Quantifying corporate emissions for portfolios

The issue is discussed in ‘Corporate carbon emissions data for equity and bond portfolios’, an academic paper by Robeco’s data scientist Thijs Markwat and quant researcher Laurens Swinkels. They compare corporate carbon emissions data from four data providers for investment universes in developed and emerging equity markets, as well as investment grade and high yield credit markets.

They look at how data for scope 1 emissions, which are generated directly by the company, and Scope 2 emissions, which are created by the energy used, is relatively straightforward. However, the data for Scope 3 emissions generated across the product’s life is much harder to get and then more complex to analyze; indeed, much of it needs to be estimated using an uncertain set of parameters.

Regarding asset classes, emissions data coverage is higher and more consistent across providers for equity markets, but less so for corporate bonds. The paper offers solutions to increase coverage and consistency, and ends on a high note by explaining that the data has become more reliable and uniform over time, with an increasing number of companies reporting their carbon emissions.