This category includes Scope 3 emissions associated with the company's investments in the reporting year. This is applicable for investors and companies who provide financial services.
1) How this category aligns with carbon accounting standards
The Cozero category, Investments, is a source of upstream Scope 3 emissions, as defined by the GHG Protocol. All Cozero emissions calculation methodologies follow the requirements for this Scope of emissions accounting.
The GHG Protocol Corporate Standard
The GHG Protocol Corporate Standard
The GHG Protocol Corporate Standard is an internationally-recognized go-to standard for estimating and reporting corporate GHG emissions. GHG emissions are categorized into three ‘Scopes'. For further information see here.
Scope 1 includes direct GHG emissions that originate from sources that are owned or controlled by the reporting company, e.g. generation of electricity, heat and steam, physical or chemical processing, transportation of materials and fugitive emissions. They are the most important source of emissions because they are the direct result of companies’ activities.
Scope 2 encompasses indirect emissions from the generation of purchased or acquired electricity consumed by the reporting company. These emissions are considered to be indirect because they arise as a result of the reporting company’s activities, but they originate from sources that are owned and controlled by external entities.
In turn, these emissions are categorized as Scope 1 for the energy generator that produced the electricity, given that they arise from their owned and controlled resources.
Scope 3 emissions are all indirect emissions (not included in Scope 2) which occur in the value chain of the reporting company. In other words, the emissions that are linked to the company’s operations but are outside of its control. Scope 3 emissions can be categorized into two high-level groups:
Upstream emissions: Indirect emissions related to the procurement of goods and services, starting from the initial sourcing and pre-processing stages. Upstream emissions can be attributed to the materials’ extraction, production and transportation processes before they reach the company.
Downstream emissions: Indirect emissions related to products and services sold by the reporting company, occurring after the products have been sold to the customer or end-user. Downstream emissions relate to activities such as distribution, storage, usage by consumers, and the eventual end-of-life disposal or recycling of the products.
According to GHG accounting, investments fall under 4 categories: equity investments, debt investments, project finance, managed investments and client services.
2) Calculation methods
For this emission category, users have two options to input emissions in Cozero: either by directly inputting the investment-related emissions, or by estimating the emissions using Cozero’s screening method using a revenue-based accounting method.
2a. Direct input of CO2e
Requesting emissions data directly from your investees is a great form of value chain engagement, and encourages the companies you invest in to start calculating and managing their emissions. This is also the most accurate way to track emissions of your investments.
Emissions from investments should be accounted for according to the proportional Scope 1 and 2 emissions of the investee company, based on the owned equity share. This means for example that if you own a 30% equity share of a company, you account for the 30% of their Scope 1 and 2 emissions in your Scope 3.
Once you have received the emissions data, you can input the emissions in Cozero using the Investments subcategory “Other Investments”. Under this category, you can directly enter the emissions in tCO2e without any other inputs necessary.
2b. Investments screening method
Requesting data from investee companies is not always easy. It could be that your investees are not yet able to provide emissions data, or your many investees make data collection difficult and time consuming.
Because of this, in Cozero you can also estimate your investments’ emissions based on the revenue they generated in the reporting period. This allows you to easily account for their emissions, but due to the financial-based accounting, the accuracy of the emissions calculation is lower. It can, however, give you valuable insight into your emissions.
The revenue-based screening method uses emissions intensities obtained from Environmentally Extended Input-Output (EEIO) analysis. This connects an economic activity to greenhouse gas emissions, and results in emission factors that measure emissions per unit of currency generated within a specific sector. These emission factors can then be used to estimate the emissions generated by a single company within that sector.
To calculate emissions using Cozero’s screening method, you need the following data points:
The revenue generated by your investee in the reporting period;
The percentage share of equity you own;
The main operating sector of the investee.
This way, you are accounting the emissions using the share of the investee's revenue proportional to your owned equity share, and connect it to the emission factor specific to your investee’s operating sector.
How to report emissions in Cozero?
Step 1: Select the category “Investments”
Step 2: Select the subcategory “Investments - Screening method”
Step 3: Select your investee’s operating sector, such as “Automobiles and other vehicles” or “Data processing and hosting”
Step 4: Input the total revenue of the investee within the set period, and the currency unit
Step 5: Input the owned equity share %
Step 6: Select the territory that matches the investee’s operating sector
Step 7: Save log entry, and your emissions are automatically calculated
3) Where can I find the relevant data?
Activity Data:
Revenue data and equity share data will be available from financial records of the reporting and investee company