There are several popular taxonomies used to identify and categorise the environmental credentials of business entities and activities. These all aim to measure how business and investment practices contribute – positively or negatively – to the process of climate change. In this document, we look at harmonising three of these taxonomies, namely the EU taxonomy, NACE and CPRS, with EDHECinfra’s own TICCS classification system, and identifying a clear mapping across each of the three pairs.

  • By considering the EU taxonomy together with TICCS, analysts can identify the environmental sustainability of infrastructure investment. Combining the two taxonomies reveals the extent to which infrastructure assets contribute to the European Environmental objectives.
  • We also consider how the European industry classification system NACE alongside TICCS. Our mapping aligns relevant economic activities identified by NACE to the TICCS infrastructure activities at the subsector level. (The economic activities of the EU taxonomy are themselves derived using NACE as the basis, but use only those activities relevant only to its environmental objectives. Consequently, its categories do not correspond directly to those activities found in NACE. As a result, some activities listed in the EU taxonomy do not have a NACE code equivalent, while others cover multiple codes.)
  • In addition, we map TICCS to the Climate Policy-Relevant Sectors (CPRS) in order to understand the exposure of infrastructure assets to climate-related transition risk. The CPRS approach to climate policy is a sectoral one, developed by the European Commission. This approach aims to identify and quantify the impacts of climate change on key economic sectors. It considers all activities that are relevant for climate transition. Sectors covered by the CPRS approach include fossil fuel, utility, energy-intensive, buildings, transportation, agriculture, finance, scientific research & development, and others. The CPRS classification is complementary to the EU Taxonomy, and the two can be used together to provide a comprehensive and robust approach to addressing the climate transition.

The complete mapping is available on the download page here

References

1. 1
“EU Taxonomy Compass,” 2021.
2. 1
Battiston S and V. G, “A Climate stress-test of the financial system,” Nature Climate Change, vol. 7, no. 4, pp. 283–288, 2017, [Online]. Available: https://doi.org/doi:10.1038/nclimate3255
3. 1
“Mapping climate risk: Main findings from the EU-wide pilot exercise,” 2021.



The following sections set out the steps taken in applying NACE, EU taxonomy and CPRS to the TICCS industry pillar. 

TICCS to NACE:

Initially, we have reviewed and created a shortlist of relevant NACE codes that are deemed to be infrastructure activities.

We considered the principal activities and underlying assets of each TICCS code and mapped them to themes that align with the relevant NACE code following the list. In addition, we identified NACE codes that were in fact infrastructure specific but omitted from our initial mapping and added these to the mapping.

In those instances where we found no direct map of an asset TICCS subclass to a NACE code, we instead mapped it to the “closest” NACE group instead. For example, The TICCS subclass Public Parks and Gardens (IC305020) is mapped to the NACE group Botanical and zoological gardens and nature reserves activities (R91.04).

Several assumptions were made during the mapping exercise:

  • Trade of electricity (NACE 35.14) is tagged to TICCS subclasses under the umbrella of IC10 Power Generation x-Renewables and IC70 Renewable power, given that their business activities involve the sale of electricity.

TICCS

NACE Codes

Asset code

Industrial Asset Subclass

Division

Group

Class

NACE Code

IC101010

Nuclear Power Generation

D

35

14

D35.14

IC101020

Gas-Fired Power Generation

D

35

14

D35.14

IC101030

Coal-Fired Power Generation

D

35

14

D35.14

IC101040

Combined Heat and Power Generation

D

35

14

D35.14

IC101050

Other Fossil-Fuel-Fired Power Generation

D

35

14

D35.14

IC102010

Power and Water Production

D

35

14

D35.14

IC701010

On-Shore Wind Power Generation

D

35

14

D35.14

IC701020

Off-Shore Wind Power Generation

D

35

14

D35.14

IC702010

Photovoltaic Power Generation

D

35

14

D35.14

IC702020

Thermal Solar Power

D

35

14

D35.14

IC703010

Hydroelectric Dam Power Generation

D

35

14

D35.14

IC703020

Hydroelectric Run-of-River Power

D

35

14

D35.14

IC704010

Biomass Power Generation

D

35

14

D35.14

IC704020

Geothermal Power Generation

D

35

14

D35.14

IC704030

Wave Power Generation

D

35

14

D35.14

  • Installation of industrial machinery and equipment (NACE 33.20) is mapped to TICCS subclasses that require unique, specialised machinery to operate. For instance, it is mapped to all assets in IC20 Environmental Services, including IC204010 Flood Control which involves a drainage infrastructure system to hold rainwater to prevent urban flooding.

TICCS

NACE Codes

Asset code

Industrial Asset Subclass

Division

Group

Class

NACE Code

IC201010

Non-Hazardous Waste Treatment

C

33

20

C33.20

IC201020

Hazardous Waste Treatment

C

33

20

C33.20

IC201030

Waste-to-Power Generation

C

33

20

C33.20

IC201040

Waste incineration

C

33

20

C33.20

IC201050

Gaseous Waste Treatment

C

33

20

C33.20

IC202010

Potable Water Treatment

C

33

20

C33.20

IC202020

Industrial Water Treatment

C

33

20

C33.20

IC202030

Sea Water Desalination

C

33

20

C33.20

IC202040

Water Supply Dams

C

33

20

C33.20

IC203010

Residential Wastewater Treatment and Reuse

C

33

20

C33.20

IC203020

Industrial Wastewater Treatment and Reuse

C

33

20

C33.20

IC204010

Flood Control

C

33

20

C33.20

IC204020

Coastal and Riverine Locks

C

33

20

C33.20

IC204030

Energy Efficiency

C

33

20

C33.20

IC204040

Carbon Capture

C

33

20

C33.20

  • For Construction of residential and non-residential buildings (NACE 41.20), we follow the definition of a building in the NACE guidelines. In that respect, we only include stand-alone “buildings” here and not buildings within facilities. For example, an office building in a nuclear power plant is not mapped to this code. Greenfield projects were considered in this mapping.

TICCS

NACE Codes

Asset code

Industrial Asset Subclass

Division

Group

Class

NACE Code

IC301030

Barracks and Accommodation

F

41

20

F41.20

IC302010

Schools (Classes and Sports Facilities)

F

41

20

F41.20

IC302020

Universities (Classes, Labs, Administration Buildings)

F

41

20

F41.20

IC302030

Student Accommodation

F

41

20

F41.20

IC303050

Social Accommodation

F

41

20

F41.20

IC303060

Government Buildings and Office Accommodation

F

41

20

F41.20

IC304010

Hospitals

F

41

20

F41.20

IC304020

Clinics

F

41

20

F41.20

IC304030

Residential and Assisted Living

F

41

20

F41.20

IC305010

Stadiums and Sports Centres

F

41

20

F41.20

IC601010

Airport

F

41

20

F41.20

IC602010

Car Park

F

41

20

F41.20

  • The exercise ignores Specialised construction activities (NACE 43.00) and Specialised consultancy services (NACE 71.00). In principle, these activities should be mapped to all TICCS asset subclasses, but these are excluded to allow proper analysis and comparison by market participants when using the taxonomies.

We consider as many relevant NACE codes as possible in our mapping of TICCS to NACE at the granular level, including those of construction activities, renting equipment and construction of buildings where necessary.

TICCS to EU Taxonomy:

First, we examine the list of activities relevant for each objective of the EU taxonomy which was taken from the EU Taxonomy Compass[1].[1]

Two out of six environmental objectives of EU taxonomy are currently defined, but the EU taxonomy regulation foresees additional objectives to be defined in the future.

The EU taxonomy regulation defines the two objectives investments must achieve in order to be labelled as sustainable: Climate change mitigation and Climate change adaptation. These objectives cover broadly the same activities with some differences, as a result, which led us to tag additional items for climate change adaptation.

[1] https://ec.europa.eu/sustainable-finance-taxonomy/index.htm

TICCS

EU Taxonomy Activities

Climate Mitigation

Climate Adaptation

Assetcode

Industrial Asset Subclass

Objective

Activity Number

 Climate Mitigation activity code

Objective

Activity Number

 Climate Adaptation activity code

IC302010

Schools (Classes and Sports Facilities)




CA

7.2

CA7.2

IC302020

Universities (Classes, Labs, Administration Buildings)




CA

7.2

CA7.2

IC304030

Residential and Assisted Living




CA

7.2

CA7.2

IC305030

Convention and Exhibition Centres




CA

13.1

CA13.1

IC305040

Arts, Libraries, and Museums




CA

13.2

CA13.2

Each activity defined in the EU Taxonomy will have a corresponding NACE code and thus a corresponding TICCS code.

Much like the approach we adopted in TICCS to NACE mapping, only relevant infrastructure activities are considered.

The Taxonomy Compass assigns NACE codes to activities. This code assignment is not strictly followed in our mapping exercise since we need to be as granular as possible.

During the mapping process, several assumptions were made:

The EU taxonomy activities are tagged to the infrastructure that enables them. Roads are tagged to Vehicles (i.e. taxi, bus, land transport vehicles) while Taxi operation (NACE 49.32) and Other passenger land transport n.e.c. (NACE 49.39) are mapped to Road companies (IC6050). Similarly, Ships are tagged to Ports and Aircraft to Airports. This is partly done to enable Scope 3 assessment.

  • Activity 6.7 Inland passenger water transport is not tagged to Ports because these appear to be smaller docks and ferry terminals.
  • Activity 7.3 Installation, maintenance, and repair of energy efficiency equipment is ignored because it is not considered essential for infrastructure.
  • Activity 4.17 through 4.25, where heat/cooling is generated within other renewable projects such as solar etc., are tagged to the individual renewable technologies in TICCS and an additional NACE code D35.30 Steam and air conditioning supply is tagged to the corresponding TICCS code.

TICCS


EU Taxonomy Activities

Climate Mitigation

Climate Adaptation

Assetcode

Industrial Asset Subclass

Objective

Activity Number

 Climate Mitigation activity code

Objective

Activity Number

 Climate Adaptation activity code

IC702010

Photovoltaic Power Generation

CM

4.21

CM4.21

CA

4.21

CA4.21

IC702020

Thermal Solar Power

CM

4.21

CM4.21

CA

4.21

CA4.21

IC704010

Biomass Power Generation

CM

4.24

CM4.24

CA

4.24

CA4.24

IC704020

Geothermal Power Generation

CM

4.22

CM4.22

CA

4.22

CA4.22

IC803010

District Cooling/Heating Network

CM

4.15

CM4.15

CA

4.15

CA4.15

TICCS to CPRS:

We have obtained a more granular CPRS code from Finexus[1] [2], referred to as CPRS2, distinguishing between some high carbon and low carbon activities. Each NACE code 4-digit level is associated with no more than one CPRS2.

We applied some rules below to the mapping,

  • 2-utility l electricity (2.1), 2-utility (2.2), and 2-utility l electricity&gas (2.3) are being ignored as they are not tagged to NACE level 4 classes.
  • The activities below are being ignored as each is not applicable in the context of infrastructure,
    • 1-fossil l coal (1.1), as it is related to mining and extractions of materials.
    • 1-fossil l oil&gas (1.4), as it is related to extraction of crude petroleum and natural gas activities.
    • 3-energy-intensive (3.1), as it is related to manufacturing and mining activities.
    • 5-transportation l other (5.3) as it relates to activities via transport other than air, railways, roads and water.
    • 5-transportation l roads l bicycles (5.6).
    • 6-agric. etc (6.0).
    • 7-finance (7.0).
    • 8-scientific R&D (8.0).
  • Other TICCS codes that are not tagged to any of the CPRS 1.0-8.0 are assigned to CPRS 9.0-Other.

Subsequently, for CPRS exposures to the level of carbon emission activities, the European Banking Authority (EBA) has allocated the CPRS to six buckets of GHG emission intensity. Based on the EBA data[3], we have aggregated and created two main buckets (i.e. very low to medium and medium to very high) in respect of the carbon intensity and tagged each CPRS to the respective bucket. Further, a unique code was created for each CPRS code.

CPRS main

Unique code by EDHEC

Level of carbon activities [A]

CPRS2

1-fossil-fuel

1.1

Medium to Very High

1-fossil|coal


1.2

1-fossil|gas


1.3

1-fossil|oil


1.4

1-fossil|oil&gas


1.5

1-fossil-fuel


1.6

1-fuel|fossil|gas

2-utility

2.1

Medium to Very High

2-utility|electricity


2.2

2-utility


2.3

2-utility|electricity&gas


2.4

2-utility|electricity|distribution


2.5

2-utility|electricity|generation


2.6

2-utility|electricity|trade


2.7

2-utility|electricity|transmission


2.8

2-utility|other


2.9

2-utility|waste


2.10

2-utility|water&sewerage

3-energy-intensive

3.1

Medium to Very High

3-energy-intensive

4-buildings

4.1

Medium to Very High

4-buildings

5-transportation

5.1

Medium to Very High

5-transportation


5.2

5-transportation|air


5.3

5-transportation|other


5.4

5-transportation|railways


5.5

5-transportation|roads


5.6

5-transportation|roads|bicycles


5.7

5-transportation|space


5.8

5-transportation|water

6-agric. etc.

6.1

Medium to Very High

6-agric. etc|agriculture


6.2

6-agric. etc|fishing


6.3

6-agric. etc|forestry

7-finance

7.1

Very Low to Medium

7-finance

8-scientific R&D

8.1

Very Low to Medium

8-scientific R&D

9-other

9.1

Very Low to Medium

9-other


[1] https://www.finexus.uzh.ch/en/projects/CPRS.html

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