New Investor Tools Aim to Shed Greater Light on GHG Emissions

Carbon neutrality database and greenhouse gas reporting standard showcased at London climate event. 

Two new tools which will help investors identify and factor greenhouse gas (GHG) emissions into their investment decisions were highlighted at this week’s London Climate Action Week (LCAW).  

A carbon neutrality database, which aims to provide greater transparency and comparability of initiatives to achieve carbon neutrality, has been devised by The Climate Registry (TCR), a North American non-profit organisation which measures and reports on greenhouse gas emissions. 

Described as being a ‘one-stop shop’the database will serve as a central repository for information about carbon-neutral pledges, protocols and progress, helping investors to efficiently compare and track relevant data, whilst also facilitating more transparent disclosure.  

There are quite a few areas [of information] that need to be addressed in the net-zero and carbonneutral space to better support the organisations that we work with in the race to zero,” said Alexandra Lilienfield, TCR’s Strategic Partnerships Associate, during a discussion at LCAW on Tuesday. 

The database will allow for the sharing of information between organisations and jurisdictions across sectors. At its core, it will provide detailed information on carbon neutrality targets, and offer insights to help users to build capacity and improve strategy. The database enables specific search criteria, breaking down information into searchable sub-categories, such as sector, region and year.   

Addressing the issue of standardisation, another core pillar of the database is the establishment of a common terminology to foster discussion between investors and companies.  

The database comes at a time when many entities are seeking to improve their ‘race to zero’ strategies, and to strengthen their carbon-neutral targets to align with global benchmarks, such as the Paris Climate Agreement. While the database is focused predominately on climate-related reporting, TCR says its core aims and benefits are directly applicable to other ESG metrics.  

The Carbon Neutrality Database is currently in the first phase of its development process, with industry experts collaborating to design the framework, select transparency requirements, disclosure criteria, scale and rate systems and include specific resources. The second phase, which will focus on technical feedback and the user experience, is scheduled for the latter half of 2021. 

Measuring financed emissions 

Separately, the Partnership for Carbon Accounting Financials (PCAF) launched its Global GHG Accounting and Reporting Standard for the Financial Industry, offering banks, asset managers and asset owners a free, standardised, robust and clear way of measuring and reporting GHG emissions tied to their loan and investment portfolios. 

The Global GHG Accounting and Reporting Standard has been developed over the past 12 months, including public consultations and expert feedback, by 16 financial institutions from Europe, Africa, Latin America and the United States. As part of the PCAF initiative, 86 financial institutions, with US$17.5 trillion in total assets, have committed to measuring and reporting emissions from loans and investments.  

“As more governments legislate for net zero emissions in 2050, every sector of the economy needs to adapt for the transition. Harmonised carbon accounting is essential, as steering portfolio’s starts by having a standard framework, and being able to measure it. We hope for an accelerated uptake, so that the investment industry can move on, and shift its focus from not only measurement, but also to creating impact,” said Carola van Lamoen, Head of the Sustainable Investing Center of Expertise at Robeco, a PCAF founder bank.

The standard provides methods to measure financed emissions across six asset classes: listed equity and corporate bonds; business loans and unlisted equity; project finance; commercial real estate; mortgages; and motor vehicle loans. It has received the ‘Built on GHG Protocol Mark’ from the GHG Protocol, a supplier of the greenhouse gas accounting standards. 

As well as providing technical support to institutions implementing the standard globally, the PCAF intends to develop additional asset class methods and publish case studies during 2021. 

“PCAF’s methodology will be a key tool to measuring carbon emissions, enabling climate risk management, and helping drive low carbon product development,” said Audrey Choi, Chief Sustainability Officer at Morgan Stanley, one of the banks involved in the standard’s development. 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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