The accounting flaw at the heart of ‘financed emissions’

illuminem summarizes for you the essential news of the day. Read the full piece on Bloomberg or enjoy below:

🗞️ Driving the news: A report highlights the duplicative nature of counting "financed emissions," particularly in the financial industry, where emissions related to investments are often recorded multiple times across various companies in the same value chain
• This method can mislead the actual impact of emissions reductions

🔭 The context: Financed emissions include greenhouse gases resulting from financial activities like lending and investing
• Critics argue that current accounting methods result in double-counting emissions across companies' Scope 1 and Scope 3 categories, complicating the assessment of a true reduction in emissions

🌍 Why it matters for the planet: Overstating reductions in financed emissions can obscure the real progress (or lack thereof) towards reducing overall greenhouse gas emissions, potentially leading to insufficient climate action and misleading stakeholders

⏭️ What's next: There is a growing call to focus on absolute emissions rather than relative reductions to ensure real-world impacts
• The shift from "reducing financed emissions" to "financing reduced emissions" could align financial reporting more closely with actual climate goals

💬 One quote: "Fixating on a linear reduction of financed emissions is misguided at best," said Adrian Fenton of the Institutional Investors Group on Climate Change, emphasizing the need for meaningful climate solutions

📈 One stat: The Canada Pension Plan Investment Board (CPP Investments) oversees $632 billion in assets, highlighting the significant scale at which large financial institutions measure and manage financed emissions

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