Engine No. 1’s “Total Value Framework” now available

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As Ross Kerber reports in this Reuters article, Engine No. 1 – which has about $430 million in assets under management – has released a “Total Value Framework” for investing that pushes for a value to be assigned to how corporate activities affect climate and society. Here’s an excerpt from that article:

In the white paper published on Monday, co-authored with Wharton School management professor Witold Henisz, an adviser to the firm, Engine No. 1 said traditional environmental, social and corporate governance (ESG) scores were too detached from the financial value assigned to companies. That makes it harder for investors to focus their capital to bring about changes like cutting emissions, Henisz said in an interview.

Instead, Engine No. 1 attaches a value to a company’s impact on climate change, water consumption, workforce diversity or human rights. In the absence of company data that allows this, it uses models that draw on sources such as the United Nations and the International Labor Organization.

As an example of how its model works in practice, Grancio noted how Exxon included only about 10% of its total carbon emissions in its reduction targets, mainly by excluding the emissions created when customers burned its fuel. When companies fully report on such emissions and take steps to reduce them, “that’s potentially a huge place to pick up value,” Grancio said.