casemark/analyzing-carbon-footprints

Analyzing Carbon Footprints

When To Use

• Measuring a company's or portfolio's greenhouse gas (GHG) emissions across Scope 1, 2, and 3
• Benchmarking carbon intensity (tCO2e per $M revenue, per unit produced, or per square foot)
• Evaluating Scope 3 supply-chain or financed-emissions exposure for investment decisions
• Preparing data for TCFD, CDP, CSRD, or SEC climate-related disclosures [VERIFY: applicable disclosure framework]
• Comparing portfolio holdings against sector decarbonization pathways (e.g., SBTi, IEA Net Zero)

Inputs To Gather

• Entity scope: company name, ticker, GICS sector/sub-industry, reporting boundary (operational control vs. equity share)
• Emissions data sources: sustainability reports, CDP responses, annual reports, GHG inventories, third-party databases (e.g., MSCI, ISS, Trucost, Bloomberg)
• Scope 1 data: direct fuel combustion, fleet, fugitive emissions, process emissions (with fuel types and volumes if available)
• Scope 2 data: purchased electricity, steam, heating, cooling — obtain both location-based and market-based figures
• Scope 3 categories: identify which of the 15 GHG Protocol categories are material — at minimum review purchased goods/services (Cat 1), capital goods (Cat 2), fuel- and energy-related activities (Cat 3), upstream transportation (Cat 4), use of sold products (Cat 11), and investments/financed emissions (Cat 15)
• Normalization denominators: revenue, EVIC, production units, headcount, or square footage for intensity calculations
• Temporal scope: reporting year(s), base year for trajectory analysis
• Peer set: comparable companies or sector averages for benchmarking

Workflow

1. Classify emission scopes

   • Map each data point to Scope 1, 2 (location-based and market-based), or the relevant Scope 3 category per the GHG Protocol Corporate Standard
   • Flag any category where data is estimated vs. measured; note the estimation methodology (spend-based, activity-based, supplier-specific)

2. Aggregate and convert to CO2-equivalent

   • Apply GWP factors from the appropriate IPCC Assessment Report [VERIFY: AR5 vs. AR6 GWP values per reporting framework requirements]
   • Sum emissions in metric tonnes CO2e (tCO2e) by scope and category
   • If partial data exists, document gap-filling assumptions (e.g., extrapolation, sector-average emission factors)

3. Calculate intensity metrics

   • Revenue intensity: tCO2e / $M revenue
   • EVIC intensity: tCO2e / $M enterprise value including cash (for financed-emissions analysis per PCAF)
   • Physical intensity: tCO2e / unit of output (sector-specific — MWh for utilities, tonne of product for materials)
   • Compare against sector median, top-quartile, and Paris-aligned benchmarks

4. Analyze Scope 3 materiality

   • Rank Scope 3 categories by absolute emissions contribution
   • Identify the top 3-5 categories driving total footprint
   • Assess data quality per PCAF scoring (1 = verified, 5 = estimated) for each category
   • Highlight where supplier-specific data could replace spend-based estimates

5. Benchmark and trajectory analysis

   • Compare entity's absolute and intensity metrics to sector peers and index averages
   • Plot historical trend (minimum 3 years if available) and calculate year-over-year change rate
   • Assess alignment with decarbonization pathways: SBTi sectoral targets, IEA Net Zero 2050, or national NDC targets [VERIFY: relevant pathway for entity's sector]
   • Flag whether the entity has a validated science-based target, net-zero commitment, or interim milestones

6. Identify risks and opportunities

   • Carbon pricing exposure: estimate potential cost under $50, $100, $150/tCO2e scenarios [VERIFY: applicable carbon pricing regime]
   • Transition risk: high-intensity operations, stranded asset potential, regulatory timeline
   • Opportunity signals: declining intensity trend, renewable energy procurement, credible reduction roadmap

Output

Structure the analysis report as follows:

• Executive Summary: total footprint (tCO2e), scope breakdown (pie chart data), headline intensity metric, peer ranking, trajectory assessment (on-track / lagging / no target)
• Scope Breakdown Table: Scope 1, Scope 2 (location and market), Scope 3 by category — absolute and percentage of total
• Intensity Benchmarking: entity vs. sector median, top quartile, and Paris-aligned threshold
• Scope 3 Deep Dive: materiality ranking, data quality scores, key hotspot categories
• Trajectory & Target Assessment: historical trend, forward-looking pathway alignment, gap to target
• Risk Quantification: carbon price sensitivity, regulatory exposure summary
• Data Quality & Limitations: sources used, estimation methods, coverage gaps, confidence level per scope

Quality Checks

• Scope 1 + Scope 2 totals cross-referenced against at least two independent sources (e.g., CDP vs. sustainability report)
• Scope 2 reports both location-based and market-based figures — do not default to one without noting the other
• Scope 3 categories explicitly marked as "reported," "estimated," or "not assessed" — never leave gaps silent
• Intensity denominators match the reporting period of emissions data (no mixing FY2023 emissions with FY2024 revenue)
• GWP conversion factors cited with specific IPCC AR version
• All estimated or gap-filled data points flagged with [VERIFY] or stated confidence interval
• Peer benchmarks use consistent scope boundaries (e.g., all Scope 1+2, or all Scope 1+2+3) — do not compare mismatched scopes
• Carbon pricing scenario assumptions stated explicitly (price per tonne, year, jurisdiction)