Investor group plans avoided emissions database to break links with past controversies

Avoided emissions data is key to mobilise financing to climate solutions, says group in call for expressions of interest to develop database

A group of investors, led by Mirova and Robeco, is proposing to create the first global avoided emissions database to support the financing of decarbonising activities.

The energy transition requires both decarbonisation and investment in cleaner alternatives, but there is no widely accessible dataset that supports the latter, the group said.

The usage of avoided emissions – a metric in which the actual emissions of a zero or low-carbon project are compared with the hypothetical emissions of a high-carbon alternative – has caused controversy in the past.

For example, Brookfield’s Mark Carney sparked controversy when he claimed the firm had a reduced carbon footprint based on emissions avoided as a result of green or lower-carbon holdings. PCAF, which develops standards to measure financed emissions, has so far declined to provide guidance on avoided emissions.

“Avoided emissions are too closely associated with previous controversies after misuse by certain financial institutions and this has been very detrimental,” Mirova climate lead Manuel Coeslier told Responsible Investor.

“A key objective of the initiative is precisely to ensure avoided emissions gain credibility and support wider uptake by the market,” he added.

The initiative is backed by maior investors such as abrdn, AXA Investment Managers, Natixis, PGGM, Comgest, UK pension fund Railpen and Sycomore Asset Management.

It comes after G7 ministers last month lauded the “value in acknowledging the contribution” of avoided emissions.

Investors already use absolute emissions and emissions intensity metrics to assess how well companies are decarbonising their own operations. Avoided emissions, in turn, measures the extent to which companies are enabling decarbonisation outside of their value chains.

This could be through providing climate solutions and alternatives to carbon-intensive processes such as renewable power generation, electrified transportation and green buildings.

But providers of these solutions will almost always see their value chain emissions increase despite their positive broader impact, said Mirova’s Coeslier, which means that conventional emissions metrics are not always good benchmarks of their climate performance.

“Traditional carbon footprint metrics do not give investors the full picture of how companies are aligning with climate objectives.”

Avoided emissions are also distinct from other emissions metrics, which are largely historical, as it provides an assessment across the product lifecycle. This adds another layer of complexity, as the metric can be derived in different ways by different organisations, limiting comparability.

Calculations of the avoided emissions datasets will incorporate recent guidance issued by CEO membership body the World Business Council For Sustainable Development and the G7, which propose that avoided emissions “should not be subtracted from Scope 1-3 emissions, nor [nationally determined contributions]” and should not be expanded into a voluntary crediting mechanism.

Call to action on avoided emissions

The investor group is seeking expressions of interest for two initiatives. The first involves setting up a “globally accessible” database and suggesting a detailed methodology to calculate avoided emissions, including a metric to attribute avoided emissions across all organisations within a value chain – known as the “avoidance factor”.

The second effort relates to populating the resource with avoided emissions datasets, starting with listed companies, “over a wide investment universe”. Data inputs should be based on audited and company-reported information when possible, and estimates when unavailable.

Members of the group did not provide estimates of the cost of setting up the database but noted that proposals could also include public financing support, which will further reduce the financial outlay.

It is expected that disclosures can be made directly to the database in the future.

The deadline to respond to the expressions of interest is 16 July.