Low Carbon Transition Rating
Carbon and Other Intensity Metrics
The 'Why' and 'How' of our Assessment; Plus, Scoring Thresholds
August 2024
Each year Morningstar Sustainalytics shifts to a new baseline year model to assess the Carbon Intensity and Carbon Intensity Trend management performance indicators, among other intensity metrics. From April 2024 we started using fiscal year 2022 (versus fiscal year 2021) as the baseline year for all intensity metrics.
Frequently Asked Questions
Carbon Intensity (E.1.9)
Carbon Intensity (CI) measures how much carbon a company releases for Scope 1 and Scope 2 carbon emissions per unit of output. In this case, due to a lack of uniform, consistent output data, Sustainalytics uses revenue instead of unit of output.
- Carbon intensity is calculated as the sum of Scope 1 and Scope 2 emissions for the current baseline year, expressed in tonnes of carbon dioxide equivalent (t C02 eq) per million US dollars of revenue for the same baseline year. Performance is determined based on the positioning of a company's calculated intensity figure relative to its subindustry or industry benchmark.
Carbon Intensity Trend (E.1.10)
The Carbon Intensity Trend (CIT) indicator measures a company’s current carbon intensity compared to the average of the past three years.
- Carbon intensity is calculated as the sum of Scope 1 and Scope 2 emissions for the current baseline year, expressed in tonnes of carbon dioxide equivalent (t C02 eq) per revenue in million local currency for the same baseline year. The intensity trend is calculated by comparing the positioning of a company's current performance against its three-year intensity figure. Performance is determined based on the company's intensity trend relative to the one of its subindustry or industry.
As of April 2024, Morningstar Sustainalytics uses fiscal year 2022 data to update both Carbon Intensity and Carbon Intensity Trend indicator scores.
The three-year Trailing Average is calculated with data from the following three fiscal years:
- 2021
- 2020
- 2019
All companies that have Intensity Metric indicators assigned to their subindustry. Those companies that have not reported FY 2022 Scope 1 and 2 emissions data will receive the “inadequate disclosure” score.
The following intensity metrics will also be updated. Check to see if your company’s subindustry has the relevant Material ESG Issue (MEI), and if so, check if these indicators are included:
| Indicator Code | Indicator Name | Indicator Type | Material ESG Issue |
| E.1.2.7 | Water Intensity | Management | Resource Use |
| E.1.2.7.2 | Water Intensity Trend Generators | Management | Resource Use |
| E.1.2.7.3 | Freshwater Intensity for Generators | Management | Resource Use |
| E.1.13 | SOx Intensity | Exposure | Emissions |
| E.1.14 | NOx Intensity | Exposure | Emissions |
Sustainalytics' scoring of an intensity metric is based on a comparison to the median intensity of the industry (not subindustry). At this time, Sustainalytics has opted to collect as complete a set of fiscal-year data as possible. Therefore, we update these metrics in the first quarter of the second year following the release of the data. In Q1 2024, we released scoring updates based on FY 2022 data. We expect the collection of FY 2023 data to be completed in Q1 2025.
At this time, Sustainalytics is actively considering moving to a quarterly update system instead of an annual update. Sustainalytics will alert issuers if we decide to make this change.
Click on an indicator to view details.
This indicator assesses a company's carbon intensity performance. It compares the direct (scope 1) and indirect (scope 2) emissions of a company in a given fiscal year to its subindustry or industry benchmark.
Why we assess this indicator
The release of anthropogenic (man-made) GHG emissions, primarily through the burning of fossil fuels, is currently the most significant driver of global temperature rise. Corporations, through the production of goods and services, can release significant amounts of carbon and, therefore, can materially contribute to accelerating the rate at which the world's climate is changing. As such, assessing a company's carbon intensity against that of its peers can serve as a meaningful metric to understanding how effectively it is addressing the climate impacts and risks of its business within the broader context of its industry.
How we assess this indicator
Morningstar Sustainalytics assesses this indicator using a company's emissions data. Carbon intensity is calculated as the sum of Scope 1 and Scope 2 emissions for the current baseline year, expressed in tonnes of carbon dioxide equivalent (t C02 eq) per million US dollars of revenue for the same baseline year. Performance is determined based on the positioning of a company's calculated intensity figure relative to its subindustry or industry benchmark.
Once Sustainalytics reviews details and calculates the carbon intensity, we assign a score based on the following thresholds:
| Details | Score |
|---|---|
| The company's carbon emissions intensity is well above its subindustry or industry benchmark. | 0 |
| The company's carbon emissions intensity is above its subindustry or industry benchmark. | 25 |
| The company's carbon emissions intensity is in line with its subindustry or industry benchmark. | 50 |
| The company's carbon emissions intensity is below its subindustry or industry benchmark. | 75 |
| The company's carbon emissions intensity is well below its subindustry or industry benchmark. | 100 |
| Disclosure on carbon emissions is insufficient to determine performance relative to industry peers. | 20 |
This indicator assesses a company's performance, over time, on carbon intensity. It compares the change in the company's carbon intensity over its three-year average relative to the subindustry or industry change.
Why we assess this indicator
The release of anthropogenic (man-made) GHG emissions, primarily through burning fossil fuels, is currently the most significant driver of global temperature rise. As population growth steadily increases global demand for goods and services, corporations face the growing challenge of meeting consumers' needs while also tackling climate change through continuous GHG reductions. As such, the assessment of a company's carbon intensity against its historical performance can serve as a meaningful metric to understanding how effectively it is progressing on reducing the climate impacts and risks of its business on a year-to-year basis.
How we assess this indicator
Morningstar Sustainalytics assesses this indicator using emissions data. Carbon intensity is calculated as the sum of Scope 1 and Scope 2 emissions for the current baseline year, expressed in tonnes of carbon dioxide equivalent (t C02 eq) per revenue in million (local currency) for the same baseline year. We calculate the intensity trend by comparing the positioning of a company's current performance against its three-year intensity figure. We determine performance based on the company's intensity trend relative to its subindustry or industry.
Once Sustainalytics reviews details and calculates the carbon intensity trend, we assign a score based on the following thresholds:
| Details | Score |
|---|---|
| The company's carbon emissions intensity trend is well above its subindustry or industry benchmark. | 0 |
| The company's carbon emissions intensity trend is above its subindustry or industry benchmark. | 25 |
| The company's carbon emissions intensity trend is in line with its subindustry or industry benchmark. | 50 |
| The company's carbon emissions intensity trend is below its subindustry or industry benchmark. | 75 |
| The company's carbon emissions intensity trend is well below its subindustry or industry benchmark. | 100 |
| Disclosure on carbon emissions is insufficient to determine performance relative to the subindustry or industry benchmark. | 20 |
This indicator assesses a company's water withdrawal intensity performance. It compares the water withdrawal intensity of a company in a given fiscal year to its subindustry or industry benchmark.
Why we assess this indicator
Water is a fundamental resource of most industrial processes. Increasing levels of withdrawal and climate change have been contributing to heightening water scarcity in many regions. Given the importance of water for ecosystems and communities, scarcity increases competition for the same freshwater resources, especially in arid regions. Assessing a company's water intensity against its peers can give an indication of its ability to control and potentially reduce its overall reliance on water.
How we assess this indicator
Morningstar Sustainalytics assesses this indicator using reported water withdrawal data, which includes all water drawn by a company from surface water, groundwater, seawater or a third party. We calculate water withdrawal intensity using a company's water withdrawal in a given year, normalized by its revenue for the same baseline year. It is expressed in cubic metres (cu m) per million US dollars of revenue. We determine performance based on the positioning of a company's calculated intensity figure relative to its subindustry or industry benchmark.
Once Sustainalytics reviews details and calculates the water intensity, we assign a score based on the following thresholds:
| Details | Score |
|---|---|
| The company's water intensity is well above its subindustry or industry benchmark. | 0 |
| The company's water intensity is above its subindustry or industry benchmark. | 25 |
| The company's water intensity is in line with its subindustry or industry benchmark. | 50 |
| The company's water intensity is below its subindustry or industry benchmark. | 75 |
| The company's water intensity is well below its subindustry or industry benchmark. | 100 |
| Disclosure is insufficient to determine water intensity relative to its subindustry or industry benchmark. | 20 |
This indicator assesses a company's performance, over time, on water withdrawal intensity. It compares the change in the company's water withdrawal intensity over its three-year average relative to the subindustry or industry change.
Why we assess this indicator
Water is a fundamental resource for most industrial processes. Increasing levels of withdrawal and climate change have been contributing to heightening water scarcity in many regions. Given the importance of water for ecosystems and communities, scarcity increases competition for the same freshwater resources, especially in arid regions. As such, assessing a company's water intensity against its historical performance gives an indication of how effectively it is progressing on reducing its overall reliance on water.
How we assess this indicator
Morningstar Sustainalytics assesses this indicator using reported water withdrawal data, which includes all water drawn by a company from surface water, groundwater, seawater or a third party. We calculate water withdrawal intensity using a company's water withdrawal for a given year, normalized by its revenue for the same baseline year. This is expressed in cubic meters (cu m) per million in revenue (within the local currency). We determine performance based on the positioning of a company's calculated performance against its three-year intensity figure, relative to the three-year intensity trend of its subindustry or industry.
| Details | Score |
|---|---|
| The company's water intensity trend is well above its subindustry or industry benchmark. | 0 |
| The company's water intensity trend is above its subindustry or industry benchmark. | 25 |
| The company's water intensity trend is in line with its subindustry or industry benchmark. | 50 |
| The company's water intensity trend is below its subindustry or industry benchmark. | 75 |
| The company's water intensity trend is well below its subindustry or industry benchmark. | 100 |
| Disclosure on water intensity is insufficient to determine performance relative to its subindustry or industry benchmark. | 20 |
This indicator assesses the freshwater intensity of a company's power generation assets. It compares the freshwater intensity of a company in a given fiscal year to its subindustry or industry benchmark.
Why we assess this indicator
Power generation is well known for consuming substantial volumes of freshwater, especially for cooling processes. Increasing levels of withdrawal and climate change have been contributing to heightening water scarcity in many regions. Given the importance of water for ecosystems and communities, scarcity increases competition for the same freshwater resources, especially in arid regions. As such, assessing the freshwater intensity of a company's power generation assets gives an indication of its ability to control and potentially reduce its overall reliance on water.
How we assess this indicator
Morningstar Sustainalytics assesses this indicator using reported freshwater extraction data, which includes withdrawals from surface water, groundwater and public utilities. We calculate freshwater intensity using a company's freshwater withdrawal for a given year, normalized by power output from its own generation for the same baseline year. It is expressed in cubic metres (cu m) per megawatt hour (MWh). We determine performance based on the positioning of a company's calculated intensity figure relative to its subindustry or industry benchmark.
Once Sustainalytics reviews details and calculates the freshwater intensity for generators, we assign a score based on the following thresholds:
| Details | Score |
|---|---|
| The company's freshwater intensity is well above its subindustry or industry benchmark. | 0 |
| The company's freshwater intensity is above its subindustry or industry benchmark. | 25 |
| The company's freshwater intensity is in line with its subindustry or industry benchmark. | 50 |
| The company's freshwater intensity is below its subindustry or industry benchmark. | 75 |
| The company's freshwater intensity is well below its subindustry or industry benchmark. | 100 |
| Disclosure on freshwater intensity is insufficient to determine performance relative to its subindustry or industry benchmark. | 20 |
This indicator assesses a company's sulphur oxide (SOx) emissions intensity performance. It compares the SOx emissions intensity of a company in a given fiscal year to its subindustry or industry benchmark.
Why we assess this indicator
Sulphur oxides (SOx) are a group of poisonous gases that are released mainly through the burning of fossil fuels by vehicles and industrial facilities. The release of SOx contributes to acid rain, impairs air quality, and can lead to significant impacts on human health and sensitive ecosystems. Assessing a company's SOx intensity against its peers gives an indication of its ability to mitigate damaging releases into the surrounding environment.
How we assess this indicator
Morningstar Sustainalytics assesses this indicator using SOx emissions intensity data. We calculate it by using a company's SOx emissions (including all SOx variants) in a given year, normalized by its revenue for the same baseline year. SOx intensity is expressed in metric tonnes of SOx per million US dollars of revenue. We determine performance based on the positioning of a company's calculated intensity figure relative to its subindustry or industry benchmark.
Once Sustainalytics reviews details and calculates the SOx intensity, we assign a score based on the following thresholds:
| Details | Score |
|---|---|
| The company's SOx intensity is well below its subindustry or industry benchmark. | 100 |
| The company's SOx intensity is below its subindustry or industry benchmark. | 75 |
| The company's SOx intensity is in line with its subindustry or industry benchmark. | 50 |
| TThe company's SOx intensity is above its subindustry or industry benchmark. | 25 |
| The company's SOx intensity is well above its subindustry or industry benchmark. | 0 |
| The company's disclosure on SOx intensity is insufficient to determine its performance relative the subindustry or industry benchmark. | 20 |
This indicator assesses a company's nitrogen oxide (NOx) emissions intensity performance. It compares the NOx emissions intensity of a company in a given fiscal year to its subindustry or industry benchmark.
Why we assess this indicator
Nitrogen oxides (NOx) are a group of poisonous gases that are released mainly through the burning of fossil fuels by vehicles and industrial facilities. The release of NOx contributes to acid rain, impairs air quality, and can lead to significant impacts on human health and sensitive ecosystems. Assessing a company's NOx intensity against its peers gives an indication of its ability to mitigate damaging releases into the surrounding environment.
How we assess this indicator
This indicator is assessed using NOx emissions intensity data. It is calculated by using a company's NOx emissions (including NO and NO2) in a given year, normalized by its revenue for the same baseline year. NOx intensity is expressed in metric tonnes of NOx per million US dollars of revenue. Performance is determined based on the positioning of a company's calculated intensity figure relative to its subindustry or industry benchmark.
Once Sustainalytics reviews details and calculates the NOx intensity, we assign a score based on the following thresholds:
| Details | Score |
|---|---|
| The company's NOx intensity is well below its subindustry or industry benchmark. | 100 |
| The company's NOx intensity is below its subindustry or industry benchmark. | 75 |
| The company's NOx intensity is in line with its subindustry or industry benchmark. | 50 |
| The company's NOx intensity is above its subindustry or industry benchmark. | 25 |
| The company's NOx intensity is well above its subindustry or industry benchmark. | 0 |
| The company's disclosure on NOx intensity is insufficient to determine its performance relative the subindustry or industry benchmark. | 20 |