Carbon intensity
What is Carbon intensity?
Carbon intensity expresses greenhouse-gas emissions relative to a denominator such as revenue, physical output, enterprise value, or portfolio investment.
Intensity can fall because emissions improve, revenue rises with inflation, portfolio weights change, or a high-emitting holding is sold. A useful dashboard decomposes these effects and pairs intensity with absolute financed emissions, sector allocation, data quality, and forward-looking transition evidence. Targets should identify which mechanism is expected to dominate.
Coverage and estimation rates belong beside every result.
Common denominators
Corporate intensity may use emissions per unit of revenue, energy, floor area, tonne of product, or passenger distance. Portfolio weighted-average carbon intensity commonly weights company revenue intensity by portfolio weight. Financed-emissions intensity can use invested amount or enterprise value. These ratios are not interchangeable, and currency and inflation can change revenue-based results without operational improvement.
What intensity reveals
Intensity supports comparison of differently sized companies and can show operating efficiency or portfolio exposure. Sector business models remain important: utilities and software cannot be interpreted from one raw threshold. A falling intensity can coexist with rising absolute emissions when output grows, so the metric does not by itself indicate alignment with a finite emissions budget.
Portfolio calculation
Define weights, scopes, data year, revenue currency, fund look-through, estimates, and treatment of negative or missing values. Market-price movements can change portfolio weights and therefore intensity without a trade. Enterprise-value denominators can make a company's financed emissions rise when its market value falls, even when its physical emissions remain unchanged.
Targets and attribution
A target should state baseline, boundary, horizon, pathway, and whether it covers portfolio allocation or issuer change. Decompose progress into company emissions, company denominator, security weights, entry and exit, and methodology. This helps distinguish real operational transition from divestment, market movement, inflation, or data updates and reduces incentives to optimize only the displayed ratio.
Practical interpretation
Pair intensity with absolute emissions, sector allocation, production metrics, transition plans, capital expenditure, and data quality. Use peer comparisons with consistent business boundaries. Avoid aggregating unlike denominators or implying that low intensity means low climate risk, since physical exposure, transition sensitivity, governance, and valuation can remain material even for a low-emitting company.
Sources and further reading
- Corporate Standard, Greenhouse Gas Protocol
- The Global GHG Accounting and Reporting Standard Part A, Partnership for Carbon Accounting Financials