The Institutional Investors Group on Climate Change (IIGCC) has published guidance to support investors looking to address scope 3 emissions from investments in their portfolios.

This publication builds on concepts in the Net Zero Investment Framework 2.0 and follows the publication of an initial discussion paper earlier this year.

Scope 3 represents emissions from a companies’ value chain, covering both the upstream supply chain and downstream customer activity.

IIGCC said that the recommendations in this guidance can be used by investors more broadly and were informed by a wide range of asset owners and asset managers that are part of the working group.

In particular, the guidance noted that asset scope 3 emissions are an important aspect of climate change strategy for investors.

The report noted that asset scope 3 emissions are a “critical” element of understanding the climate impacts and risks associated with portfolios overall.

It added that investors looking to understand transition risk across their portfolios should factor scope 3 into analysis and decision-making on climate change risks.

The working group acknowledged that there are a number of valid challenges that mean it is not initially easy to address as total portfolio scope 3 can be a misleading metric. 

IIGCC said that although this paper aims to provide additional guidance and support for investors looking to understand and address the value chain emissions of investments, it is important to recognise that there are no universally applicable approaches.

The paper recommends that investors start by identifying the parts of their portfolio most likely to have material scope 3 and then conduct targeted sector and category-level analysis.

IIGCC said it will continue to revisit and update this guidance to reflect developments where relevant.

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