Investors grapple with the Scope 3 emissions in climate finance
![Investors grapple with the Scope 3 emissions in climate finance](https://sustainabilityeconomicsnews.com/wp-content/uploads/2024/02/20883831_6370377-scaled.jpg)
As asset managers initially pledged to align their portfolios with net-zero emissions, they largely sidestepped the critical issue of Scope 3 emissions.
This avoidance is no longer feasible, as companies and countries have set strict regulations to track and tackle these emissions.
Increasing regulatory measures and heightened public scrutiny are compelling investors to confront what a unit within the London Stock Exchange Group describes as “one of the most challenging dilemmas in climate finance.”
Scope 3 emissions are those generated by a company’s customers and supply chain, often constituting more than 80% of its carbon footprint. This percentage can be even higher in highly polluting sectors like oil and gas.
Though Scope 3 emissions aren’t new, investors now feel an increased need to understand their impact on both invested companies and their environmental goals.
This urgency is propelled by signals from regulatory bodies in the European Union, Japan, the UK, and other regions, hinting at the imminent imposition of mandatory disclosures for corporate Scope 3 emissions.
Furthermore, discussions at the US Securities and Exchange Commission have broached the possibility of enforcing disclosure requirements for significant emitters’ Scope 3 emissions.
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