As part of the GRESB process, responding funds are asked to submit their short-term and long-term performance goals, including a greenhouse gas (GHG) emissions target. When setting a GHG emission target, how does a company best determine a reduction goal that contributes to mitigating climate change, while also encouraging innovation and enhancing flexibility to an evolving market?
In this post, I have included information about an approach to goal-setting known as the Science Based Targets Initiative.
What is the Science Based Targets Initiative?
The Science Based Targets Initiative (SBTI) was developed by CDP, World Resources Institute, the World Wide Fund for Nature, and the United Nations Global Compact to provide companies with a framework for setting science-based targets to reduce greenhouse gas emissions. A science-based target is defined as being in line with the level of decarbonization required to keep global temperature increase below 2 degrees Celsius compared to pre-industrial temperatures, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5).
For setting your company’s own science-based target, the Science Based Target Initiative has a helpful step-by-step guide for developing, setting, and validating your science-based target. One step in that process is selecting a methodology for setting your science-based target.
Sector Decarbonization Approach Methodology
One of the many methodologies used for setting a science-based target is the Sector Decarbonization Approach (SDA) method, which was utilized by GRESB Sector Leader Kilroy Realty Corporation when setting their science-based target. The SDA method is based on the 2 ̊C scenario developed by the International Energy Agency, which sets carbon budgets up to 2050 for each sector. Within each sector, companies can derive their science-based emission reduction targets based on their contribution to the total sector activity and their carbon intensity relative to the sector’s intensity in the base year. For the real estate sector, the activity used is total square meters of a portfolio in a given year. Ultimately, the assumption is that all real estate companies will converge at 2050 with the same carbon intensity (kg of CO2e/m2).
The SDA method’s tool, which can be obtained by requesting it from the Science Based Targets Initiative at email@example.com, is an intuitive tool that requires minimal inputs to provide an emissions target. The following information is needed to develop an emissions target with the SDA method:
- An identified baseline year (between 2010 and Current Year)
- An identified target year for setting the emissions target
- Total square meters of the portfolio in the base year
- Expected total square meters of the portfolio in the future year
- Scope 1 emissions (in metric tons of CO2e) in the baseline year
- Scope 2 emissions (in metric tons of CO2e) in the baseline year
With this information, the tool will calculate the portfolio’s absolute carbon emissions of the baseline year, the absolute carbon emissions in the target year, and the carbon intensity. This information provides a clear target to achieve, and leaves the path taken to achieve the target up to the company to determine. While planning your path for achieving your target, it is important to note that the absolute carbon emissions target and carbon intensity target of a portfolio can fluctuate if the portfolio increases or decreases in size differently than what was expected (future target activity). If, for example, a merger occurs two years after the baseline year, and the merger increases the portfolio size to a point where the baseline year information is highly inaccurate (or differs greatly from the future target activity), then you would want to revise the baseline year data to now include the new assets and emissions data. Therefore, it is advised to annually review your portfolio size and target, and progress towards your target. If it seems that the portfolio is changing in size differently than what was projected, then you may need to revise your baseline year and target.
At this time, the SDA method does not include a function to set an emissions target for Scope 3 emissions.
Committing to a Target
Setting a GHG emissions target that is approved by the Science Based Targets Initiative not only signals to investors and stakeholders that you are committed to mitigating GHG emissions, but also reinforces the credibility of the target and builds trust. It is a growing trend that does not show signs of slowing down; by November 2016, 200 companies had committed to a science-based target, and by September 2017, an additional 100 companies had committed to a science-based target.
After a company commits to setting a science-based target, they will have 24 months to develop and set a science-based target. Companies may opt to fully develop their science-based target and long-term strategic plan to achieve the target through the assistance of a third-party support. CodeGreen Solutions is committed to assisting companies with developing and setting their science-based target, working with the Science Based Target Initiative to have the target approved, and setting a long-term plan to achieve the target.
This article is written by Myles Scott, Analyst at CodeGreen Solutions.