Welcome to Carbon Accounting Project

We are dedicated to helping you understand your carbon data. Our platform provides a comprehensive solution for tracking and analyzing your carbon emissions.

About the Project

Global institutional investors—including pension funds, endowments, sovereign wealth funds, and retail-focused mutual funds—are increasingly pledging to reduce the impact of their investments on global climate change. These commitments have heightened the demand for reliable approaches to measuring carbon emissions and climate impacts. However, the path to accurate carbon accounting is fraught with challenges, including significant data gaps and unresolved measurement issues. We are exploring several key questions:

Reporting inconsistencies: Carbon emissions reporting is voluntary and difficult to independently verify or peer-benchmark. A host of consulting firms and non-profit data collection-and-reporting entities examine and rank ESG metrics, including Scope 1, 2, and 3 emissions for publicly traded companies, and provide proprietary rankings to asset managers. Not all reported emissions are utilizing the same scope nor based on the same methodologies, making comparisons difficult, and in some cases impossible. For example, some companies report avoided emissions rather than total GHGs emitted.
Use of estimated data: Due to low coverage, many company emissions are estimated. These estimates are often even more inaccurate than reported data. In addition, estimation models can be inherently biased against identifying better performers within sectors, the core need for portfolio managers.
Scope 3 emissions: When companies self-report Scope 1 and 2 emissions, they are calculating direct emissions from their operations and their electricity consumption. The bigger challenge is Scope 3 emissions, which are emissions from their sometimes vast, far-flung supply chain companies. These are especially difficult to measure in any standardized, reasonably accurate manner.
Absence of forward-looking estimates: Most carbon accounting focuses on past performance rather than likely future emissions. While useful to start, this sort of data is inadequate for two reasons: (1) It provides no basis for forward-looking projections and benchmarking, and (2) it matters little to an asset manager focused on managing their portfolio utilizing the normal tools of fundamental analysis, client risk-appetite, and future corporate performance, both against a benchmark-index as well as publicly-traded peers.

Read our complete methodology here.

Motivation

The motivation behind this project stems from the importance of reducing carbon emissions and the need to assess the effectiveness of carbon targets. The project acknowledges that not all carbon targets are being achieved and recognizes the significance of investors' concern about corporate carbon emissions.

Financial institutions now have their own carbon targets, and the risk of not meeting these targets can have financially material effects. By analyzing the historical data and examining the investment plans of US electric utilities, this project aims to provide insights into the feasibility of achieving future carbon targets.

This research project will help investors determine the risk associated with corporations achieving their future carbon targets. As corporations and investment firms both commit to targets for reducing their carbon emissions, there is growing desire to understand the risk associated with these future target statements. Whether or not a firm achieves its emissions targets can not only place its reputation at risk, but also that of those along its supply chain, including their investors. Current and future policies aimed at pricing climate externalities, mean that corporate climate performance can have a material impact on financial performance. Yet, the lack of reliable metrics to capture these risks pose severe challenges. This project aims to develop a novel methodology to predict the likelihood of achieving future corporate carbon targets. It will also publish an open database of the resulting risk measures for those companies that we analyze.

For more information and project updates, please visit our GitHub repository and our project page.

This project is sponsored by the Calvert Research and Management and is affiliated with the Institute for Global Sustainability.