Mirova and Robeco announce I Care and Quantis to develop a global standard for calculating emissions avoided by low-carbon solutions
The founders of the initiative to standardize the calculation of avoided emissions Mirova and Robeco, today announce that they have selected I Care and Quantis to develop a global database of greenhouse gas emission avoidance factors, offering a standardized and transparent calculation of the emissions avoided by an extensive list of low-carbon or green enabling solutions.
The initiative is supported by 9 founding partners1, representing more than USD 2 trillion of assets under management2.
A global standard for evaluating avoided emissions
The energy transition requires us to move away from carbon-based activities, so decarbonized alternatives also need to be available. While the data currently shared by companies on their direct Greenhouse Gas (GHG) emissions and estimated indirect emissions (scope 2, scope 3) is based on solid methodological foundations, other metrics are needed to identify their respective contributions and to be able to compare solutions. For example: if it is relevant to take into account all the resources and the recyclability of components that come into play in the production of an electric vehicle, it is also relevant to understand and measure the carbon emissions that can be avoided by an electric vehicle in a transport sector still very dependent on thermal engines.
The creation of a standard for a global database of emission avoidance factors is therefore a major step forward for many economic players. For the financial sector, this initiative will generate estimates of the emissions avoided by the activities financed, making them transparent and comparable. When such estimates are implemented in a standardized way across a wide range of solutions, they will enable investment to be channeled towards the solutions with the greatest potential for decarbonization, depending on where they are located. For companies, projects’ sponsors or financiers and consultants, this database will enable calculations to be made transparently, with reference to a recognized external standard. Finally, for data providers, the database will enable them to estimate avoided emissions across a wide range of investments, thereby supplementing the existing metrics available on the climate impacts that are currently too imprecise or binary.
A standardized and transparent database
The database built by I Care by Bearing Point and Quantis will initially cover 80 specifically defined low-carbon solutions (examples: biomass energy, recycled plastic, low-carbon concrete, etc.). The geographical differentiation of the reference scenarios taken into consideration for each solution and the various links in the value chains of these solutions will result in the creation of ca. 9,600 distinct avoidance factors during this first phase, which will end in Q4 2024.
The creation of a standardized and transparent database of avoidance factors should make it possible to quantify, compare and audit the emissions avoided by companies and projects, and thus encourage the redirection of financial flows towards assets that promote decarbonization, addressing for example the production of renewable energy, the electrification of transport, low-carbon property, but also recycling or the rare metals needed for the transition.
Each emission factor will contain details of the assumptions made, in particular:
- The functional unit used
- The carbon footprint of the solution
- The reference scenario used
- The lifespan of the solution
- The time value of carbon
- The rebound effect
For all these parameters, precisely sourced default values will be provided and updated on an annual basis. The database will also allow for more detailed calculations depending on the level of access to the data. For example, a company that has carried out a "lifecycle" analysis of its solution will be able to modify the parameters to obtain an avoidance factor that is more precise. The scope of the database will also be gradually extended to include many other low-carbon or green enabling solutions. The development of the database and the choice of methodologies will be overseen by a scientific committee comprising the main organizations behind the current standards for avoided emissions.
Development of the database will commence in January 2024 and a first version will be made available to all stakeholders with a requirement to calculate avoided emissions in Q4. This includes companies, consultants, impact measurement software developers, financial institutions and data providers. The data providers who calculate company and asset-level emissions will be involved in the construction of the factor database and will have to align themselves with a protocol for its application.
1Listed at the end
2As of December 2023
This initiative is a major step forward in the history of Mirova, which, in partnership with Robeco and many players in the financial sector, contributes to inventing a new global market standard aimed at increasing the comparability and transparency of avoided emissions estimates. This innovation will allow investors to better identify and value companies that contribute positively to the decarbonization of the economy and are therefore well positioned to create value in a world in transition. It will also facilitate the aggregation of the carbon footprint of delegated assets for our institutional clients.
Avoided emissions are the missing piece of the puzzle when it comes to facilitating transition finance. At a global level, much more capital needs to go into climate solutions. This metric can help to direct capital flows towards companies that provide the most effective climate solutions. With the broad support for this initiative from investors, academics, and other stakeholders, we hope to establish the avoided emissions metric as a standard that can be used alongside alignment metrics for the identification of companies that are critical in the net zero transition. We are pleased to work with Mirova, I Care and Quantis and the 8 other funders to achieve this goal.
At Edmond de Rothschild, our ambition is to provide shared value by looking to the future and respecting our heritage. For us, innovation and tradition are key to accompany our clients on their sustainable investment journey. We are committed to developing the best-in-class tools to contribute to the building of more sustainable capital markets and putting finance back at the service of a sustainable industrial development. By joining this initiative, we are significantly contributing to the development of a transparent framework to assess avoided emissions, which will help us select solutions providers, projects and companies that are driving the decarbonization of the real economy.
This call for expressions of interest generated a significant number of high-quality applications. The approach proposed by I Care by Bearing Point and Quantis was selected because it enables a complete lifecycle analysis to be carried out, with avoided emissions attributed across the entire value chain. In addition to this expertise, what has made the difference is the transparency and accessibility of the methodology used, two essential elements when calculating and communicating avoided emissions. We look forward to seeing this new database made available to stakeholders soon and being able to integrate it into our assessment and investment processes.
LIST OF PARTNERS OF THIS INITIATIVE
STRATEGIC FOUNDING PARTNERS
Edmond de Rothschild Asset Management (France)
PREMIUM FOUNDING PARTNERS
Natixis Corporate & Investment Banking
Natixis Investment Managers
Caisse des Dépôts
Sienna Investment Managers
Mirova Gigaton Fund1 to mobilize institutional investor support for high impact climate mitigation and adaptation, social development, economic infrastructure and gender equality investment across Africa, Asia, the Middle East and Latin America. The fund is managed by Mirova and supported by Mirova SunFunder East Africa Ltd as Investment Advisor.EIB signed USD 75 million senior commitment and EUR 5 million catalyst junior investment under Luxembourg-EIB Climate Finance Platform for Mirova Gigaton FundMirova Gigaton Fund has reached over half its USD 500 million target size, with USD 282 million closed to date.
Mirova, an affiliate of Natixis Investment Managers dedicated to sustainable finance, along with Robeco and a group of 11 financial players, launch a call for expressions of interest (CEI) to develop a global database of avoided emissions factors and associated company-level avoided emissions.