Executive Summary
A global investment manager (Investment Manager), looked to 3Degrees for assistance in preparing a comprehensive greenhouse gas (GHG) inventory using a leading carbon management technology platform. Previously, the Investment Manager had completed a screening of all three scopes of emissions in the platform, including select investment funds.
As is typical of financial institutions, the majority of the Investment Manager’s GHG emissions comes from its investments. Expanding the Investment Manager’s inventory to include all of its investments, however, was a challenge because of the vast number of portfolio companies. In working with 3Degrees, the Investment Manager was able to expand its inventory coverage to include an estimate of nearly all of its public investments and about two-thirds of all private investments. 3Degrees also collaborated with the Investment Manager to re-categorize certain emission sources and refine its remaining scope 1, 2, and 3 emissions calculations.
During the engagement, 3Degrees also developed an inventory management plan (IMP) for the Investment Manager to ensure consistency in the measurement process moving forward and prepare for potential verification in the future.
The engagement resulted in:
- High-level GHG emissions inventory for scope 3 category 15 and complete GHG inventory across remaining scopes and categories, all within the carbon management platform
- Documented, repeatable process for future inventories
- Identification of emissions hotspots within direct operations and investments
Background
A global investment management firm (Investment Manager) that invests in both public and private companies is dedicated to fighting climate change through investments in climate innovators, such as carbon management technology platforms. With this climate-focused investment strategy came a desire to measure its own carbon footprint and address these emissions moving forward.
A year prior to our engagement, the Investment Manager began measuring its emissions within a carbon management platform. However, they sought additional expertise and guidance with gathering and evaluating the data inputs, as well developing a streamlined process for GHG measurement moving forward. The Investment Manager hired 3Degrees, an experienced climate solutions provider, to support this process.
Challenges
While scope 3 emissions typically account for the majority of any organization’s footprint, for the Investment Manager, it accounts for nearly all of its emissions, with the bulk coming from its financed emissions (category 15). These emission sources ultimately stem from the companies to which the Investment Manager provides capital or financing. Reducing or even measuring this category can be challenging because these emissions occur from entities outside of the Investment Manager.
Various paths exist for quantifying financed emissions, each requiring varying levels of data from portfolio companies. The most granular methodology entails collecting detailed emissions data from every portfolio company, a time consuming and likely impractical approach, as while many companies measure and disclose emissions data that could be leveraged by the Investment Manager, many do not.
Additionally, having only recently begun their measurement journey, the Investment Manager had not yet developed documentation around the processes involved in preparing their inventory and had data gaps in other parts of it, including uncertainty around which scope select activities ultimately belonged.
How We Helped
The 3Degrees team supported the Investment Manager with two main tasks, GHG Inventory Measurement and developing an inventory management plan (IMP).
GHG Inventory Measurement:
3Degrees supported the Investment Manager with this task by first solidifying its organizational boundary. This required aligning on the consolidation approach it would use and then identifying where the Investment Manager’s activities would fall as a result of that boundary. Additionally, 3Degrees identified ways in which the inventory could be further improved from the previous year, including more specific data sources and assumptions.
Next, 3Degrees reviewed the emission factors used for categories that were quantified in the previous year and refined the selection using the vast emission factor database in the carbon management platform. Selecting the emission factors that most closely represent emissions activities is an important step in the measurement process.
To address the Investment Manager’s financed emissions, 3Degrees worked with it to first begin collecting enough data about each company it invested in to perform a basic screen of all funds. To perform these calculations, 3Degrees used revenue data paired with emission factors (tCO2e/$ revenue) generated by the carbon management platform. While imperfect, these emission factors enable the Investment Manager to get an initial estimate of where its emissions hotspots are within this category. In future years, the Investment Manager can prioritize gathering primary data for its investments with the highest emissions. The Investment Manager can also further improve its measurement by incorporating publicly available emissions data that is disclosed by investees.
Upon completion, 3Degrees quantified nearly all public investments and about two-thirds of all private investments. Using the carbon management platform, 3Degrees was able to break down the Investment Manager’s emissions sources in a way that enabled the identification of emissions hotspots across category 15 as well as scopes 1, 2, and the remaining scope 3 categories. Through this analysis, the teams identified that out of all the Investment Manager’s portfolio companies, just three contributed to approximately half of its investment emissions.
Additionally, 3Degrees identified opportunities for future automation within the carbon management platform that would streamline the collection and management of the Investment Manager’s GHG data.
Inventory Management Plan (IMP):
To ensure that the Investment Manager could complete its GHG inventory in future years in a consistent and simplified manner, 3Degrees delivered an IMP along with two companion documents:
- A standard inventory management plan (IMP) that documents boundaries and data collection practices for each scope, along with steps to calculate emissions.
- Data tracker that guides the Investment Manager in obtaining all the information they need to complete an inventory as well as intermediate cleaning and treatment steps.
- Key findings presentation that provides high-level takeaways and links to raw data files as well as the documents listed above.
These documents not only allow the Investment Manager to calculate its inventory the same way each year, but also provide transparent documentation, should an auditor wish to validate its inventory data. Ultimately, 3Degrees also provided a roadmap that enables the Investment Manager to best leverage the carbon management platform’s software to streamline its annual GHG measurement process as well as continuously improve data quality and actionability going forward.
Results
- Screen for scope 3 category 15 and complete GHG inventory across remaining scopes and categories in carbon management platform
- Documented, repeatable process for future inventories
- Identification of emissions hotspots within direct operations and investments
