Portfolio carbon metrics: WACI and financed emissions
Intuition
Investors are often asked, "How much carbon is in your portfolio?" There is no single answer, because there are different questions hidden inside it.
One question is about ownership: how many tonnes of emissions belong to the investor's share of each company? Another is about exposure: how carbon-heavy are the businesses the portfolio is tilted towards? A third looks forward: are these companies on track to cut emissions in line with climate goals?
Each question has its own metric. A portfolio can look good on one and poor on another, so it is worth knowing what each one measures and where it misleads.
Mechanics
The four main metrics
| Metric | Formula | Unit | Question it answers |
|---|---|---|---|
| Financed (total) emissions | Sum of (holding ÷ company EVIC) × company emissions | tCO2e | Emissions owned by the investor |
| Carbon footprint | Financed emissions ÷ portfolio value | tCO2e per ₹ crore invested | Emissions owned per rupee invested |
| Weighted average carbon intensity (WACI) | Sum of (portfolio weight × company emissions ÷ company revenue) | tCO2e per ₹ crore of revenue | Exposure to carbon-intensive businesses |
| Alignment metrics | For example, implied temperature rise | °C | Whether holdings are on track for climate goals |
Emissions here usually mean Scope 1 and 2. Scope 3 is often reported separately, because it is less reliable and is counted more than once across companies.
Worked example (hypothetical numbers)
A portfolio of ₹100 crore holds three companies:
| Company | Holding (₹ crore) | Weight | EVIC (₹ crore) | Scope 1 and 2 (tCO2e) | Revenue (₹ crore) |
|---|---|---|---|---|---|
| A (cement) | 30 | 30% | 30,000 | 1,50,00,000 | 20,000 |
| B (IT services) | 50 | 50% | 1,00,000 | 2,00,000 | 50,000 |
| C (power) | 20 | 20% | 40,000 | 2,00,00,000 | 25,000 |
Financed emissions
- A: (30 ÷ 30,000) × 1,50,00,000 = 15,000 tCO2e
- B: (50 ÷ 1,00,000) × 2,00,000 = 100 tCO2e
- C: (20 ÷ 40,000) × 2,00,00,000 = 10,000 tCO2e
- Total = 25,100 tCO2e
Carbon footprint
- 25,100 ÷ 100 = 251 tCO2e per ₹ crore invested
WACI
- Intensities: A = 750, B = 4, C = 800 tCO2e per ₹ crore of revenue
- WACI = (30% × 750) + (50% × 4) + (20% × 800) = 225 + 2 + 160 = 387 tCO2e per ₹ crore of revenue
If the manager moves 10 percentage points from C to B, WACI falls to (30% × 750) + (60% × 4) + (10% × 800) = 225 + 2.4 + 80 = 307.4, a fall of about 21%, even though the companies themselves have not changed at all.
Benchmarks built on these metrics
The EU defines two types of climate benchmark:
- EU Climate Transition Benchmark (CTB): carbon intensity at least 30% below the parent index, and a further cut of at least 7% a year.
- EU Paris-Aligned Benchmark (PAB): carbon intensity at least 50% below the parent index, the same 7% yearly cut, and exclusion of companies above set revenue thresholds from coal, oil and gas.
Disclosure rules
- The TCFD originally recommended WACI as the main metric for asset owners and managers.
- IFRS S2 asks banks, insurers and asset managers to disclose financed emissions.
- PCAF sets the standard method for financed emissions and scores data quality from 1 (best) to 5 (weakest).
Sources
From the research
A Comparative Financial Analysis of Three Listed Companies
Three IT services leaders, five years of numbers: similar growth, very different margins and returns on capital, and their October 2026 valuations.
MarketsIPO Issue Price vs. Listing Price vs. Subsequent Performance
Seven of India's most talked-about IPOs since 2021, tracked from issue price to listing to October 2026. Buying on listing day lost money in six of seven.
ValuationPaytm: Valuing a Company With No Clean Comparable
Paytm is part payments processor, part device business, part loan distributor. Why no single peer fits, and how to value it in parts and in reverse.
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