Avoided Emissions: Why it matters to investors to account for what does not exist
- 10 October 2024 (7 min read)
To stop global warming, society needs to reduce its greenhouse gas (GHG) emissions and reach a state of net zero – the point at which the GHG concentration in the atmosphere stabilises and is no longer increasing1 . Such a goal requires an energy transition.
This means fully transforming the world’s energy mix and changing how we produce and consume food, goods and services. As investors, we ask companies to play their part by reducing their own emissions and contribute to emission reduction along their value chain. Companies can also develop products and services which can help users lower their individual emissions.
Corporate GHG accounting is largely governed by guidelines and methodologies produced by the GHG Protocol2 . There is a widely accepted system used to measure and report on direct/indirect corporate emissions - called scope 1, 2 and 3 emissions3 .
Scope 1 refers to direct emissions from a company’s activity while scope 2 are emissions related to operational electricity use. A company’s scope 3 emissions are those found along its value chain, both upstream (before) and downstream (after) its own operations.
However, there are no formal standards used to measure and report avoided emissions that are due to company-sold solutions.
In this paper, we will examine avoided emissions, look at their place in the energy transition narrative, outline their potential pitfalls and explain why they matter for investors.
- PGEgaHJlZj0iaHR0cHM6Ly93d3cuYXhhLWltLmNvbS9pbnZlc3RtZW50LWluc3RpdHV0ZS9zdXN0YWluYWJpbGl0eS9jbGltYXRlLWNoYW5nZS1yZWxhdGlvbnNoaXAtYmV0d2Vlbi1uZXQtemVyby1hbmQtcmlzaW5nLWdsb2JhbC10ZW1wZXJhdHVyZXMiPkNsaW1hdGUgY2hhbmdlOiBUaGUgcmVsYXRpb25zaGlwIGJldHdlZW4gbmV0IHplcm8gYW5kIHJpc2luZyBnbG9iYWwgdGVtcGVyYXR1cmVzPC9hPg==
- PGEgaHJlZj0iaHR0cHM6Ly9naGdwcm90b2NvbC5vcmcvc3RhbmRhcmRzLWd1aWRhbmNlIj5TdGFuZGFyZHMgJmFtcDsgR3VpZGFuY2U8L2E+
- PGEgaHJlZj0iaHR0cHM6Ly9jb3JlLmF4YS1pbS5jb20vcmVzZWFyY2gtYW5kLWluc2lnaHRzL2ludmVzdG1lbnQtaW5zdGl0dXRlL3N1c3RhaW5hYmlsaXR5L2Vudmlyb25tZW50YWwvdW5kZXJzdGFuZGluZy1zY29wZS0zLWhvdy1yZXNwb25zaWJsZS1pbnZlc3RvcnMtY2FuLXdyZXN0bGUtdW5ydWxpZXN0LWVtaXNzaW9ucyI+VW5kZXJzdGFuZGluZyBzY29wZSAzOiBIb3cgcmVzcG9uc2libGUgaW52ZXN0b3JzIGNhbiB3cmVzdGxlIHdpdGggdGhlIHVucnVsaWVzdCBvZiBlbWlzc2lvbnM8L2E+
Disclaimer
This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.
Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Past performance is not necessarily indicative of future performance.
Some of the Services and/or products may not be available for offer to retail investors.
This publication has not been reviewed by the Monetary Authority of Singapore.