Platform Looks to Solve Decarbonisation Puzzle
Standardised approach aims to improve transparency, eliminate greenwashing risks around avoided – or Scope 4 – emissions.
Investor efforts to accurately understand the climate impact of their decisions has taken a step forward according to backers of a platform that compares emissions from competing low-carbon investment options.
The Avoided Emissions Platform (AEP) has been developed by asset managers including Robeco and Mirova as an interactive tool which models avoided emission factors across 65 climate solutions and technologies, including electric vehicles and wind power.
The term ‘avoided emissions’ – also known as Scope 4 – refers to possible greenhouse gas emissions which have been ‘saved’ by using a low-carbon product or service over a more carbon-intensive choices – for example, an electric vehicle versus one with an internal combustion engine.
“Targeting a 1.5°C or well below 2°C temperature scenario takes both understanding the decarbonisation strategies of portfolio companies and the solutions they provide to others to decarbonise – measuring avoided emissions is part of the puzzle,” Manuel Coeslier, Climate and Environment Lead at Mirova, told ESG Investor.
“By measuring avoided emissions, investors can get a better understanding of how companies are actually contributing to global decarbonisation efforts.”
As well as supporting investment decision-making through harmonised metrics, the platform aims to increase data consistency.
“When putting together this platform, we found that there is no real consistency in the way that companies were reporting avoided emissions, or the way they were being calculated by data providers,” said Emily Homer, Climate and Biodiversity Specialist at Robeco.
“At the moment, a company producing wind turbines might report the avoided emissions from all wind turbines sold in 2024 over their whole lifetime based on the amount of kilowatt hours of electricity generated, whereas other companies might choose to report the forward-looking emissions from the wind turbines they sold in 2024. Neither is right or wrong, it’s just about ensuring investors have comparability.”
The methodology for the AEP – which has been 18 months in the making – is open-source, meaning investors can interact with the approach and apply it to their own portfolios. Access to the platform itself will require an annual licence fee.
Robeco and Mirova first launched a call for expressions of interest in developing the AEP back in May 2023.
Sustainability consultants I Care and Quantis were appointed to develop the standard and global database of factors underpinning the AEP’s calculation of avoided emissions.
The AEP is backed by 12 asset managers and owners collectively representing more than US$4 trillion in AUM, alongside six data providers, 13 corporates, an independent scientific committee, and an international corporate investing bank.
Building blocks
The AEP currently covers low-carbon technologies across eight sectors, including power, buildings and waste management. It will be expanded over time.
“Utilising an avoided emissions metric enables you to compare two climate solutions in different sectors that have different outputs – for example, an investment in an offshore wind farm or an investment in a lithium miner,” said Homer.
By promoting transparency and harmonisation, the group also hopes to mitigate greenwashing risk and build investor confidence in financing emissions avoidance solutions.
“One of the primary reasons for developing this platform was because there was previously too much greenwashing risk involved in reporting avoided emissions, because investors didn’t know that portfolio companies were reliably calculating and making sensible choices in their calculations of avoided emissions,” said Homer.
The database has been designed to always take the most conservative baseline when calculating avoided emissions.
The AEP is not the first initiative focused on promoting transparency and harmonisation around Scope 4 emissions.
The World Business Council for Sustainable Development (WBCSD) issued guidance on avoided emissions back in 2023, outlining its recommendations for measuring and disclosing Scope 4.
The WBCSD, which formed part of the AEP’s scientific committee to ensure alignment between the platform and the standard, intends to update and enhance the guidance later this year.
Over the coming months, the platform’s backers will continue to refine the platform by testing its reliability and how scalable it can be at the portfolio level.
“But the AEP can be directly utilised today by investors – especially those that are exposed to project finance or infrastructure investments, as these are more straightforward in terms of their exposure to climate solutions, such as investment in a wind farm,” said Mirova’s Coeslier.
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