Finance is a key player for the future of our planet, and that makes you a key player as an investor or a professional working in or with the financial sector. The NEC metric is a tool designed to empower you, your organization and your stakeholders to make investment choices, create strategies that drive the environmental transition and report on a reliable, compliant and transparent way.
The NEC metric will give you a clear picture of the environmental impacts and future potential of any economic activity or sector. By joining the initiative, you will gain access to this tool and develop your capacities in the 5 following areas :
1. Measure Risks and Opportunities
The environmental transition is already on its way and will keep on changing the rules of the game worldwide. The induced shift in risks and opportunities is impacting finance: hard times are to come for environmentally blind players. So you need to know:
– if an activity will be favoured in the future due to its alignment with the environmental transition
– if it may be handicapped and risky due to its obstructions to societies’ environmental goals.
The NEC provides a clear score for this transition risk based on climate-related issues and other environmental impacts, when significant.
2. Implement smart investment strategies
The motivation for integrating environmental impacts can be multiple:
– get strategic insight for environmental impacts
– achieve positive impact for the next generations
– avoid stranded assets
– avoid greenwashing or drive green transitioning Whatever your goals, the NEC can help you to set specific, measurable and time-based environmental objectives. NEC score can be used to set investment strategies in several ways at business, company, portfolio or any level of group of assets: +As a static threshold, for example a minimum NEC score of 0% for each issuer within a portfolio or an average NEC of more than 20% +A transitioning objective for businesses, companies, funds, asset managers or asset owners, for example the overall NEC score should grow by 1% every year, or investees should demonstrate a credible trajectory to increase their NEC of more than given % within five years, etc.
3. Engage and get support
As a member of the NEC Initiative, you will pro-actively contribute to improving transition risk measurement and business model alignment with the environmental transition by engaging in dialog with investees. Through this collaboration, you will also gain valuable insights for your sustainability and transitioning efforts by connecting with like-minded professionals who share their methods, data and encouragement.
4. Gain in reporting clarity and transparency
The NEC is a powerful reporting tool that offers excellent transparency and an easy-to-understand single figure representing the greenness of a financial product (see opposite). The NEC is also gaining traction as an industry-recognized tool, which has been applied to more than 2,500 issuers, and it has been appearing in monthly or annual reports for retail or institutional investors since early 2018.
5. Demonstrate compliance and achieve certification
The NEC metric supports your efforts to achieve and demonstrate compliance with soft laws (e.g. TCFD recommendation on transition risk or PRI reporting scheme) and hard laws (e.g. fiduciary duty, article 29 of French Energy Transition for Green Growth Law, Sustainable Finance Disclosure Regulation, etc.). The NEC metric also provides invaluable support for green certification, as illustrated below (source: Sycoway as in investor 2018).