Quant firm Research Affiliates (RA) has called for mandatory reporting of corporate emissions after it concluded that third-party estimates of emissions and forward-looking scores were insufficiently accurate to guide investment decisions.
In a study overseen by RA’s European research head Vitali Kalesnik, researchers from the University of Augsburg found that estimates of carbon emissions were at least 2.4 times less effective at identifying the most polluting companies compared to reported data. Estimates were almost exclusively correlated with a company’s sector and size, rather than its emissions.
Using estimates, the researchers said, could “lead to misidentification of brown companies as green companies and vice versa, and ultimately to greenwashing of investor activities”.
In addition, the researchers found no evidence that forward-looking carbon scores and ratings were able to predict future changes in company emissions.