The UN-convened NZAOA has released a compelling paper advocating for mandatory regulatory mandates focused on Scope 3 emissions.
According to ESG News, these emissions, often escaping rigorous scrutiny, contribute up to 75% of a company’s total emissions footprint.
The alliance’s paper sheds light on the critical necessity for robust, credible, and comparable Scope 3 data, underscoring it as essential for achieving substantial carbon reductions in the real economy. The document draws attention to significant global initiatives such as the Corporate Sustainability Reporting Directive (CSRD) in the European Union, alongside emerging frameworks in Japan and California, which are pivotal in advancing standardized disclosure norms.
Udo Riese, the global head of sustainable investing at Allianz Investment Management, passionately highlights the urgency of the situation. “Our paper highlights the need for credible and comparable Scope 3 data, or else we will not see necessary carbon reductions in the real economy. Regulatory mandates are needed for systemic progress, but asset owners must take responsibility and lead through actionable strategies now,” he explained.
The NZAOA report identifies principal challenges that hinder the integration of Scope 3 emissions into asset owners’ portfolios and climate strategies, including poor data quality, inconsistent accounting frameworks, and risks of double counting. To navigate these obstacles, the Alliance recommends focusing on the two most significant categories of Scope 3 emissions per sector, which account for 81% of the overall emissions intensity.
The paper outlines five actionable strategies for asset owners: improving the disclosure by seeking audited and verified Scope 3 data from issuers, shifting investments towards corporates with established Scope 3 targets, engaging with issuers especially in sectors with high Scope 3 emissions or limited disclosure, setting sector-specific emissions reduction targets, and distinguishing Scope 3 reduction goals from Scope 1 and 2 targets for enhanced clarity.
Through these recommendations, the NZAOA aims to bridge the gap between policy and practical implementation, empowering asset owners to take a leadership role in driving global decarbonization efforts.
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