A new report from State Street Global Advisors (SSGA) has said that it is “not practical” to include Scope 3 emissions data in investment strategies, while measuring and reporting tools remain in a “nascent stage”.
In the recent report, SSGA said, “Given the simple definitions for Scope 1 and 2 emissions, they are easier than Scope 3 emissions to calculate and control. [In contrast], given the numerous parties and processes involved in the supply chain, the calculation of Scope 3 emissions is a complex task.”
“Even a seemingly minor omission in Scope 3 reporting can create an inaccurate picture of a company’s emission profile,” the fund manager said.
SSGA attributed problems with Scope 3 reporting to inaccurate and unreliable data, lack of standardized methodologies and a lack of resources and personnel.
In the report, SSGA showed that, due to Scope 3 emissions calculations being made from a combination of disclosed and estimated values, the accuracy of Scope 3 reporting is 10% to 30% lower than that of Scope 1 and 2 emissions reporting.
“The lack of consistency among vendors can prompt misalignment in portfolio construction and reporting, which are critical elements for clients who have pledged to reduce Scope 3 emissions in their portfolios. Incorporation of Scope 3 would, at minimum, require a higher disclosure ratio, which will depend on government intervention and may be challenging for suppliers and users.” the report concluded.