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Emissions estimations should embed a precautionary principle

Nature Climate Change volume 11, pages 638–640 (2021)Cite this article

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To align their portfolios with the Paris Agreement, investors need to know the emissions of companies they invest in. Estimating these should start from a precautionary principle that disincentivizes free-riding and protects the planet.

Climate action is sprouting worldwide. Companies around the world are announcing greenhouse gas (GHG) emission reduction targets (for example, see ref. 1), and the EU has now published Paris Aligned Benchmarks that require participating investors to reduce the average GHG emissions of the portfolio of companies in which they invest by 7% per year (weighted by their investment value; for example, see refs. 2,3,4). Reliable targets and their achievement rely on robust GHG data. To calculate weighted average GHG emissions, investors need emissions data for any potentially investable company globally. This information is necessary regardless of whether the company (i) has a target, (ii) is reporting company-wide GHG emissions or (iii) is participating partly or in whole in the EU’s Emissions Trading Scheme (ETS; where emissions of participating facilities are verified). Hence, many investors are now starting to assess available GHG emissions data to understand their position and plan a strategy ahead. This includes (i) detailed milestone data on pathways that meet the climate goals of the Paris Agreement5,6 and estimates of actors’ (ii) past and (iii) present GHG emissions7,8. Notably, GHG emissions reported by organizations are always estimates, as no organization has the capacity to install sufficient sensors to literally measure 100% of their GHG emissions9. With this demand for data of sufficient quality that is needed for making investment decisions also comes an important responsibility: investors and their delegates (for example, rating agencies) who collect and estimate GHG emissions data, or scientists supporting them, should take into account the incentives that come with the estimates they provide. Specifically, methods for providing climate and other environmental information for target setting should be impregnated with the precautionary principle.

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Fig. 1: Application of the precautionary principle to estimation of under- and non-reporting companies.

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Acknowledgements

We thank H. Adamsson, M. Bytheway, T. Cojoianu, N. Humphreys, J.-C. Nicaise Chateau, C. Posti, M. Rezec, P.-S. Yu and G. Zdanceviucite for constructive discussions on precautionary estimation techniques. A.G.F.H. acknowledges funding from the European Union’s Horizon 2020 research and innovation programme for research on Fintech (grant no. H2020-ICT-825215) and Science Foundation Ireland (award 19/FIP/AI/7539). J.R. acknowledges funding from the European Union’s Horizon 2020 research and innovation programme (grant no. 820829; CONSTRAIN).

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Authors and Affiliations

  1. Smurfit Graduate Business School, University College Dublin, Dublin, Ireland

    Andreas G. F. Hoepner

  2. Platform on Sustainable Finance, DG FISMA, European Union, Brussels, Belgium

    Andreas G. F. Hoepner

  3. Centre for Environmental Policy and Grantham Institute – Climate Change and Environment, Imperial College London, London, UK

    Joeri Rogelj

  4. International Institute for Applied Systems Analysis, Laxenburg, Austria

    Joeri Rogelj

Authors
  1. Andreas G. F. Hoepner
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  2. Joeri Rogelj
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A.G.F.H. and J.R. contributed equally to the writing of the paper.

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Correspondence to Andreas G. F. Hoepner or Joeri Rogelj.

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The authors declare no competing interests.

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Peer review information Nature Climate Change thanks Kornelis Blok, Timo Busch and Jonatan Pinkse for their contribution to the peer review of this work.

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Hoepner, A.G.F., Rogelj, J. Emissions estimations should embed a precautionary principle. Nat. Clim. Chang. 11, 638–640 (2021). https://doi.org/10.1038/s41558-021-01109-3

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