ICE conducts Impact Bond and Avoided Emissions Assessment of GPIF Portfolio

Intercontinental Exchange, a leading global provider of data, technology, and market infrastructure, was selected by The Government Pension Investment Fund of Japan (GPIF), the world’s largest pension fund, to conduct an impact assessment of the fund’s investment in impact bonds, which was used by GPIF in its recently published 2022 ESG Report.

Impact Bond Indicator

ICE conducted an impact assessment of the impact bonds in GPIF’s portfolio, which covered various impact categories from emissions reduction and renewable energy generation to social impact, including job creation.

In the “Impact Bond Indicator” report, impact from eligible green and social projects from GPIF’s holdings of Environmental, Social and Governance (ESG) Impact Bonds is examined. To this end, a framework and methodology were developed to identify, assess, compare, and report the estimated Environmental and Social Impact across seven specific Impact Metrics, as well as providing an overall portfolio impact.

The analytical framework developed aims to provide GPIF with tools to assess the Impact Contribution of individual investments (Impact Bonds) across various categories of impact from Emissions Reduction and Renewable Energy Generation through to Social Impacts such as Job Creation.

Through a structured framework of standardization and normalization of numerous variables, including impact objectives of individual bonds, ICE performed a detailed analysis of GPIF’s portfolio impact, in terms of US $ amount invested.

The results of the analysis allow for a direct comparison regarding the relative effectiveness (impact per US $ invested) of individual investments, which could assist GPIF with future investment decision making.

For context, the results for each of the Impact Metrics are also expressed in terms of real-world impact, highlighting the direct relative effectiveness of investments.

Avoided Emissions

ICE used its extensive carbon emissions database and avoided emissions methodology to construct models that estimate avoided emissions for companies with products that enable transition to low carbon economy, which were used in conducting the assessment for GPIF.

Avoided emissions are emission reductions that occur outside of a product’s life cycle or value chain. By identifying the emissions avoided by use of that product, investors can identify opportunities with a positive impact and quantify the real-world difference such investments can generate.

The ICE framework for Avoided Emissions analysis consists of three elements — data analysis, modelling, and comparative scenario analysis. This framework incorporates five key concepts that underpin ICE’s approach to methodology construction: lifecycle assessment approach, materiality, apportionment, forward-looking capabilities, and geographical granularity.

Overall, this approach to Avoided Emissions helps to provide a more holistic view of the climate impact of individual companies and/or investment, also having the potential to channel capital towards solutions providing positive climate impact.

In the “Avoided Emissions” report, ICE details the process used to identify, analyze and report the impact of the Avoided Emissions across the companies in three sectors within the GPIF portfolio. The sectors examined are Zero Emission Vehicles, Utilities and Mined Minerals.

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