11 Oct 21

Listed Companies Account for 40% of Climate-

Warming Emissions, Reveals New Research by
Generation Investment Management
NEWS FIRM-WIDE

IN BRIEF

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11 Oct 21

New analysis shows listed companies are responsible for 40% of greenhouse gas emissions, much higher than
previous estimates
Research highlights the importance and influence of investors in delivering a net zero world

LONDON, 11TH OCTOBER 2021

Listed companies are responsible for 40% of all climate-warming emissions, shows a first-of-its kind analysis by
Generation Investment Management, the sustainable investment management firm. In its Insights 6: Listed Company
Emissions report, published today, Generation reveals that all previous estimates underplay the true impact that listed
companies have on climate-warming emissions.

Generation’s research combines a number of calculations to give a clearer picture of the greenhouse gas emissions
accountable to listed companies. In particular, the research looks beyond the company boundary, taking into
account Scope 1, 2 and some types of Scope 3 emissions like supply chain impact . The research also seeks to
eliminate the problem of double counting emissions.

Miguel Nogales, co-Chief Investment Officer of Generation Investment Management, said:

“Listed companies are hiding in plain sight when it comes to the climate crisis. Far from being minor players, our
analysis shows they are responsible for around 40% of all climate-warming emissions. Of course, this also means
that the influence and leverage of the investment community has been underestimated. As COP26 approaches, our
research highlights the importance of capital allocation choices and meaningful portfolio engagement if we are to be
successful in delivering a net zero world by 2050.”

“Given their outsized resources and focus on developed markets, listed companies will need to deliver the lion’s share
of private sector emissions reductions in the next few years. If the world needs to get to net zero by 2050, the
ambition for public companies overall should be 2040 at the latest - and they must focus on decarbonisation in the
near term.”

RESEARCH METHODOLOGY

Most previous estimates focus on direct emissions only (known as Scope 1 emissions) and estimate listed
companies’ emissions at around 20% of the total. Generation’s analysis, which incorporates listed companies’ value
chain GHG emissions, estimates almost double the Scope 1 results, based on CDP data. Similarly, it is more than
double the Scope 1-only calculation published recently by MSCI.

For example, the Generation analysis includes oil produced by listed global oil majors that is consumed by

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households and smaller non-listed enterprises, as well as the oil consumed in vehicles manufactured by listed
companies. The problem of double counting is accounted for in the research.

The analysis also considers emissions from food production and changes in land use which are largely absent from
Scope 1 estimates, because most food is produced by smallholder farmers, larger independent farmers and
cooperatives or by privately owned companies.

Even with these additional factors included, Generation’s estimates are likely to be conservative. For example, the
analysis excluded emissions where double counting was too difficult to address and where sufficient, reliable data
was not available from public sources. Future research will expand the methodology to cover other ways listed
companies contribute to global GHG emissions.

Felix Preston, Director of Sustainability Insights at Generation Investment Management, said:

“Our analysis suggests that the collective importance of over 10,000 listed companies globally has been underplayed.
While investor action on climate change is rightly targeted on the highest emitting and systemically important
companies, the rest of the publicly traded universe also has an important role to play. With the right incentives, these
companies can attack emissions reduction from all angles and unleash untold potential for innovation and
collaboration. Indeed, this could be an important weapon in driving change in incumbent heavy industries, which are
some of the largest Scope 1 emitters. Many listed companies in this long tail are more nimble and far less wedded to
high-carbon business models, and can play an important role in driving progress.”

Claire Elsdon, Joint Global Director of Capital Markets at CDP, said:

“As findings from this research suggest, investor engagement is critical to driving corporate environmental action and
achieving a net-zero, nature positive economy. Now more than ever, investors require decisive data that is
consistent, comparable and comprehensive. To make this possible and support them in setting and meeting their own
net-zero ambitions, they expect companies to fully engage with TCFD-aligned standards on environmental disclosure
and have robust science-based targets that drive rapid decarbonization in line with a 1.5°C pathway. The tide is
turning against companies not taking note of investor demands.”

To conduct this analysis, Generation worked with Pengwern Associates, a consultancy specialising in the economics
of climate change.

Carbon Trust, Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the
generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other

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indirect emissions that occur in a company’s value chain.

MSCI, ‘The Role of Capital in the Net-Zero Revolution’, 2021, https://www.msci.com/documents/1296102/24586122/Role-of-

Capital-in-the-Net-Zero-Revolution.pdf/20b604be-5658-08c7-aa4e-c78f5d49cd73

- END -

Media contact

Richard Campbell, Kekst CNC

generation@kekstcnc.com
+44 7775 784 933

About Generation Investment Management

Generation Investment Management LLP is dedicated to long-term investing, integrated sustainability research and
client alignment. It is an independent, private, owner-managed partnership established in 2004 and headquartered in
London, with a US office in San Francisco. Generation Investment Management LLP is authorised and regulated in
the United Kingdom by the Financial Conduct Authority.

www.generationim.com

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