSCI ACWI Index.
ITR data was pulled in November 2023 using modeled history from Jan. 31, 2020, to Jan. 31, 2022. Source: MSCI ESG Research.
Xinxin Wang
Xinxin Wang
Executive Director, MSCI Research
Guido Giese
Guido Giese
Managing Director, MSCI Research
Drashti Shah
Drashti Shah
Senior Associate, MSCI Research

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