Investment emissions, as classified under Scope 3 Category 15 in the GHG Protocol Corporate Value Chain (Scope 3) Standard, encompass the greenhouse gas (GHG) emissions associated with the operation of investments, including equity and debt investments and project finance that are not already accounted for in Scope 1 or 2 emissions.
This category is critical because it reflects the indirect emissions that an organisation's investment portfolio may generate, which can be a substantial part of its overall carbon footprint, particularly for financial institutions and companies with significant investment activities.
In detail, investment emissions include:
- Equity investments: Emissions from entities where the reporting company owns a stake but does not have operational control. It accounts for these entities' operations proportionate to the share of equity investment.
- Debt investments: Similar to equity investments, this includes emissions from the operations of entities to which the company has provided funding through loans or bonds, proportionate to the amount of the funding supplied compared to the entity's total debt.
- Project finance: Emissions attributed to specific projects financed by the company, often in sectors like construction, infrastructure, energy, and utilities, where such projects can have significant environmental impacts.
Managing these emissions effectively involves understanding the carbon impact of investment decisions and considering these implications in the investment strategy. This can include engaging with investees to improve their carbon performance, considering divestment from high-carbon assets, or increasing investment in green projects and technologies.
To go further and structure your sustainability strategy, read our guide on the corporate decarbonisation journey.
