We encourage our investee companies to report their Scope 3 emissions and to set verified Science Based Targets.
However, our research shows that Scope 1-3 emissions data can provide a misleading indicator of transition risk for investors when applied indiscriminately across all sectors and industries. Emissions data, in particular Scope 3 (alone or aggregated with Scopes 1 & 2), is a necessary but not sufficient indicator of company transition risk. Standardisation of risk metrics is crucial for comparability within sectors and industries but Scope 3 is a complex category which is currently inconsistently applied by both companies and data providers. Further, the GHG Protocol Scope 3 standard does not offer a complete picture of forward-looking transition risk for companies involved in delivering climate solutions.
Given the focus of the ISSB is financially material risk for investors, we believe some adjustments need to be considered in the application of Scope 3 data for financial risk reporting and capital allocation.
In this paper we have summarised our response to the UK government’s consultation on Scope 3 emissions in the UK reporting landscape and offer some proposals for additional pieces of emissions-related information and guidance that we believe would be valuable for investors.
Read the full paper here: