Using avoided emissions to build the case for investing in climate change mitigation

IN THE current environment when climate activities are at the forefront of investments, we believe companies that are contributing towards climate change mitigation and adaptation will stand out. While focusing on a company’s own Scope 1, 2 and 3 emissions is important, it often misses the mark when thinking about investment impact. In many cases, companies have a much larger impact on the environment by providing the products, materials and services that are needed for the transition. One of the ways that we think this can be measured is known as avoided emissions.

What are avoided emissions?

When building a climate-change portfolio, there are numerous tools and metrics that can be used to measure efficacy, and ensure that each holding is having a meaningful impact on climate change mitigation or adaptation. One such gauge is to calculate “avoided emissions”, which means estimating the CO2 reduction impact that the solutions of a given business contribute.

In other words, avoided emissions are emissions that would have been released if a particular action or intervention did not take place. Emissions can be avoided by using a more efficient product or service. Since this still depends on consumer or market behaviour, we refer to them as potential avoided emissions.