Investors should not rely on this metric when making an investment decision and instead should refer to a fund’s prospectus and governing documents. The ITR metric is not an indication or estimate of a fund’s performance or risk. The ITR metric is not a real time estimate and may change over time, therefore it is prone to variance and may not always reflect a current estimate. However, there is no guarantee that these estimates will be reached. The ITR metric estimates a fund’s alignment with the Paris Agreement temperature goal.
Where data is not available, and / or if data changes, the estimation methods vary, particularly those related to a company’s future emissions. To the extent that data becomes more readily available and more accurate over time, we expect that ITR metric methodologies will evolve and may result in different outputs. At present, availability of input data varies across asset classes and markets. There is not a universally agreed upon set of inputs for the calculation.
There is not a universally accepted way to calculate an ITR.
Importantly, an ITR metric may vary meaningfully across data providers for a variety of reasons due to methodological choices (e.g., differences in time horizons, the scope(s) of emissions included and portfolio aggregation calculations). Also, there are limitations with the data inputs to the model. This forward-looking metric is calculated based on a model, which is dependent upon multiple assumptions. What are the key assumptions and limitations of the ITR metric? The bands help to underscore the underlying uncertainty in the calculations and the variability of the metric. As a result, BlackRock publishes MSCI’s ITR metric for its funds in temperature range bands. A summary explanation of MSCI’s methodology and assumptions for its ITR metric can be found here.īecause the ITR metric is calculated in part by considering the potential for a company within the fund’s portfolio to reduce its emissions over time, it is forward-looking and prone to limitations. Note, only corporate issuers are covered within the calculation. If emissions in the global economy followed the same trend as the emissions of companies within the fund's portfolio, global temperatures would ultimately rise within this band. The ITR metric is calculated by looking at the current emissions intensity of companies within the fund's portfolio as well as the potential for those companies to reduce its emissions over time.
A net zero emissions economy is one that balances emissions and removals. Scientific consensus suggests that reducing emissions until they reach net zero around mid-century (2050-2070) is how this goal could be met. The ITR metric is used to provide an indication of alignment to the temperature goal of the Paris Agreement for a company or a portfolio. The temperature goal of the Paris Agreement is to limit global warming to well below 2☌ above pre-industrial levels, and ideally 1.5 ☌, which will help us avoid the most severe impacts of climate change. To address climate change, many of the world's major countries have signed the Paris Agreement. What is the Implied Temperature Rise (ITR) metric? Learn what the metric means, how it is calculated, and about the assumptions and limitations for this forward-looking climate-related metric.Ĭlimate change is one of the greatest challenges in human history and will have profound implications for investors.
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