Overview
The incorporation of climate-related risks and considerations into investment portfolio decisions has grown as the availability and accuracy of corporate emissions data have improved.
A variety of greenhouse gas (GHG) indicators is now disclosed by companies and made available by specialist data providers. At the same time, there has also been a proliferation of equity benchmarks that aim to gauge companies' alignment with Paris Agreement targets.
Focusing on GHG emissions, this commentary seeks to shed light on the purpose and utility of these different metrics as well as their limitations.
Investors seeking to manage climate-related risks cannot limit themselves to scope 1 or even scope 2 emissions data.
We argue that investors seeking to manage climate-related risks cannot limit themselves to scope 1 or even scope 2 emissions data; a scope 3 analysis is essential even if such data are not currently widely available. Investors who wish to both manage climate risks and make a positive contribution to the energy transition will need to deploy more complex carbon measurement techniques.
