Investment Analysis Flashcards

Under PCAF, an investor holds $10 million of a listed company with EVIC of $100 million and emissions of 50,000 tCO2e. What are the financed emissions?

Answer: 5,000 tCO2e

Attribution factor = $10M / $100M = 10%, so financed emissions = 5,000 tCO2e.

A portfolio is 60% Company A (intensity 100 tCO2e/$M revenue) and 40% Company B (intensity 300 tCO2e/$M revenue). What is the weighted average carbon intensity (WACI)?

Answer: 180 tCO2e/$M

WACI = 0.6 x 100 + 0.4 x 300 = 60 + 120 = 180 tCO2e/$M revenue.

What does a portfolio's 'carbon footprint' metric (as recommended by TCFD) express?

Answer: Financed emissions per million dollars invested

Carbon footprint normalizes absolute financed emissions by the portfolio's market value.

Under the ICMA Green Bond Principles, what is the defining feature of a green bond?

Answer: Its proceeds are allocated to eligible green projects

Green bonds are defined by use of proceeds for eligible environmental projects with tracking and reporting.

What does 'carbon lock-in' mean in long-term investment analysis?

Answer: High-emitting infrastructure built today commits future emissions for decades

Long-lived carbon-intensive assets lock in emissions over their operating life, constraining future reductions.

When converting a capital cost into an equivalent annual cost for a cost-per-tonne calculation, which factor is applied?

Answer: Capital recovery factor

The capital recovery factor spreads an upfront investment into equal annual payments over the asset life at a given rate.

A company prioritizes abatement options strictly by lowest cost per tonne. What is a key limitation of this approach?

Answer: It may ignore the total abatement volume needed to reach a target and interdependencies between measures

Ranking only by unit cost can overlook volume, timing, and how measures interact, leaving targets unmet.