What is the current status of the NEC Initiative?

The NEC is a holistic and transparent environmental indicator. It produces a score between -100% and +100% that measures the level of contribution of any economic activity to the ecological transition, based on its impact on the climate, biodiversity and resources. Since January 2022, the development of the NEC has been supported by a company with a mission: the NEC Initiative. As we approach the end of 2023, we have two priorities: to raise a second round of funding and to update our methodology.

How did you develop your methodology?

The NEC is based on scientific and non-partisan data. It compares environmental impacts in relation to physical data (kg of nutrient, kWh of electricity, m² of building, etc.) and not financial data (turnover or profit).

To build our methodology, we used two types of data from nearly 250 sources. On the one hand, we used life cycle analysis databases such as those of the Food and Agriculture Organization of the United Nations (FAO), EcoInvent, Statista, the French Environment and Energy Management Agency (ADEME), etc. On the other hand, we used data from the European Union’s Environment and Energy Management Agency (EMEA). On the other hand, we have used environmental certifications for organic farming, sustainable livestock rearing, energy performance of buildings, forestry operations, and so on.

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The methodological construction of the NEC is the fruit of four years of Research & Development and testing, to which environmental or sector experts and sustainable finance practitioners contributed. The expert firms I Care by Bearing Point and Quantis have been working with us on this since 2015. We have also benefited from the support of the Institut Louis Bachelier.

Between now and the end of the year, we are going to enhance and develop our current methodology so that the NEC is more granular in certain sectors, particularly health/pharmaceuticals and financials (banking/insurance/asset management). From 2024 onwards, we want to be able to update our methodology regularly.

We have several thousand NEC scores for goods and services and currently cover a universe of 3,200 lines, via our distribution partner, Iceberg Data Lab.

Who uses the NEC score?

The indicator was designed by investors for investors. But we are also working to diversify the uses of the NEC. We are now offering it to companies and manufacturers, who can use the NEC for their internal CSR strategy. We have new customers such as  RevaïaZencap, Initiative et Finance, Solactive and Generali France , who have joined long-standing customers such as Groupama AMSPIEBNP Paribas AMLita.co and our shareholders Sycomore AM and SWEN Capital Partners. Eventually, we will have a business model with two legs: investors and companies.

As far as distribution is concerned, Iceberg Datalab is our exclusive distributor. It calculates NEC scores and sells them to managers. We also train managers and analysts who can then calculate the NEC score for their portfolios. If a manager wishes to master the tool for greater granularity and to train his employees, he can acquire a user licence from the NEC Initiative.

Would you like to accelerate your development with other distributors?

The size of the NEC market does not justify having another distributor at this stage. However, the day Iceberg Datalab has competitors on the NEC, it will be a sign that this indicator has developed well.

What is your marketing strategy for NEC?

Our ambition is to make the NEC a market standard. We want to do this in a collaborative way with diversified corporate governance, with new shareholders representing a diversity of businesses and nationalities. We also want to find foreign investors and bring together private and public players. For the latter, we plan to meet with foundations.

We also need the resources to develop commercially. So far, we’ve been concentrating on our tool, which has been supported by three permanent employees and two interns since summer 2022. Raising funds will enable us to significantly increase the number of employees.

What type of investors are you targeting for the fund-raising?

We are currently meeting with institutional investors, who are trendsetters. They have the ability to influence their suppliers, the asset managers. This is where the main thrust of our commercial strategy for the financial sector lies: convincing institutional investors to endorse and recommend the NEC to the asset management companies working for them.

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Is your search for new shareholders limited to Europe?

We have an excellent image on the French market, and we are continuing to raise our profile there. We now need to expand internationally. So we are meeting more and more European players and we also plan to meet American players who are sensitive to the subject, although we are aware that ESG is less popular across the Atlantic.

How do you avoid conflicts of interest in terms of corporate governance?

Our concern for independence is embodied in our decision to adopt the status of a company with a mission, in order to preserve values such as transparency, collaboration, a spirit of openness and independence, and robustness.

We want NEC to be part of a collaborative approach. To this end, we regularly request feedback from our customers, to find out what improvements they would like to see and what difficulties they have encountered in using the indicator. In terms of transparency, our methodology is published on our website to avoid bad practice.

We are still a very small team, but supported by solid and committed shareholders, and we are beginning to acquire a certain notoriety in the financial industry. We are convinced that the NEC will have a real impact on both financial players and companies.

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Written by Tuba Raqsham