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Comparing Carbon Estimates Against Disclosures

In December 2015, we identified 277 companies that were constituents of the MSCI ACWI Investable Market Index (IMI) that had disclosed their 2013 scope 1+2 carbon emissions in 2015 for the first time. This provided a unique opportunity to test out carbon estimation models on which institutional investors have had to rely. We found that the methods that have been around the longest – which rely on Economic Input Output Life Cycle Analysis (EIO-LCA) models – were not very accurate when compared against company disclosure. In contrast, an alternative approach developed by MSCI ESG Research which relies on historical data reported by the company or recently reported data by a sample of comparable companies produced closer estimates.