Accounting for Financed and Investment Emissions

Understanding Scale, Complexity and Importance

Emissions from investment-related activities can represent a major driver of a company’s carbon footprint, particularly for financial institutions, asset managers and private equity firms. Through their investment decisions, these organizations effectively finance activities that often far exceed the direct operational emissions of the investors themselves, making financed emissions a critical — but complex — component of their overall emissions profiles.

What’s All at Stake?

Accurate and comprehensive greenhouse gas (“GHG”) inventories for financed and investment activities are essential for companies seeking to report compliant, credible and transparent carbon footprints. At the same time, increasing regulatory scrutiny and rising investor expectations are intensifying the demand for detailed and reliable emissions data linked to investment activities. Accurate measurement of these emissions is no longer optional for all companies, and is increasingly required for building credible ESG programs and complying with many regulations, such as California’s Senate Bill 253 and the European Union’s Corporate Sustainability Reporting Directive. Accurate calculation typically requires detailed information on investee emissions, ownership stakes, attribution methods and investment size. Collecting complete and reliable data on these factors can be particularly challenging for companies with large or diverse investment portfolios. Data limitations, gaps, inconsistent reporting practices or a lack of understanding of reporting requirements can result in companies misreporting these emissions, potentially skewing corporate carbon footprints and providing an incomplete picture of financed emissions.

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