Investors to create global database for ‘Scope 4’ corporate avoided emissions

Respondents have until July 2023 to respond to the CEI

The group of 11 investors, which includes Natixis Investment Managers’ affiliate Mirova and Robeco, have launched a call for expressions of interest (CEI) to develop a database on avoided emissions, sometimes referred to as “Scope 4” emissions.

The investors aim to create a global database of “avoidance factors” that could be accounted for by companies. The database could then be applied to companies based on estimates on full life cycle analysis across the value chain and a methodology for the calculation of avoided emissions.

Robeco’s climate and biodiversity strategist Lucian Peppelenbos said: “The net-zero transition is a massive opportunity for investing in climate solutions and emission mitigation technology. Robeco is implementing investment strategies that focus on this opportunity, but at a global level climate finance is six times lower than what is required.

“Forward-looking metrics are key to increasing climate finance. This includes a credible measurement of avoided emissions. Transparency and a common methodology are essential, and we hope this initiative may contribute establishing this.”

Avoided emissions can include technology solutions or behavioural interventions to prevent emissions that would otherwise have occurred.

There is currently no global data available to compare how avoided emissions could be integrated at a company level. In turn, this hinders the amount of investment that could be funnelled into avoidance solutions.

The investor notes that, unlike induced emissions that benefit from strong methodological bases, avoided emissions are calculated in a variable manner by different companies. This jeopardises their credibility and prevents their use at scale.

Respondents have until July 2023 to respond to the CEI.

Separately, the G7 is calling for the private sector to work together to develop an international standard for Scope 4 emissions.

Scope 3 struggles

While work gathers pace on Scope 4, separate research warns that most UK businesses are struggling to keep up with reporting requirements for Scope 3 emissions.

In November 2022, the European Commission officially adopted the Corporate Sustainability Reporting Directive (CSRD), a new corporate sustainability reporting directive that aims to provide a more comprehensive picture of companies’ sustainability performance.

The directive widens the net on which companies are mandated to report, with almost a fivefold increase in the number of businesses affected, to 50,000+. It sets stricter requirements on the range of issues and quality of data which companies must disclose. A key focus here is Scope 3 emissions, which typically account for the majority of climate impact for a large business.

However, research warns that six in ten UK businesses are unlikely to be ready to meet the January 2024 deadline for these enhanced climate disclosures, a survey of 801 firms has found.