In line with the Platform for Carbon Accounting Financials (PCAF) methodology as well as the GHG Protocol, emissions for investment portfolios are expressed in terms of t of CO2eq per considered scopes 1, 2, and 3 when appropriate. With this in mind, the considered scopes function under the same principle as those established for corporations:
• Scope I includes greenhouse gas emissions from Direct activities. This scope accounts for all mobile and stationary sources that belong to the company, and that are used throughout the daily functioning of the organisation. Some examples of Scope I emissions include boilers, furnaces, and vehicles.
• Scope II includes greenhouse gas emissions from Indirect (Upstream) activities. This scope accounts for emissions associated with the production of electricity purchased and used by the company; however, it is essential for the emissions to physically occur within the organisations’ facilities for them to be included in this scope.
• Scope III includes greenhouse gas emissions from Indirect (Upstream and Downstream) activities. It accounts for indirect emissions that occur in the company’s value chain, including both upstream and downstream activities. They relate to products or services, which are necessary for the production/exploitation/utilization processes, but do not happen within the boundaries of organisation itself and therefore are not directly controlled by it. Some examples of this scope include the extraction, processing, and transportation of raw materials, the purchase of fuels, as well as the use of products and services for the organisation to function.

Proper carbon accounting procedures and emission attribution to the aforementioned scopes within the investee projects is the primary step toward the computation of carbon footprint and carbon intensity indicators of the investment portfolio. For more information on carbon accounting visit our dedicated section here.

The aforementioned GHG indicators are also applicable to the communication of sustainability goals by the financial market participants. With respect to the ambitiousness of these goals, SFDR differentiates three types of funds:

-   funds having no sustainability objective (Article 6 funds). All funds are classified under Article 6 by default unless proven otherwise. The respective asset managers still have to disclose the integration of sustainability risks into these funds;

-   funds that promote environmental and/or social characteristics, provided that the companies in which the investments are made follow good governance practices (Article 8 funds, «light-green»). These funds have to disclose their sustainability objective, related reference benchmark indexes, their calculation methodologies along with monitoring approaches in the frame of product-level and entity disclosures;

-   funds that set environmental and/or social characteristics as their objective, provided that the companies in which the investments are made follow good governance practices (Article 9 funds, «dark-green»). These funds have also to disclose their sustainability objective, related reference benchmark indexes, their calculation methodologies along with monitoring approaches in the frame of product-level and entity disclosures. Where a financial product within Article 9 fund has a reduction of carbon emissions as its objective, product-level pre-contractual disclosure has to include the objective of carbon emissions exposure in view of achieving the long-term global warming objectives of the Paris Agreement.