How does PFA measure the CO2 emissions of the portfolio?
PFA’s work on climate targets depends on our ability to measure and monitor the CO2 emissions of our equity investments. This is not entirely adequate, since there is a lack of sufficient data for many assets. Fundamentally, therefore, PFA only systematically measures CO2 emissions from the equity portfolio; not from the likes of the bond portfolio or our alternatives.
Source: MSCI 2019
From the outset, shares in PFA Climate Plus will emit 60 % less CO2 than the world equity index (MSCI ACWI), while PFA currently emits 16 % less CO2.
CO2 emissions in investments are measured by tons per USD million invested. For MSCI ACWI, CO2 emissions were 135 tons per USD million invested in 2019, while in PFA Plus and PFA Climate Plus they stand respectively at 113 and 54 tons per USD million invested.
PFA obtains figures from the global share index, MSCI
PFA’s assessments and benchmark are based on data from the MSCI ACWI (All Country World Index), which annually publishes estimates for the CO2 emissions of individual companies. Even though MSCI is currently the market standard for measuring CO2 emissions from an equity portfolio, the data used is still subject to a degree of uncertainty. This is partly because a lot of data is retrospective and may be a year or two old; and partly because there are still many companies that do not even publish data on their CO2 emissions. In the latter case, MSCI itself assesses emissions by using comparable companies in the same industry and locality.
MSCI’s assessment takes into account three different aspects of a company’s CO2 emissions. These are known as ‘Scopes’. While there is reasonably reliable data for Scopes 1 and 2, Scope 3 is subject to great uncertainty and is difficult to calculate. Consequently, it is not currently included in the measurement or benchmark of PFA Climate Plus.
• Scope 1 is the CO2 emitted by a company’s activities – e.g. manufacturing, etc.
• Scope 2 is the CO2 for which a company is indirectly responsible – e.g. CO₂ from energy produced for the company.
• Scope 3 is the CO2 emitted by the company’s other indirect activities: in other words, sources that companies do not own, control or manage. This might be, for example, the application of a company’s products.