Net-Zero Asset Owner Alliance Calls For Mandatory Scope 3 Disclosure

Listen to this story:

• Scope 3 Challenges: Scope 3 emissions account for 75% of corporate emissions but face barriers like data quality, inconsistent frameworks, and double counting.
• Regulatory Push: The Alliance calls for top-down mandates to standardize Scope 3 disclosure globally, mirroring efforts in the EU, Japan, and California.
• Actionable Steps: NZAOA outlines five strategies for asset owners to integrate Scope 3 into climate strategies effectively.

The UN-convened Net-Zero Asset Owner Alliance (NZAOA) is calling for mandatory regulatory mandates to address persistent challenges in Scope 3 emissions disclosure, which account for up to 75% of most companies’ total emissions.

In its latest paper, the Alliance emphasizes the need for credible and comparable Scope 3 data to drive meaningful reductions in the real economy. The report highlights global initiatives like the Corporate Sustainability Reporting Directive (CSRD) in the EU and emerging frameworks in Japan and California as critical steps toward standardized disclosure.

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Udo Riese, Global Head of Sustainable Investing at Allianz Investment Management, underscores the urgency:

“Our paper highlights the need for credible and comparable Scope 3 data, or else we will not see necessary carbon reductions in the real economy. Regulatory mandates are needed for systemic progress, but asset owners must take responsibility and lead through actionable strategies now.”

Barriers and Solutions

The NZAOA identifies key challenges, including poor data quality, inconsistent accounting frameworks, and double-counting risks. These hurdles limit the ability of asset owners to integrate Scope 3 emissions into portfolios and climate strategies.

To overcome these barriers, the Alliance recommends focusing on the two most significant categories of Scope 3 emissions per sector, covering 81% of overall emissions intensity.

Five Steps for Asset Owners

The report provides actionable strategies for immediate adoption:

1. Improve Disclosure: Seek audited and verified Scope 3 data from issuers.
2. Shift Investments: Prioritize investments in corporates with Scope 3 targets.
3. Engage Issuers: Focus on sectors with high Scope 3 emissions or limited disclosure.
4. Set Sector Targets: Integrate Scope 3 into sectoral emissions reduction goals.
5. Separate Targets: Include Scope 3 reductions alongside Scope 1 and 2 goals for clarity.

A Call for Leadership

The Alliance’s recommendations aim to bridge the gap between policy and practice, enabling asset owners to lead by example. With regulatory frameworks evolving worldwide, the NZAOA stresses the importance of immediate action to align portfolios with a net-zero future.

This initiative signals a clear need for systemic change, positioning asset owners as key players in driving global decarbonization.

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