Scope 3 emissions are “not a useful concept” for measuring or reducing an asset owner’s carbon footprint, according to a senior executive at a US institutional investor.
Scope 3 footprinting of “a diversified asset owner that could be invested across the whole economy” can lead to double-counting because the investor could have exposure to two companies within the same supply chain, the executive said at PEI Group’s Responsible Investment forum last week. The conference was held under Chatham House rules, meaning speakers could not be identified. “We have over a thousand line items on our balance sheet representing somewhere in the neighbourhood of 10,000 underlying portfolio companies. We’re not even scratching the surface on this data problem.”
More generally, focusing on portfolio decarbonisation over real-world decarbonisation “creates some really perverse incentives for an investor to decarbonise your financial portfolio,” the person added. “We could invest in a really inefficient technology company… or the best in class steel manufacturing company that is developing world-class technology to decarbonise the steel manufacturing process. [The latter] is by definition going to be more carbon intensive than inefficient technology company.”