The energy transition requires not only moving away from carbon activities but also proposing decarbonised alternatives. Although these are mostly known, there is no global, quantified data available to compare them and support redirection of financial flows to companies enabling the decarbonization.
Estimates of the investment required to meet global net-zero emissions by 2050 range from USD 109-275 trillion1. A large portion of this investment will be in so-called “climate solutions”, such as renewable power generation, electrified transportation and green buildings. Whilst investment is needed across the board, the incremental contribution of the investment to the low-carbon transition is dependent on the location and the type of the investment.
More and more companies now communicate their scope 1, or direct, CO2e2 emissions and we see an increase in the amount of data about estimated indirect emissions, scope 2, and scope 3. Metrics are needed, however, to identify their respective contribution to the global net zero objective and compare solutions. One such measure is avoided emissions, sometimes referred to as “scope 4”. Unlike induced emissions that benefit from strong methodological bases, avoided emissions are calculated in a variable manner by different companies, which jeopardizes their credibility and prevent their use at scale. This was recognized recently by the G7 who called for the private sector to work together to develop an international standard3.
That is why today, a group of financial institutions, spearheaded by Mirova and Robeco, come together through a call for expressions of interest to enable:
- The creation of a globally accessible common database of avoidance factors (Batch 1).
- The estimation of emissions avoided by companies over a wide investment universe of listed companies first, resulting from the application of the avoidance factor database on the activity data of the companies concerned (Batch 2).
- Full life cycle analysis as well as an attribution of avoided emissions across the entire value chain.
- Precautionary principle with the least advantageous baseline scenario being selected to calculate avoidance factors.
- Transparency and access: the methodology for calculation of avoidance factors should be transparent.
Responses to the call for expression of interest are expected to be put forward by the 16th of July 2023. Academic institutions, consultants and data providers are all welcome.
LIST OF SIGNATORIES OF THIS CALL FOR EXPRESSIONS OF INTEREST
- AXA IM
- Impax Asset Management
- Natixis Investment Managers
- OFI AM
- Sienna Investment Managers
- Smart Pension
- Sycomore AM
2 The terms ‘carbon’, ‘CO2e’, ‘greenhouse gas’ systematically refer to all greenhouse gases converted into carbon equivalent tons based on their global warming potential at 100 years as provided by the IPCC.
3 Source: G7 launches nature-focused initiative, backs avoided emissions measure (responsible-investor.com)
4 Introduced in France in 2018 under the Pacte Law, a ‘société à mission’ company must define its "raison d'être" and one or more social, societal or environmental objectives beyond profit. The purpose, and objectives aligned with this purpose, must be set out in its Articles of Association. The Articles specify the means by which the execution of the Mission will be monitored by a Mission Committee (a corporate body distinct from the board of directors which is responsible for monitoring the implementation of the mission with at least one employee.) An independent third party then verifies the execution of the Mission, via a written opinion which is annexed to the report of the Mission Committee to shareholders and made available on the website of the company for a period of five years.
Mirova is an affiliate of Natixis Investment Managers.
Portfolio management company – French Public Limited liability company
Regulated by AMF under n°GP 02-014
RCS Paris n°394 648 216
Registered Office: 59, Avenue Pierre Mendes France – 75013 – Paris.
Natixis Investment Managers
RCS Paris 453 952 681
Share Capital: €178 251 690
43 avenue Pierre Mendès France
This communication is for information only and is intended for investment service providers or other Professional Clients. The analyses and opinions referenced herein represent the subjective views of the author as referenced unless stated otherwise and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material.
Copyright © 2023 Natixis Investment Managers S.A. – All rights reserved