Mirova & Robeco lead initiative to develop global database of avoided emissions factors and associated company-level avoided emissions

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 trillion^[1]. 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, CO₂e^[2] 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 standard^[3].

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).

The new datasets should be based on the following principles:

• 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.

Manuel Coeslier, Lead Expert, Climate & Environment at Mirova, explains: “The financial sector plays a key role in driving the economy towards net zero emissions globally. To this end, clear and comprehensive information on companies' true contribution to the global net zero objective is essential. This includes a robust measurement of avoided emissions. As a mission-driven^[4] company, Mirova seeks to continuously improve its approach and drive the market towards more ambition and transparency. That is why we are very proud to be at the forefront of this initiative.”

Lucian Peppelenbos, Climate & Biodiversity Strategist at Robeco, adds: “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^[5]. 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.”

Responses to the call for expression of interest are expected to be put forward by the 16^th of July 2023. Academic institutions, consultants and data providers are all welcome.

[1]  Source: Green Equity Exposure in a 1.5°C Scenario, FTSE Russel, 2022
[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.
[5] Source: Kreibiehl, S., T. Yong Jung, S. Battiston, P. E. Carvajal, C. Clapp, D. Dasgupta, N. Dube, R. Jachnik, K. Morita, N. Samargandi, M. Williams, 2022: Investment and finance. In IPCC, 2022: Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [P.R.  Shukla, J. Skea, R. Slade, A. Al Khourdajie, R. van Diemen, D. McCollum, M. Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S. Luz, J. Malley, (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA. doi: 10.1017/9781009157926.017

LIST OF SIGNATORIES OF THIS CALL FOR EXPRESSIONS OF INTEREST

• Mirova
• Robeco
• abrdn
• AXA IM
• Comgest
• Impax Asset Management
• Natixis Investment Managers
• OFI AM
• PGGM
• Railpen
• Sienna Investment Managers
• Smart Pension
• Sycomore AM