MO.3.E || Life Cycle Metrics in Sustainable Finance and Business

Popescu, Ioana-Stefania; Chion, Laurent; Gibon, Thomas; Hitaj, Claudia; Benetto, Enrico

Regulators increasingly demand investors to assess indirect (scope 3) greenhouse gas emissions attributable to investee companies. However, where reported, data is inconsistent, and, where estimated, it cannot be relied upon due to a lack of transparency and standardisation. We compare indirect emissions from corporate sustainability reports with emissions derived using environmentally extended multi-regional input-output analysis (EEMRIO) and lifecycle inventories (LCI). We aim to understand the deviations that arise from using estimates as proxies for company impact and to assess the suitability of lifecycle assessment (LCA) tools for impacts assessments in the investment fund industry. As testbed case, we conduct an in-depth study on the automotive industry. Reported data comes from the Carbon Disclosure Project (CDP). EXIOBASE, an EEMRIO database, is used to derive average sectorial emission factors that are then allocated to companies. Finally, we use car model-specific LCI data for well-to-tank (WTT) and vehicle production data to compute impact at the entity level. Preliminary results conducted on a sample of companies reveal that EEMRIO-based methods can predict scope 3 emissions with 70% accuracy. Specifically, the sampled companies have EEMRIO-based scope 3 emissions estimates between 0.8- and 1.6-times CDP reported emissions, suggesting that estimates can be used to report on missing supply chain emissions data. In terms of scope 1 emissions, the variation is larger, showing that, for emissions from operations, as data is available, estimates should rather be used for benchmarking purposes rather than for reporting. Given the simplified data collection process, using LCA-based estimation methods can significantly reduce the time needed to conduct complete impact assessments and offer sustainable finance professionals consistent and transparent estimation methodologies, that can be streamlined across other relevant economic sectors.