New database aims to address lack of “global, quantified” information on avoided emissions.
Investment managers Mirova and Robeco, together with eleven other financial institutions, have launched a call for expressions of interest (CEI) to develop a globally accessible common database of avoided emissions factors to support financial flows to companies that are decarbonizing the economy enable.
Manuel Coeslier, chief climate and environment expert at Mirova, explains ESGthat an avoided emissions database offers the opportunity to understand the “right way” investors can allocate capital to contribute to larger decarbonization efforts.
He said that this insight is “key to the energy transition” and offers the opportunity to differentiate actors based on their “real contribution” to these decarbonization efforts.
“An avoided emissions database provides a dictionary for understanding where to invest to contribute to decarbonization,” he added.
The avoided emissions have not reached the expected usage level, says Coeslier.
“We are now in a situation where we need a global consensus to calculate these emissions,.” he said.
“To avoid confusion and the risk of it being considered a black box indicator, we need a global initiative to push for a [avoided emissions] database.”
Despite energy transition solutions being “the best known”, there is “no global, quantified data available to compare zero-carbon alternatives and support the redirection of financial flows towards companies that enable decarbonization,” a joint statement said from Mirova and Robeco.
It underlined that unlike induced emissions that benefit from “strong methodological foundations” through life cycle assessment databases, avoided emissions are currently calculated in a “variable way by different actors, which compromises their credibility and prevents their widespread use”. In addition, metrics are needed to identify the contribution of avoided emissions at company level to the global net zero target and to compare solutions.
Coeslier explained that avoided emissions is a useful metric because it uses the same unit as the carbon footprint of induced emissions in tonnes of carbon equivalent, which gives it the “advantage of being understandable”.
He also said that avoided emissions is a useful metric for comparing different energy transition solutions, as it can quantify their contribution to decarbonization.
Lucian Peppelenbos, Climate & Biodiversity Strategist at Robeco, says: “Forward-looking figures are crucial for increasing climate finance. This includes credible measurement of avoided emissions. Transparency and a common methodology are essential, and we hope this initiative can help achieve this.”
A tool for everyone
The financial institutions involved in the CEI, including AXA IM, Impax Asset Management, PGGM and Railpen, have started calculating avoided emissions to better understand how companies can contribute to climate change mitigation, Coeslier said. The database would also add a reference scenario for the activity under consideration and be fully transparent, he said.
The new datasets for the avoided emissions database should be based on the following principles: Full life cycle assessment, as well as an allocation of avoided emissions across the entire value chain; the precautionary principle, where the least advantageous base case is selected to calculate avoidance factors; and transparency and access to the methodology for calculating avoidance factors.
Coeslier expects that the avoided emissions database will be very similar to existing life cycle assessment databases that are accessible to all organizations wishing to calculate their carbon footprint.
He added that the database should be seen as a tool that can be used by “any institution that is close to avoided emissions, directly delivers avoided emissions or indirectly invests in the financing of avoided emissions.”
Coeslier said he expects the new datasets to be set up in the first quarter of 2024, with a phased rollout of the database by the end of next year.
Scientific institutions, advisors, data suppliers and others can respond to the CEI before July 16.