There's a complex ecosystem of frameworks and standards that set parameters in carbon accounting. These frameworks have evolved over time.
A framework is a set of principles and guidance for "how" a report is structured.
A standard outlines specific, replicable, and detailed requirements for "what" should be reported for each topic.
Collectively, the current frameworks, standards, and organizations that support ESG initiatives have evolved into somewhat of an alphabet soup.
Formerly known as the Carbon Disclosure Project, CDP is a non-profit organization founded in 2000. It runs the disclosure system for investor, companies, cities, states, and regions to manage their environmental impacts.
CDP offers reports and resources around three focus areas:
Organizations complete a questionnaire, and with that information, CDP assigns a score (A+, B, C, etc.) The scored questionnaire can be exported and shared with key stakeholders.
With the world's most comprehensive collection of self-reported data, the world's economy looks to CDP as the gold standard of environmental reporting.
Published in 2020 as a response to industry demand for a global, standardized approach to measure and report financed emissions, PCAF was created to add further guidance to the GHG Protocol's Scope 3, Category 15 (investment activities).
The Standard provides detailed methodological guidance to measure and disclose the GHG emissions associated with six asset classes:
In this module, when we refer to the GHG Protocol, we are referring to the Corporate Standard.
The first edition of the Corporate Standard was published in 2001.
The GHGP establishes globally standardized guidelines to measure and manage greenhouse gas emissions from private and public sector operations, value chains, and mitigation actions.
The Principles for Responsible Investment is an international organization designed to promote sustainability in investing through the integration of environmental, social, and governance (ESG) factors in the investment decision making process.
The PRI supports its members by developing a deep understanding of the implications of ESG on investments and by helping them to incorporate this knowledge into their investment decisions.
Now representing over $120 trillion in assets under managements, the PRI aims to align the capital of its members with key sustainability milestones such as net zero emissions and enable real-world action through delivering the UN's Sustainable Development Goals (SDG). They aim to achieve this by ensuring all their signatories are committed to meeting their six principles of sustainable investment.
Initiated in April 2021, the Glasgow Financial Alliance for Net Zero (GFANZ), is a voluntary coalition of financial institutions brought together to accelerate the global transition to a net zero economy. Inaugural members of the group include some of the world's largest banks such as Bank of America, Santander, and Natwest; asset managers such as Blackrock; and asset owners such as the Rockefeller Foundation. These principal members steer the GFANZ strategy and direction, and track progress toward its goals.
Created by UN Special Envoy for Climate Action, Mark Carney and COP27 President Alok Sharma, GFANZ is part of a wider partnership with Race to Zero, a UN-backed global campaign to help companies, cities, financial institutions, and educational institutions set and reach net zero targets.
GFANZ now includes over 450 of the world's largest financial institutions with over $130 trillion in assets, all with the joint objective of reducing their emissions to net zero by 2050 and mitigating climate change.
Founded in 2017, TCFD is an industry-agnostic climate-related disclosure framework that establishes eleven recommendations across four key areas of interest:
The recommendations were designed to help companies provide better quality data to support informed capital allocation decisions. Unlike the CDP, there is no score associated with reporting in-line with the TCFD, but it is the most commonly considered framework across regulators - given the robustness of its considerations.
Founded in 1997, the GRI is an international, independent standards organization that helps businesses, governments, and other organizations understand and communicate their impacts on issues such as climate change, human rights, and corruption.
The initiative provides the GRI Standard - a widely-used standard for sustainability reporting.
Founded in 2011, VRF (formerly SASB) is a global non-profit organization that offers a comprehensive suite of resources designed to help businesses and investors develop a shared understanding of enterprise value - how it is created, preserved, and eroded.
Their resources include:
The Integrated Thinking Principles
A guide for board and management planning and decision-making.
The Integrated Reporting Framework
Provides principles-based, multi-capital guidance for comprehensive corporate reporting.
A powerful tool that enables businesses to identify, manage, and communicate financial sustainability information to their investors.
Created in 2006, the ISO 14064 is an international standard for measuring and reporting greenhouse gas emissions. The standard is part of the International Standardization Organization environmental management standards and is broken into three parts, each with a different technical approach.
Part 1 refers to the guidance of quantifying a greenhouse gas inventory for organization using a bottom-up data collection approach.
Part 2 addresses the quantification and reporting of emissions from individual project activities.
Part 3 establishes a process to verify the validity of an organization's emissions.
The ISO 14064 is continually being updated with new iterations improving and fine-tuning the standard. It is consistent with and derived from the GHG Protocol. The two documents differ in that the GHGP focuses on the provisions of best practices for making GHG inventories, while ISO14064 establishes the minimum levels of compliance against the GHGP best practices. Although only slightly different, the two standards complement each other.
As far as frameworks for carbon accounting go, the Greenhouse Gas Protocol, or GHGP, is the most commonly-used guidance for companies, while financial institutions refer to the Partnership for Carbon Accounting Financials, or PCAF, which is built on the GHGP.