This article has been written by an expert contributor, Fidelity International
Climatic change happens over many years so it might be difficult to notice dramatic changes over one human lifetime. For a company, measuring greenhouse gas emissions can be difficult, time-consuming and potentially very expensive. But this will be the starting point along the reporting journey, with benefits and obligations well-grounded.
Climate change is measurable, with a number of already established and widely recognised ways to measure portfolios in climate change exposure. While they are not perfect as the area itself is constantly evolving, there are currently several basic building blocks that people can use to calculate most emissions from organisations.
Generally, a carbon footprint is calculated by measuring and/or estimating the quantities and assessing the sources of various greenhouse emissions that can be directly or indirectly attributed to the activities of the underlying holdings.
Three Scopes of Emissions
The emissions are classified as per the Greenhouse Gas Protocol and are grouped in categories called Scope 1, Scope 2 and Scope 3.
Scope 1 refers to all direct emissions from the activities of an organization or entities under their control. Sources of emission include fuel combustion in gas boilers and fleet vehicles and air-conditioning leaks.
For example, for a jeans manufacturer, emissions can come from indigo dyeing and sizing, fabric weaving, as well as denim washing and brushing under the roof of the denim factory.
Scope 2 relates to indirect emissions from electricity a company produced and used from its supplier.
For example for a jeans manufacturer, this can include emissions produced by suppliers in generating steam, electricity, heating and cooling.
Scope 3 emissions are a consequence of the activities of the company, but occur from sources not owned or controlled by the company. These occur along a value chain, both upstream with suppliers and downstream with customers.
Take a pair of jeans for example. There are emissions from the purchase of the raw materials like cotton which go into making the jeans. Then there’s the fuel used in transporting materials from suppliers and the finished product to customers. If an employee takes a car into work, if a sales person flies to see a customer, this is also Scope 3.
Established in 1969, Fidelity International offers world class investment solutions and retirement expertise. As a privately owned, independent company, investment is our only business. We are driven by the needs of our clients, not by shareholders. Our vision is to deliver innovative client solutions for a better financial future.
Prior to making an investment decision, retail investors should seek advice from their financial adviser. This document is intended as general information only.