Corporate carbon emissions data for equity and bond portfolios

Abstract

PurposeTo better understand the impact of choosing a carbon data provider for the estimated portfolio emissions across four asset classes. This is important, as prior literature has suggested that Environmental, Social and Governance scores across providers have low correlation.Design/methodology/approachThe authors compare carbon data from four data providers for developed and emerging equity markets and investment grade and high-yield corporate bond markets.FindingsData on scope 1 and scope 2 is similar across the four data providers, but for scope 3 differences can be substantial. Carbon emissions data has become more consistent across providers over time.Research limitations/implicationsThe authors examine the impact of different carbon data providers at the asset class level. Portfolios that invest only in a subset of the asset class may be affected differently. Because “true” carbon emissions are not known, the authors cannot investigate which provider has the most accurate carbon data.Practical implicationsThe impact of choosing a carbon data provider is limited for scope 1 and scope 2 data for equity markets. Differences are larger for corporate bonds and scope 3 emissions.Originality/valueThe authors compare carbon accounting metrics on scopes 1, 2 and 3 of corporate greenhouse gas emissions carbon data from multiple providers for developed and emerging equity and investment grade and high yield investment portfolios. Moreover, the authors show the impact of filling missing data points, which is especially relevant for corporate bond markets, where data coverage tends to be lower.