Reaching a decarbonization intensity target was central to the fund’s investment strategy. As it considered an investment in an industrial company, one question needed to be answered before the deal progressed:
Could this asset realistically contribute to delivering the fund’s decarbonization target?
Answering that question during due diligence, rather than after the deal had closed, was critical. The fund therefore needed an independent, evidence-based assessment of the asset’s decarbonization potential before committing capital.
The Challenges
The target’s existing carbon footprint had not been calculated with the methodological rigor needed to assess its decarbonization potential credibly. This meant the fund did not yet have a reliable baseline from which to assess how well the asset aligned with its investment thesis. Indeed, providing a robust baseline was a necessary condition to guarantee reliability of the analysis.
Beyond the baseline itself, the asset’s industrial processes involved variables that could affect its decarbonization pathway, including changes in the energy mix, supply constraints and technical limitations on what could realistically be electrified or substituted. The fund therefore needed more than a single point estimate. It needed a range of outcomes based on scenarios that made the key assumptions, uncertainties and sensitivities explicit.
Carbometrix's role
Carbometrix started by critically reviewing and recalculating the target’s carbon footprint against the GHG Protocol requirements. The recalculation resulted in a correction of more than 30% versus the original third-party figure, establishing a more robust baseline for the fund’s investment assessment.
From this corrected baseline, decarbonization actions were identified and assessed to quantify the emissions reductions the asset could realistically achieve. Each action was discussed and challenged with management, then modelled across multiple scenarios, taking into account its expected emissions impact, CAPEX requirements and implementation timeline. This provided the fund with a range of potential outcomes.
The result
Carbometrix used this analysis to assess the asset’s alignment with the fund’s carbon intensity reduction target. The fund got what it needed to inform the investment decision: a corrected carbon footprint, a quantified decarbonization pathway and an evidence-based assessment of the asset’s alignment with its decarbonization target.