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Investors with more than $1.2tr in assets urge influential standard setter to ensure emissions reporting guidance better reflects changing nature of clean energy supplies
A group of 13 investors with more than $1.2tr in assets under management have today issued a joint statement urging the Greenhouse Gas Protocol (GHG Protocol) to update its Scope 2 emissions guidance to better align carbon reporting guidelines with decarbonising electricity systems.
The group, which has been coordinated by campaign group ShareAction, warned current standards for measuring and managing Scope 2 energy-related emissions have the potential to obscure some of the risks companies face as the global clean energy transition continues to accelerate. It warned that Scope 2 reporting guidelines can allow businesses to report zero emissions from the electricity or heat they purchase, even if it is produced by burning fossil fuels.
Signatories suggest reporting based on green tariffs or sourcing sufficient clean power to cover electricity use over the course of a year can obscure the true carbon impact of an organisation's electricity use.
As such, they are calling on the GHG Protocol to reporting guidance based on hourly renewable energy matching of consumption and production, as well as clearer market boundaries to ensure clean electricity claims are based on local generation capacity that can serve a company within the power system where it operates.
The statement also calls for a phased implementation of new Scope 2 reporting standards to give companies and electricity markets time to adjust, and recognition of legacy clean energy contracts to protect those front-runners who were early to adopt renewable energy strategies.
Investors backing the statement claim the proposed updates would help boost corporate demand for energy storage technologies, accelerate grid decarbonisation, and strengthen voluntary clean energy markets, as companies would be incentivised to source clean power round the clock.
"The standards that were originally designed to help foster an emerging voluntary renewable energy market are no longer fit for purpose," said Jackie Garton, interim head of corporate climate campaigns at ShareAction. "Renewable energy is now the fastest growing source of energy, making this a critical moment to ensure the rules fully reflect how power is generated, transmitted and consumed today."
Signatories to the statement include a.s.r. vermogensbeheer, Comgest, Ecofi Investissements, EQ Investors, Etica Funds, Inyova, John Ellerman Foundation, KBI Global Investors, Mirova, Nest Sammelstiftung, Nordea Asset Management, PIRC, and Union Investment.
The investors argue reforms to the GHG Protocol Scope 2 emissions guidance would improve their ability to assess companies' resilience during the energy transition, while stimulating investment opportunities in much-needed transition technologies, such as energy storage and smart grid systems.
"The consequences of climate change are worsening by the day, with impacts like heatwaves, floods and extreme weather events becoming more intense and frequent," said Garton. "This makes our carbon reporting rules more important than ever.
"These standards are used by investors, companies and policymakers to make rules and decisions that will affect people and planet for years to come. This is a pivotal opportunity to accelerate the global shift to a renewable energy system."
Last year, the International Organisation for Standardisation (ISO) and GHG Protocol agreed to merge their existing climate standards into a single framework and co-found a series of new environmental measurement and reporting benchmarks.
Under the agreement, ISO and GHG Protocol will combine the ISO 1406X family of emissions reporting standards with the GHG Protocol's Corporate Accounting and Reporting, Scope 2 and Scope 3 frameworks. They also promised to jointly produce a new product carbon footprint standard.
"Serious investors need honest information about which companies are genuinely buying clean electricity when and where they need it," said Killian Daly, executive director of EnergyTag. "Right now, they're largely flying blind. The GHG Protocol is moving in the right direction, anchoring Scope 2 reporting in physical reality. That will reward the companies truly driving the journey to round-the-clock, affordable clean power – and give capital allocators the signal quality they need to back them."
Responding to today's statement, GHG Protocol reaffirmed its commitment to ensuring all its accounting standards reflect market needs and remain credible and responsive to a rapidly evolving landscape. "We update all our standards through a transparent, consensus-driven governance process, drawing on expertise from business, finance, academia, auditors and civil society," a spokesperson said.
Moreover, the standards setter added it was in the process of reviewing two public consultations held since October, which focus on delivering updates to its Scope 2 guidance and consequential accounting methods for estimating avoided emissions from electricity-sector actions. Across both consultations, GHG Protocol received almost 1,400 responses. "GHG Protocol is now working through evaluation of this feedback," the spokesperson said.
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