Glossary

Every term used across the Carbon Quotient Ratio methodology, in one place.

Adjusted EPS: Adjusted Net Income divided by diluted weighted-average shares outstanding — reported diluted EPS recalculated as if Carbon Expense were an actual line-item cost.
Adjusted Market Capitalization: Market Capitalization minus Unrealized Carbon Expense.
Adjusted Net Income: Net Income minus Carbon Expense — pro forma net income reflecting a company's current-period Carbon Expense as if it were an actual cost.
Adjusted Stockholder's Equity: Stockholder's Equity minus Unrealized Carbon Expense.
Adjusted Total Assets: Total Assets minus Unrealized Carbon Expense.
Carbon Expense: An imputed expense for the unpaid cost to permanently offset a firm's current period carbon emissions with negative emissions — i.e., the incremental cost to achieve carbon neutrality in the current period, calculated as Realized Emissions times Carbon Price.
Carbon Intensity: A measure of the greenhouse gas emissions generated annually by a company's tangible assets, calculated as Carbon Expense divided by PPE.
Carbon Price: A constant value ($/tCO2e) reflecting the cost to permanently remove carbon from the ambient atmosphere at scale. The Carbon Quotient Ratio uses $100/tCO2e as the default value.
Carbon Quotient Ratio (CQR): A normalized measure of Carbon Risk that represents the imputed cost of future carbon emissions associated with a company's PPE.
Carbon Risk: Also called transition risk, a function of the imputed cost of carbon for Realized Emissions and Unrealized Emissions. Carbon Risk is positively correlated with Carbon Intensity and PPE Life.
DD&A Expense: Arises from the gradual expensing of tangible and intangible assets over time through depreciation, depletion and amortization, in order to match costs to revenues.
Depreciation Expense: Arises from the gradual expensing of PPE over time in order to match costs to revenues. Depreciation is a subset of DD&A.
Market Price Impact: Unrealized Carbon Expense divided by Market Capitalization — the share of a company's market value implied by its unrecognized future carbon cost.
PPE: Property, plant and equipment, less accumulated depreciation.
PPE Life: A measure of the estimated remaining depreciable life of a company's long-lived tangible assets (PPE), calculated as PPE divided by current period Depreciation (or DD&A, when a current-period Depreciation figure isn't available from the company's financial filings).
Realized Emissions: A firm's direct (Scope 1) emissions (tCO2e) for the current period.
Total Assets: Includes PPE, intangible assets, cash and marketable securities, and everything else a company owns or controls that has economic value.
Unrealized Carbon Expense: A risk-adjusted contra asset account representing the imputed cost of future emissions, calculated as Carbon Expense times PPE Life.
Unrealized Emissions: Future Scope 1 emissions that will result from the continued use of a firm's PPE over its remaining useful life, calculated as Realized Emissions times PPE Life.
Weighted-Average Carbon Quotient Ratio (WACQ): An asset-weighted average Carbon Quotient Ratio for an investment portfolio such as the CQ500 Index. It is a measure of Carbon Risk in a portfolio of loans and investments.