Company Profile
Industry: Financial Services (Asset Management)
Size: Mid-sized asset manager with 500+ employees
Assets Under Management: $50 billion
Investment Focus: Diversified portfolio across equities, fixed income, and alternatives
Client Base: Institutional investors, pension funds, and high-net-worth individuals
Challenge
A leading asset management firm faced increasing pressure from clients and regulators to address the climate impact of their investment portfolios. The firm needed to:
- Measure the carbon footprint of thousands of investments across asset classes
- Develop a climate strategy aligned with the Paris Agreement
- Meet emerging regulatory requirements (EU SFDR, UK SDR, etc.)
- Respond to client demands for low-carbon investment options
- Manage climate-related financial risks in their portfolios
Their existing approach relied on manual processes, inconsistent methodologies, and limited data coverage, making it impossible to scale across their entire portfolio.
Solution
The firm implemented Carbon GPT to transform their approach to financed emissions, following a structured methodology:
1. Portfolio Assessment
- Conducted a comprehensive carbon footprint analysis across all portfolios
- Applied PCAF (Partnership for Carbon Accounting Financials) methodologies
- Established emission baselines for different asset classes
- Identified highest-emitting sectors and companies
- Assessed climate-related financial risks and opportunities
2. Climate Strategy Development
- Set portfolio-level emission reduction targets aligned with science
- Developed a climate transition plan with clear milestones
- Created asset class-specific strategies:
- Listed Equities: Engagement and selective divestment
- Fixed Income: Green bonds and sustainability-linked instruments
- Real Estate: Energy efficiency and renewable energy
- Private Equity: Climate due diligence and value creation
- Established governance structure for climate strategy implementation
3. Investment Process Integration
- Embedded climate metrics into investment analysis
- Developed climate risk rating system for all investments
- Created climate scenario analysis framework
- Implemented portfolio optimization tools for climate alignment
- Trained investment teams on climate-related financial analysis
4. Client Engagement and Reporting
- Developed client-facing climate reporting
- Created new low-carbon investment products
- Established climate-focused advisory services
- Implemented transparent disclosure of portfolio emissions
- Engaged with clients on climate preferences and requirements
5. Monitoring and Continuous Improvement
- Implemented quarterly climate performance reviews
- Established data quality improvement processes
- Developed engagement tracking for investee companies
- Created feedback loops for strategy refinement
- Built capacity for emerging climate-related regulations
Carbon GPT Implementation
The firm leveraged several key Carbon GPT features:
Portfolio Analysis
- Used AI-powered analysis to calculate financed emissions
- Applied different attribution methodologies by asset class
- Created visual portfolio emission maps and hotspots
- Performed scenario analysis under different climate pathways
Data Management
- Integrated with financial data providers
- Automated data collection from multiple sources
- Applied data quality scoring and gap-filling methodologies
- Maintained audit trails for regulatory compliance
Climate Strategy Tools
- Used AI Assistant to identify portfolio alignment strategies
- Modeled potential emission reductions for different approaches
- Created optimization scenarios for portfolio construction
- Tracked progress against targets and benchmarks
Reporting and Disclosure
- Generated TCFD-aligned disclosure reports
- Created client-specific portfolio climate reports
- Produced regulatory submissions (SFDR, SDR)
- Developed marketing materials for low-carbon products
Results
After two years of implementation, the firm achieved:
Portfolio Impact
- 25% reduction in weighted average carbon intensity across portfolios
- 40% increase in low-carbon investments
- $2.8 billion allocated to climate solutions
- Paris alignment achieved for 65% of AUM
Client and Business Benefits
- $4.5 billion in new client mandates with climate focus
- 30% growth in ESG-focused investment strategies
- 15% premium on climate-aligned investment products
- Competitive differentiation in a crowded market
Data and Analysis Improvements
- Coverage increased from 60% to 95% of portfolio
- Analysis time reduced from weeks to hours
- Forward-looking metrics incorporated for all major holdings
- Scenario analysis capabilities extended to all portfolios
Regulatory Compliance
- Full compliance with EU SFDR Article 8 and 9 requirements
- TCFD implementation rated as "leading practice"
- Climate risk management integrated into risk frameworks
- Audit-ready climate data and methodologies
Key Success Factors
Executive Commitment
- Board-level climate committee established
- CIO sponsorship of climate integration
- Dedicated climate strategy team
- Performance incentives tied to climate goals
Systematic Approach
- Phased implementation with clear milestones
- Balance between ambition and pragmatism
- Integration with existing investment processes
- Regular review and refinement
Technology Leverage
- Full utilization of Carbon GPT capabilities
- Integration with portfolio management systems
- Automation of data-intensive processes
- AI-powered insights for investment teams
Stakeholder Engagement
- Client education and consultation
- Investment team training and support
- Investee company engagement
- Industry collaboration and knowledge sharing
Lessons Learned
Challenges Overcome
- Data limitations: Addressed through hybrid data approaches and proxies
- Investment team resistance: Overcome through education and practical tools
- Methodological complexity: Managed through clear guidance and support
- Client expectations: Balanced through transparent communication
Best Practices Developed
- Start with material sectors and largest holdings
- Develop asset class-specific approaches
- Focus on decision-useful metrics for investment teams
- Integrate climate considerations into existing processes
- Balance risk management with opportunity identification
Future Plans
Building on their success, the firm is now:
- Expanding analysis to include broader environmental impacts
- Developing climate solutions investment strategies
- Implementing advanced physical risk assessment
- Exploring biodiversity and nature-related financial risks
- Setting net-zero targets for all portfolios by 2050
Conclusion
This case study demonstrates how a systematic approach to financed emissions, powered by Carbon GPT's comprehensive platform, can deliver significant environmental impact while creating business value. By integrating climate considerations into investment processes, the firm has positioned itself as a leader in sustainable finance while meeting evolving client and regulatory expectations.
For more information on how Carbon GPT can help your financial institution address financed emissions, contact our team at finance@carbongpt.ai.