Proposals should address two dimensions of the project: 1) A framework designed to harmonize data on companies’ capital expenditures (capex), which companies report inconsistently, into categories (such as low-carbon solutions) for assessing alignment with global climate goals as expressed by industry benchmarks; and 2) The use of large language models to assess the credibility of companies’ climate commitments based on capex data contained in their financial and sustainability reports.

Research Description:

Since the Paris Agreement in 2015, the financial sector has been seeking indicators to measure how companies intend to transition their business model to a net-zero emissions world. One golden standard indicator has stood out: CapEx, or Capital Expenditures i.e., actual long-term investments by companies (e.g., renewables, low carbon solutions). In this thesis, we want to look into what a company’s current CapEx tell us about the credibility of listed companies’ net zero claims.

We want to answer this question with a focus on critical transition sectors (e.g., oil & gas, utilities) and two main aspects. The first one is about building a framework for harmonizing CapEx data, which are inconsistently reported across companies, into meaningful climate categories (e.g., EU green taxonomy, low carbon solutions, oil&gas expansion). The second aspect involves building and running a Large Language Model (LLM) application across company annual and sustainability reports (accessible at MSCI) to assess a company’s net zero credibility using such data (looking at the existing open-source alignment methodology PACTA can provide inspiration). Net zero benchmarks could include scenarios (e.g., scenarios by the Network for Greening the Financial System (NGFS); 1.5°C-aligned scenario pathways involve indeed year -specific energy mix (e.g., share renewables vs fossil fuels in 2024). Another benchmark could be company net zero target data (accessible at MSCI) – the question is then whether CapEx demonstrates progressive alignment with a net zero target.

Relevance for industry/investors/ecosystem:

• Investors currently lack an appropriate assessment of how companies back their transition plans with investments. The Climate Action 100+ coalition (more than 700 investors) underscores, that the alignment of capex strategies with net zero transition goals remains almost non-existent.
• Major financial industry net zero guidance from both the Paris Aligned Investment Initiative and the Glasgow Financial Alliance for Net Zero (GFANZ) flags CapEx alignment as a key characteristic for defining aligned companies. Yet this data point does not exist yet at scale.

 MSCI (and other) data to be used:

• Examples of green CapEx mappings (MSCI data)
• CapEX data found in a large sample of collected company annual and sustainability reports (stored at MSCI)
• Extensive company target data on listed companies (MSCI data)
• Consolidated scenario pathway dataset (NGFS, stored at MSCI)

 Types of analysis to be conducted:

• Produce a scalable methodological approach to assess CapEx’s net zero credibility for sectors critical to the net zero transition (such as oil&gas, utilities, transportation)
• Research and integrate financial data (CapEx reporting) with climate alignment data (NGFS scenario, target data)
• Apply Machine Learning, LLM and other automation approaches.

 Ideal candidate profile/degree:

• Enrolled in a Master’s program related to Finance, Economics, Statistics, Environmental Sciences, Mathematics, Physics, Computer Science, Data Science etc.
• Strong analytical and quantitative skills.
• Proficiency in statistical analysis tools/software, experience with Python.
• A keen interest in sustainability and its intersection with finance.

MSCI supervisor:

Tanguy Séné, Head of Net Zero Alignment Metrics, Climate Risk Center, MSCI Potsdam

Application:

Please note that this program is available to Master’s level students from the following institutions:

• ETH Zurich
• EPFL (École Polytechnique Fédérale de Lausanne)
• University of Zurich
• ZHAW Zurich University of Applied Sciences
• University of St. Gallen

Please submit your resume and statement of interest to Bettina Meyer (bettina.meyer@msci.com) and Rumi Mahmood (rumi.mahmood@msci.com)