The Divergence of ESG (Environment, Carbon) Ratings

Over the past one year, Carbon Zero Venture Capital has met with more than 30 start-ups in the Carbon Capture or ESG collation or Environment monitoring SAAS companies.  Our conclusion is that there is no shortage of start-ups attempting to measure and compute carbon/ESG/plastics/environment etc, but what is lacking is the standardisation of such measurements.  What do we mean?

Recent research suggest that the divergence of opinion makes it impossible for the industry to make an objective assessment of company performance, and as such allows green washing and erroneous reporting.   For example, every investor and bank understand what a P/E of 10 means, but what is the difference of an “A” rating for environment by the difference rating agencies and the increasingly numerous ESG/Environment providers mean?

At the moment, few can argue when a revenue can be booked in an accounting sense, but lots argue and use different ESG parameters for their evaluation. If the ratings agencies were aligned, then it would be clear for everyone what a rating mean, and incentivise companies to reform and improve.  Consistency is desperately needed in the underlying data. An example is the recent saga of Semcorp (a Singapore Company) selling their India coal plant but retaining financial control: is that greenwashing when a company get rid of it from the balance sheet but keep control?   The question is an important one as it also involves the company issuing green bonds.

There are already so many standards and frameworks, and making it consistent is arguably more important, in our view, than having even more standards.
 
·      Reporting standards: specific and detailed criteria of reporting
·      Frameworks: principles on how information should be defined.

We welcome any start-ups attempting to standardise these standards and frameworks to pitch us.

https://lnkd.in/gaCjKWCa
Eco-Business

#climatechange #esg #greenbonds #india #cdp #pri #tcfd #fasb#impactinvesting #venturecapital #carbon #plasticpollution