2024年碳投资前估价私募股权可持续市场倡议（PESMIT）报告

Valuingcarbonpre-investment

PrivateEquitySustainableMarketsInitiative(PESMIT)

September,2024

©Copyright2024byTheERMInternationalGroupLimitedand/

oritsaffiliates(‘ERM’).Allrightsreserved.Nopartofthisworkmaybereproducedortransmittedinanyformorbyanymeans,withoutpriorwrittenpermissionofERM.

Valuingcarbonpre-investment-PESMIT

2

ContentsContext4

CarbonValuationPlaybook10

MethodologyforValuationComponents22

Appendix34

CaseStudies39

Valuingcarbonpre-investment-PESMIT3

Context

Valuingcarbonpre-investment-PESMIT

mmmmmmmmmmmmmmmm4

SustainableMarketsInitiative

OtherIndustry-ledPrivateEquityCEO

TaskForceTaskForce

PrivateEquityActionCommittee

Climate

working

group

Biodiversity

Working

Group

Metrics

Working

Group

Introduction

TheSustainableMarketsInitiative(SMI)waslaunchedin2020attheWorldEconomicForumAnnualMeetinginDavosbyHisMajestyKingCharlesIIIwhenhewasThePrinceofWales.

TheSMIisanetworkofglobalCEOsacrossindustries

workingtogethertobuildprosperousandsustainable

economiesthatgeneratelong-termvaluethroughthe

balancedintegrationofnatural,social,human,and

financialcapital.TheseglobalCEOsseethemselvesasa‘CoalitionoftheWilling’helpingtoleadtheirindustriesontoamoreambitious,accelerated,andsustainable

trajectory.

TheSMIseekstoputNature,PeopleandPlanetatthe

heartofglobalvaluecreation.Thisisevidentthroughits

TerraCarta,whichservesasthemandatefortheSMIandprovidesapracticalroadmapforaccelerationtowardsanambitiousandsustainablefuture;onethatwillharnessthepowerofNaturecombinedwiththetransformativepower,innovation,andresourcesoftheprivatesector.

Thispaperincludesinputfromtheclimatechangeworkinggroup,asubgroupoftheSMI’sPrivateEquityTaskForce

(PESMIT).1Leveragingthe

2023ValuingCarboninPrivate

Markets

publication,thePESMITClimateWorkingGroupandERMhavedevelopedsupplementalpracticalguidanceonvaluationofcarboninthecontextofpre-investment.

Thepurposeofthisfollow-onpaperthereforeistoofferfurtherguidanceonhowtoimplementtheframework,ratherthanaprescriptivemodel.Insodoing,webelievethatbyvaluingcarboninthepre-investmentprocess,

investorswillbebetterequippedtomakeinvestmentdecisionsbasedonquantifiablemetrics.Throughoutthisdocument,“carbon”isusedasanumbrellatermencompassingallgreenhousegasesandtheircarbonemissionequivalents.

FormoredetailsontheSMIandPESMIT,pleasevisitthe

website.

ThePrivateEquityTaskForcewaslaunchedin2021

andisthefirsteverCEO-levelprivateequityworking

groupestablishedtodiscusswaystheindustrycaneffectchange.TheTaskForceleveragesexpertisewithineachmemberfirmacrossthreepriorityareas:climatechange,biodiversityandsustainability-relatedmetrics.

1)AsdiscussedfurtherintheLegalDisclaimer,participationintheSustainableMarketsInitiative,includingtheTaskForcesand/orWorkingGroups,isnotintendedtoconvey

currentoranticipatedalignmentwithorendorsementorapprovaloftheinformationcontainedinthispaper.Rather,thispaperaggregatesinformationandexamplesgatheredfrommultiplesources;individualfirms’approachesmayvarysignificantly.

Valuingcarbonpre-investment-PESMIT

5

Objectivesofthisinitiative

Leveragingthe

2023ValuingCarboninPrivateMarkets

publication,thePESMITClimateWorkingGroupandERMhavedevelopedsupplementalpractical

guidanceonvaluationofcarboninthepre-investmentcontextasameansofassessingmaterialrisksandvaluecreationopportunities.

Guidancewill:

·

Buildonpositivefeedbackreceivedonprevious

publication

·

Considerwaystovaluecarboninprivatemarkets

earlyintheinvestmentlifecycle(i.e.inDueDiligence[DD])

·

Includetangible,quantifiedexamples

·

Emphasizethebusinesscaseforintegratingcarbon

considerationsintovalue-creationplanning

Valuingcarbonpre-investment-PESMIT

6

“

ValuingcarbonduringDDcanhelpensurethatrisksandopportunitiesarefactoredinthe

investmentthesis&IC

decisionmaking,wherematerial

“

Whyintegratecarbonvaluationintotheduediligenceprocess?

Whilstthisframeworkhasbeendesignedforthepre-investmentprocess,itscomponentscanalsobeappliedpost-acquisitiontohelpquantifyandrealizefinancialvalue.

MeetLPDemands

52%

ofEuropeanLPshavenet-zerocommitmentsinfluencinginvestment1

GenerateLong-TermValue

~20%*

EBITDAincreasepotential

by2030fromdecarbonisation2

Risk

Management

400%

increaseinEUEmissionsTrading

Schemecostsformanufacturing

businessfrom2022to20303

Sources:1)

ILPAandBain(2022)

,

2)McKinsey(2023)

,3)

EuropeanRoundtableonClimateChangeandSustainableTransition(ERCST)

*ExampleofalargeEuropeanluxurybrand

Valuingcarbonpre-investment-PESMIT

7

BuildinguponPESMIT’sexistingcarbonvaluationframeworkwithpracticalguidanceandadditionaldetailonindirectcarbonimpactsOverview|Carbonvaluationframeworkcomponents

。Carbon-adjustedCashFlows

Carbon-

adjusted

multiple

Costsimposedbyregulationonaspecificsectorinageographythatresultinactualcashoutflow(e.g.,viaETS,carbontax)

Self-imposedcostsbasedonself-assessedviewofcarbonprices(e.g.,pricesetbyfirmorportfoliocompanytoachieveNetZero

targets)

Incrementalcostsorbenefitsincurredasaresultoftherelativecarbonfootprint,canbedrivenbyrevenue(e.g.,higher/lowercustomerdemand)orcosts(e.g.,higher/lowerfinancingcosts)

Reductioninregulatedandinternalcarbon

costsandincreaseinindirectcarbonbenefitsfrompursuingdecarbonisationactions(e.g.,addingsolartoreducefootprint)

Self-imposedadjustmentinvaluationmultipleatexitwhenexitEBITDAdoesnot

reflectcarbon-relatedfuturegrowthandearningsrisk(e.g.,futurecarbonprices/decarbonisationstrategynotreflected),basedonself-assessedviewofthespecificcontextofagivenbusinessanditsenvironment

Internalcarboncosts

Indirectcarbonimpacts

Decarbonisationvaluecreation

A

B

C

D

Carbon-adjustedmultiple

Regulated

carboncosts

Relevantasset-levelemissions

Relevantasset-levelemissions

Internalcarbonprice

Regulatedprice

Revenueimpact

Costimpact

E

+

+

+

A

C

x

x

B

>

>

>

>

Extendedcarbonvaluationframeworkcomponents

C1

Decarbonisationcosts/saving

CAPEXofreduction

-

OPEXreduction

Voluntarycarboncosts*

C2

Residualasset-levelemissions

Priceofcarboncredit

x

C3

Sustainability-linkedfinancialinstruments

Interestexpensefortraditionalfinancialinstruments

-

Interestexpenseforsustainability-linkedfinancialinstruments

Considerimpactofnotmeeting

customerclimatedemandsand

reviewintegrationofsustainablegrowthoptionsintovaluecreationplanningduringtheholdperiod

SustainableGrowth

C4

*Coststoaddresstheimpactofacompany’sunabatedemissions,byinvestinginhigh-qualitycarboncreditportfoliosthatarealignedwiththeirshortandlong-termmitigationstrategies.Firmscandecidewhether,andtheextenttowhich,theymightparticipateinthevoluntarycarbonmarkets,i.e.non-regulatedcarbonmarkets,aspartoftheiroveralldecarbonisationapproach

Legend

A-E

ExistingPESMITValuationComponents

C1-4

ExtendedPESMITValuationComponents

Valuingcarbonpre-investment-PESMIT

8

Bydetailingthecalculationforeachcomponent,thisframeworkcanhelpquantifytotalcarbonenterprisevaluecreatedIllustrativeexample:notallcomponentsmayberelevantforeachdeal,normayhaveapositiveimpactonenterprisevaluedependingonthecircumstances

C4

E

Sustainable

Growththrough

C3

newproducts&servicesthat

D

Potentialmultiplererating

meetcustomer

climatedemands2

Lowercost

ofcapital:

A

NetEVcreated

C4

Sustainability-

C2

Regulated

SustainableGrowth:

Customer

linked

C2

Carbon

financial

C1

Voluntarycarbon

Costs

instruments

Lower

A

C1

Voluntarycarboncosts

climatedemandsnotmet2

costs1

NetOPEX

Saving:reduced

CAPEX:

Decarb.Costs3

Potentialmultiplederating

energycosts3

NetOPEXSaving:

RegulatedCarbon

Marketsfrom

reducedemissions

Costofcarbonwherenodecarbactionisundertaken

Aninvestmentindecarbonisationmeasures(C1)canhavepotentialknock-oneffectsforreducednetOPEXspend,lowercostofcapital,andpotentialrevenuegeneration

Scenario1

Scenario3

Scenario2

ExitEVreflecting

situationatentry

(carbonnotpricedin)

ExitEVifcompany

takesnoaction

(carbonpricedin)

ExitEVifcompanytakes

actiontodecarbonise

(carbonpricedin)

1)Assumingplannedpurchaseofvoluntarycarboncredits

2)Whenacompanydoesnottakedecarbonisationaction,theremaybepotentialdownsidefromnotmeetingcustomerclimatedemands.Whenthecompanydoestakedecarbonisationactionthatmeetscustomerclimatedemands,thevalueofitscontractsmaybeprotected,andtheremaybepotentialupsidefornewcustomercontracts

3)InternalCarbonPrice(B)doesnotresultinactualcashoutflowsbutactsasanenablerfordecarbonisationmeasures,suchasCAPEXinvestments(C1)andthepurchaseofvoluntarycarboncredits(C2).TheICPmayhoweverhaveatangibleimpactonenterprisevalue(“EV”)asperceivedbythebuy/sellsideinthemarket

Valuingcarbonpre-investment-PESMIT

9

CarbonValuationPlaybook

Valuingcarbonpre-investment-PESMIT

mmmmmmmmmm10

Amateriality-basedapproachtocarbonvaluationthatcanbeincorporatedintotheexistingduediligenceprocess

DealTeamscanusethisapproachtoassessthematerialityofcarbonduringtheDDprocess.Dependingontheirindividualcircumstancesandapproach,certainGPsmayassessregulatedandvoluntarycostsforalldeals,whilstothersmayassessallmaterialcarbonvaluationcomponents.

1.ESGDUEDILIGENCE2.FINANCIALMODEL3.INVESTMENTMEMORANDUM

D

E

ABC1C2C3C4

Screening

Assessmaterialityofcarbon

Valuation

EstimateimpactofcarbononCashFlows

CashFlowImpact

Sumofcarbonimpacts

ValuationAdjustment

Adjustmultiple

Valueofcarbonreflectedininvestmentcaseandvaluationmultiple

Materiality-basedapproach:·DealTeamcanfocustheireffortson

business-relevantcarbonimpacts,

includingsectoralrelevance,customerrequirementsandvaluecreation

opportunities.

·

Additionally,iftheGPhasadecarbtarget,

thismightbetakenintoconsideration

whenevaluatingthematerialitythresholdofclimateinallinvestments.

·TheDTmakesaconclusiononthe

materialityofcarbon.Ifitismaterial,itmaybeincludedinICdocumentation.

Legend

Internal

carboncosts

Sustainable

Growth

Regulated

carboncosts

Sustainability-linked

financialinstruments

Voluntary

carboncosts

Carbon-adjusted

multiple

A

C1

C2

B

Decarbonisation

costs/saving

C3

C4

D

E

Decarbonisationvalue-

creation(A+B+C)

Valuingcarbonpre-investment-PESMIT

11

Materiality-basedmethodscanhelpdirectdealteamstobusiness-criticalcarbonimpacts

1.ESGDUEDILIGENCE2.FINANCIALMODEL3.INVESTMENTMEMORANDUM

Screening

Assessmaterialityofcarbon

>

Gatingconsiderations

QualifyiftheGPhasa

firm-widetarget(e.g.SBTi

PortfolioCoverageApproach)1

andconsiderhowthismay

impactthematerialityof

valuationcomponents

Obtainactualorestimatedemissions

dataforcompany.Ifdataislimited,

estimatewithprimary&secondarydata

(e.g.revenuemultipliedbyemissions

factorprovidedinindustryreportsfrom

CarbonDisclosureProject[CDP]or

EnvironmentallyExtendedInput-Output

[EEIO]Models)

>

Guidancetosupportcalculationusingproxies

intheabsenceofdata

>

>

ApplyQuantitativematerialityapproach

ApplyQualitative

materialityapproach

Materialityassessment

1)InitsPrivateEquitysectorguidance,theScience-BasedTargetsinitiativedefinestheportfoliocoverageapproachas“anengagement-basedapproachwheretheGPcommitstohavingapercentageofitsportfoliowithapprovedSBTs(Science-BasedTargets)fiveyearsfromthetimetheGP’stargetissubmittedtoSBTiforofficialvalidation,sothatthefirmisonalinearpathtoachieve100%SBTcoverageby2040atthelatest.”Furtherinformationisavailableinthe

SBTi’sPEsectorguidance

.

Valuingcarbonpre-investment-PESMIT

12

GPsmaydecidetoadoptaquantitativeapproachtodeterminethematerialityofcarbonbyapplyingaproxycarbonprice

Firmsmaydeveloptheirowninterpretationsofmaterialitybasedontheirownassumptionsofpass-throughcoststoTargetsofcarbonpricesanditsimpactonsalesorEBITDAasapercentage

1.

Obtain,measureorestimatethecompany’semissions

>

2.

Applycarbonprice(potentialregulatedorvoluntarycost)

>

3.

Interpretimplicationsforfinancial

analysisandValueCreationPlans(VCPs)

CashFlow/EBITDAimplicationswhenapplyingacarbonpriceto[YEAR]emissions

。Clickforguidanceonhow

todeterminemateriality

$Cashcost

$pertonCO2e

%ofcost

Carboncashcost(toassesscarbonmateriality)

%ofsales

TonCO2e

$[x]

x

x

=

Scope1

Interpretation(e.g.minor)

%

$Cashcost

TonCO2e

$pertonCO2e

%ofcost

Interpretation(e.g.minor)

Scope2

%ofCashFlow/EBITDA1

x

x

=

%

Without

carbonprice

Exitimplications

EBITDAmargin

With

carbonprice

TonCO2e

$pertonCO2e

%

Scope3

x

x

=

$Cashcost

%ofcost

%

%

IRR

$[x]

Clickforadditionalguidanceonhowtodefine%ofcost

%

x

MoM

x

1)Financialmetric(e.g.CashFloworEBITDA)usedisatthediscretionoftheDealTeam

Valuingcarbonpre-investment-PESMIT

13

1.ESGDUEDILIGENCE

2.FINANCIALMODEL

3.INVESTMENTMEMORANDUM

Step1:ESGDueDiligenceScreening

PEfirmsmayopttoscreenforasubsetofvaluationcomponentsanddeterminetheappropriatequantitativeorqualitativescreeningcriteriabasedontheirsectors,risk,ambition,etc.

Determineimpactofacquiringbusinessontargetachievementandthereforerelevanceof

valuationcomponents

Gatingconsiderations

Estimateemissionsleveraging

eitherconsumptiondata(utilities,NG,fleet,etc.)orproxydata(e.g.revenuebysub-sector)

Screeningcriteria

Quantitativeapproach

Qualitativeapproach

Criteria

Datasource

Criteria

Datasource

Suggestedaction

Topic

Notrelevant

1.DoestheGPhavea

decarbonisationtargetofitsown?

2.DoestheTargethaveaGHGemissionsbaseline?

Managementquestion

A:RegulatedCarbonCosts

·

Emissionsmultipliedbya

carbonpricetodeterminethefinancialimpact

·

Financialmaterialitythreshold*

(e.g.carboncashcostisatleast[x%]ofEBITDA)

·

Carbonfootprintdata

(estimatedorreported)

·EBITDAorothermetricsourced

fromdealteamLBOModel

·

Regulatedcarbonpricewithin

relevantmarkets

·

WorldBankCarbonPricing

Dashboard

1.Thetargethasoperations

locatedinmarketsthathave

currentorforthcomingclimatereg.(e.g.NA,EUandEEA),andthetarget’ssectoriscoveredbyreg.mechanismsoranticipatedtobeincludedinthefuture

(e.g.manufacturing,marinetransport,aviation)

WorldBankCarbonPricing

Dashboard

Determinepotentialexposuretocurrentandfuturecostsimposedbyrelevantregulation

LBO=LeveragedBuyOut|NA=NorthAmerican|EU=EuropeanUnion|EEA=EuropeanEconomicArea|

Valuingcarbonpre-investment-PESMIT

14

1.ESGDUEDILIGENCE

2.FINANCIALMODEL

3.INVESTMENTMEMORANDUM

Topic

Screeningcriteria

Suggestedaction

Quantitativeapproach

Qualitativeapproach

Criteria

Datasource

Criteria

Datasource

B:InternalCarbonCosts

·

Emissionsmultipliedbya

carbonpricetodeterminethefinancialimpact.

·

Financialmaterialitythreshold*

(e.g.internalcarbonpriceisatleast[x%]ofEBITDA).

WorldBankCarbonPricing

Dashboard

1.Thetargetsetaninternal

carbonfee?Note,thisshouldnotincludeashadowcarbon

price1,whichincludesnodirectfinancialtransactions

2.TheGPsetaninternalcarbonprice(ICP)?

·

WorldBankCarbonPricing

Dashboard

·

ManagementQuestion

·VDRaccess

Includeinternalcarbonpricewithincarbonvaluation

C1:DecarbonisationCosts/

Savings

1.Obtain,measureorestimatethecompany’semissions

2.Applycarbonprice(potentialregulatedorvoluntarycost)

3.Financialmaterialitythreshold*(e.g.carboncashcostisatleast[x%]ofEBITDA)

4.InterpretimplicationsforfinancialanalysisandVCPs

·

Managementquestion

·VDRAccess

·

CDPindustryaveragedata

·

CarbonBorderAdjustment

Mechanism(CBAM)

·

EUEmissionsTradingSystem

(ETS)

·

SearchbycountryintheCarbon

MarketRegulationsTracker

()

1.Thecompanyoperateswithinahigh(i.e.energy,datacenters,heavymanufacturing)or

mediumemittingsector(i.e.consumergoods,realestate)

2.Thecompanyhassignificant

energy/fuelconsumerand/ordoesithaveacomplexsupply-chain?(Thiscanbeassessed

usingindustryaverageCDPdata)

3.Thecompanyhasanexistingdecarbonisationplanand/ortargets

·VDRAccess

·

SASBMaterialityMap

·

CDP

·

SBTi

·

GHGProtocol

·

PrivateMarketsDecarbonisation

Roadmap(PMDR)

Decarb.planinplace:Reviewcredibilityofexistingdecarb.

plan(i.e.Capex/Opex/ROI)andincludewithincarbonvaluation

or

Nodecarbplaninplace:Conductahigh-leveloutside-inreviewto

identifypotentialvalueaccretiveemissionreductioninitiatives

1)ShadowCarbonPricingisamethodologythatquantifiesrisksandopportunitiesfornewinvestmentsinCO2emissions,createdbasedontherecommendationsoftheParisAgreementtoestablishcarbonprices

Valuingcarbonpre-investment-PESMIT

15

1.ESGDUEDILIGENCE

2.FINANCIALMODEL

3.INVESTMENTMEMORANDUM

Topic

Screeningcriteria

Suggestedaction

Quantitativeapproach

Qualitativeapproach

Criteria

Datasource

Criteria

Datasource

C2:VoluntaryCarbonCosts

Financialmaterialitythreshold(e.g.carboncashcostisatleast[x%]ofEBITDA)

·

Carbonfootprintdata

(estimatedorreported)

·EBITDAorothermetricsourced

fromdealteamLBOModel

·

Estimatedpriceofcarbon

credits

1.Thecompanyalreadypurchasescarboncredits

2.Thecompanyhasanemissionstargetwhichrequiresfuture

commitmentstooffsetresidual

emissions

·VDRAccess

·

AlliedOffsets

·

·

TroveResearch

Bloomberg

Determinecurrentandfuture

costsofcarboncreditsand

determineifcostsareintegratedintofinancialplanning

C3:Sustainability-linked

financialinstruments

CalculatethedifferenceininterestexpensebetweenSustainability-

linkedfinancialinstrumentsandregularcreditfacilities.Checkformaterialdifferences

·

Bloomberg

·

CapitalIQ

·

Factset

1.ThecompanyorGPhasa

sustainability-linkedfinancialinstrument

2.ThecompanyorGPplanning

ontakingasustainability-linkedfinancialinstrument

Managementquestion

Reviewinterestrateon

comparableloansforCompanieswithastrongESGperformance

whoareeligibleforsustainability-linkedfinancialinstruments

C4:SustainableGrowth

Financialmaterialitythreshold

(e.g.thecompanygenerate

[x%]ofrevenueorsalesfrom

sustainableproductsorservicesorfromcustomersthathave

definedtargets(e.g.SBTs)whichwillimpacttheirabilitytodo

businesswiththem)

·

ManagementQuestion

·VDRaccess

1.Thecompanyidentifiednearadjacenciesforgreengrowthopportunities

2.Thecompany’scustomershaveclimatedemandsthathave

implicationsforcurrentandfuturecontracts

3.Competitorsaredeveloping/

deployinglowcarbon

alternativesthatcoulddisplacethisproduct/service

·

ManagementQuestion

·VDRaccess

Determinerelevantnextstepspost-closingaspartofbroadervaluecreationplanning

Valuingcarbonpre-investment-PESMIT

16

1.ESGDUEDILIGENCE

2.FINANCIALMODEL

3.INVESTMENTMEMORANDUM

Step1:ESGDueDiligenceValuation

Examplerelevantregulations

Relevanceandvaluecreation

Valuationcomponent

Suggestedaction

Dataneeded

A:RegulatedCarbonCosts

·

Regulatedcarbonmarketsareincreasingin

geographicandindustryscope

·

Considerpassthroughemissionsandhow

carbonregulationsmayimpactmultiplefirmsinvaluechain

·

Assessfuturecostsagainstpotentialsavings

associatedwithdecarbonisationinitiatives

·

CarbonBorderAdjustment

Mechanism(CBAM)

·

EUEmissionsTradingSystem

(ETS)

·

-CaliforniaCap-and-Trade

Program

·

Current&projectedregulatedpriceof

carbonwithinthemarketswheretheassetisoperationalduringholdperiod

·

Current&projectedemissions

·

Selectappropriatecarbonpricebasedon

relevantregulations

·

Calculateregulatedcarboncost(pricex

emissions)

·

ApplymethodologyforA

B:InternalCarbonCosts

·

Whileaninternalcarbonprice(ICP)does

notalwaysresultincashoutflows,itcanhelpdirectcurrentinvestmentdecisions

·However,theICPcancreatecashoutflowsifafirmhasdecidedtousethesetopurchasecarboncredits

·

SettinganICPcreatesabudgetaryincentive

forefficiencychangestominimizecarbon

NA

·

CurrentandprojectInternalCarbonPrice

(ICP)forAsset

·

Current&projectedemissions

·

DetermineifTargethasanICP

·

Ifso,calculatecurrentpriceandestimate

futurecurveforemissions

·

ApplymethodologyforB

C1:DecarbonisationCosts/

Savings

·

CAPEX&OPEXimpactsofimplementing

decarbonisationinitiatives

·

Implementingenergy-efficienttechnologies

andprocessestoreduceoperationalcosts

·

EuropeanGreenDeal

·U.S.CleanPowerPlan

·

U.S.EnergyStarcertification

program

·

TargetdecarbonisationplanswithCAPEX&

OPEXprojections

·

Current&projectedemissions

·

CompanyWACCorhurdlerate

·Calculatethecostofdecarbonizationand

OPEXreductionpotential

·

ApplymethodologyforC1

KeyoutcomesInputstosupportincorporationofcarbonvaluationtotheoperatingmodel,financialandvaluecreationcase

Valuingcarbonpre-investment-PESMIT

17

1.ESGDUEDILIGENCE

2.FINANCIALMODEL

3.INVESTMENTMEMORANDUM

Examplerelevantregulations

Relevanceandvaluecreation

Valuationcomponent

Suggestedaction

Dataneeded

C2:VoluntaryCarbonCosts

·

Voluntarycarboncostsassociatedwith

bestpracticetarget-settingfornear-termreductionand/orNet-Zeroalignment

·

Considerfuturevoluntarycarboncosts

associatedwithdecarbonisation

SearchbycountryintheCarbon

MarketRegulationsTracker

()

·

Voluntarycarboncreditprice

·

Companygrowthprojections(CAGR)

·Emissionsdata

·

DetermineifTargethasconsideredcurrent

andfuturecostsofvoluntarycarboncredits

·

Checkforobligationsundertargets(e.g.

isthecompanysigneduptoSBTNet-Zerowheretheresidualwillneedoffsettingfromafutureyear?)

·

ApplymethodologyforC2

C3:Sustainability-Linked

FinancialInstruments

·

DDisanopportunitytoidentifyfinanciers

forgreeninvestments,preferentialinterestratesmaybeavailablefromfinanciers

·

Sustainability-linkedfinancialinstruments

andESGmarginratchetsmayreducethecostofcapitalbyofferinglowerinterestratesorfavorabletermstoGPsortargetcompaniesthatachievesustainability

performancetargets

NA

·

Companysize

·

Companygeography

·

Loanmaturity

·

Corporatebondproxy

·

Corporatesustainability-linked/greenbond

proxy

·

Estimatereductionininterestexpensevia

ESGratingasabenchmark

·

Checkadherencetosustainability/green

instrumentguidance,e.g.,LoanMarketAssociation’sSustainabilityLinkedLoanPrinciples(SLLP)

·

ApplymethodologyforC3

C4:SustainableGrowth

·

(Not)meetingcustomerclimatedemands

canhavematerialfinancialimpactonexistingandnewcustomercontracts

·

Dependentoncompanysectorandmarkets,

butpotentialleversincludegreenpremium,productdesign,logistics&supplychain

·

Agreenrevenueassessmentevaluates

opportunitiesacrossbusinessKPIstoarriveathighvaluegreenleverstotestwhat

wouldcreatebottomlinegrowthforthe

company

NA

·Thiscouldinclude,butisnotlimitedto:

·Financialdataofcustomercontractslost,

protectedorwonbecauseof(not)meetingcustomerclimatedemands

·

AnalysiswithB2B/B2Ccustomersto

prioritiseproductfeatures

·

Totalunduplicatedreachandfrequency

(TURF)analysistoprovidemarketpotentialestimates

·

VanWestendorpAnalysistodetermine

propensitytopayagreenpremium

·

Ifacompanyhasidentifiednearadjacencies

forgreengrowthopportunities,consideractioningcommissionedstudy

·

ApplymethodologyforC4

KeyoutcomesInputstosupportincorporationofcarbonvaluationtotheoperatingmodel,financialandvaluecreationcase

Valuingcarbonpre-investment-PESMIT

18

1.ESGDUEDILIGENCE

2.FINANCIALMODEL

3.INVESTMENTMEMORANDUM

Step2:FinancialmodelCashflowimpact

Illustrativeexample:Financialprojection,includingCapexandOpexanalysistoestimatedecarbcosts,forimplementingemissi