Institutional investors are making pledges to reduce the emissions in their portfolio of investments. Most often the goals are tied to their scope 1 and 2 emissions (those controlled by a company they invest in). Occasionally, scope 3 emissions are also included in their goals (indirect emissions from a company’s value chain).
While it is not common today, this podcast explains why scope 4 (also called avoided emissions) should be considered in green investment goals. Scope 4 emissions consider the big-picture impact by capturing the emission benefits when a company’s products are used.
For example, take an energy-intensive insulation manufacturer that has relatively high scope 1 and 2 emissions. These high emissions could cause investors with strict requirements around reducing scope 1 and 2 emissions to not invest. However, when insulation is used in buildings, the emissions reductions are large. These long-term emissions reductions from using the insulation are scope 4 or avoided emissions. This example demonstrates how, by considering the scope 4 emissions, investors can see the big picture of their investment's climate impact.
This week our guests tell us more about the state of emissions reporting, including scope 4 emissions. We are pleased to welcome Erica Coulombe, Vice President at Millani, and Marcus Rocque, Senior Research Analyst at ARC Energy Research Institute to the podcast.
Content referenced in this podcast:
- Report that outlines the GHG emission reduction goals of various Canadian pension funds “Building Climate Resilience In Canada’s Pension Funds” by Smart Prosperity Institute
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