Aussie fintech Emmi launches new solution for investors

A new industry lead solution allows investors to decipher carbon transition risk and opportunity.

Australian fintech and carbon risk solution company Emmi has launched Carbon Intelligence, a platform developed with investors to solve a large challenge facing the sector today, analysing carbon transition risk and opportunity in a portfolio.

The solution extends Emmi's proprietary Global Carbon Efficiency Rating launched last year, the first of its kind data engine that 'houses' the most extensive and timely global carbon data available.

Using Carbon Intelligence, investors will be able to quantify portfolio carbon exposure, perform attribution contribution analysis of high-level portfolio exposure and understand granular drivers of risk. They can also see how investment decisions influence the extent of carbon exposure relative to peers and benchmarks.

"Carbon Intelligence responds to the needs of the investment sector and has been developed following extensive industry consultations," says Emmi CEO, Michael Lebbon.

"We've listened to investors, and it is clear the biggest gap in the market today is a lack of quantitative data and a method that can take investors beyond a simple footprint and help them confidently factor carbon risk into investment decisions," he says.

"The global economy's transition to lower carbon emissions will create trillions of dollars of risk for carbon inefficient businesses and investment out performance opportunities. The investment sector is critical to the carbon transition and, up until now, has been 'flying blind' without adequate methods to confidently decipher the winners and losers and understand whether they are being sufficiently rewarded for the risk they are taking on."

Lebbon says that while investors don't need to remove all carbon risk from their portfolios, they must understand and explain their drivers of carbon exposure. This level of investment confidence will be the difference between those investors that break away from the pack and thrive during the global transition and those that under perform."

Sean Henaghan, chief investment officer at Aurora Capital, agrees that the responsibility on investors today is unparalleled, and many nuances need to be considered when investing in companies during the carbon transition.

"Being an investor right now is daunting because the financial risk associated with a company's carbon transition has been difficult to assess due to a gaping hole in the carbon data available," he says. "But it is also an exciting time for investors. The opportunity to generate alpha during the transition is unprecedented for those who get this right.

"Just as there will be companies who dominate the transition to net-zero, so will be the case with investors. It will become quite clear, those using best practice methods and better data to quantify their risk and reward scenarios in a carbon-constrained world."

Following industry feedback, Carbon Intelligence contains three tools – Carbon Snapshots, Carbon Insights and Carbon Benchmarking, providing investors with a user-friendly, step-by-step holistic view of a company and portfolio's carbon risk.

"Emmi doesn't make judgements or recommendations on investments but helps managers and investors understand and position their portfolios better, against carbon risk and opportunity, based on their specific risk appetites and investment objectives," says Emmi chair, Tim Samway.

"All investors have a different view of the transition to net-zero will look like. Many investors still have a basic interpretation that high carbon emitters are bad and low emitters are good, and embark on divesting strategies that frankly leave alpha on the table," says Samway.

"The questions investors should be asking is how a company is transitioning to net-zero, what this transition looks like in tons of carbon per annum, how do I compare the stated carbon budget to the global carbon budget and compare their financials to global GDP."

"Emmi has created Carbon Intelligence to respond to these questions and a myriad of others so that investors can make informed decisions on their investments around carbon," he adds.

The development of Carbon Intelligence comes off the back of a $3.5 million capital raise in 2021, which also saw Emmi expand its team of carbon finance and tech experts.