Climate Momentum

Truvalue Labs' Greenhouse Gas Emissions Signal and Decarbonization Rates

This research paper discusses the topic of "Climate Momentum," which represents the trajectory of a business’s greenhouse gas intensity in the time between carbon disclosure and reporting periods. Screen Shot 2020-05-26 at 10.01.58 AMThe concept and its measurement are important and will become increasingly critical for assessing the health and valuation of companies as carbon prices and taxes emerge as an operating reality.

While our research is exploratory, the results have important implications for stock selection, asset allocation, and the investment process more broadly, including:

  • Predictive qualities in changes in our GHG Emissions Climate Momentum Signal with respect to subsequent changes in carbon intensity

  • Stronger predictive qualities and wider decarbonization spreads exist using the GHG Emissions Climate Momentum Signal among more carbon-intensive industries and companies

  • Early evidence suggesting that the decarbonization factor is positively associated with financial performance measures such as revenue growth, operating margin, and multiple expansion