September 1, 2025
Insights for asset owners navigating the tensions in GHG emissions reporting
As asset owners integrate climate considerations into their portfolios, the reliability and transparency of greenhouse gas (GHG) emissions data have become essential. Yet a core tension persists: reporting frameworks are often designed to minimise disclosed emissions and enhance comparability, while effective risk management requires comprehensive, forward-looking insights.
Asset owners need to be across the various approaches to reporting so they can insist their network provides the data they need – an essential prerequisite in making long-term investment decisions in the best interests of their members.
This tension is most obvious in Scope 3 emissions. The GHG Protocol allows companies to apply subjective “relevance” tests, enabling them to exclude material value chain emissions, such as those from suppliers or product use. While this reduces reported figures and compliance burdens, it leaves asset owners exposed to unquantified transition risks, including regulatory change and carbon pricing.
This article explores the conflicts embedded in GHG accounting methodologies, drawing on standards such as the GHG Protocol and the Partnership for Carbon Accounting Financials (PCAF). We also outline practical steps asset owners can take to strengthen data quality, engage with holdings, and advocate for more robust reporting. Pathzero plays a role here, providing asset owners with access to granular, standardised data from both listed and unlisted investments.
Reporting minimisation vs. risk management
Several common accounting choices illustrate how current approaches prioritise narrow disclosures over holistic risk assessment.
1. Real estate emissions – Whole-building vs. proportional attribution
PCAF approach: Attributes all building emissions (electricity and heating) to the investment, regardless of landlord/tenant control. This reflects full exposure to risks such as energy efficiency regulations or asset stranding.
GHG Protocol: Often limits reporting to the landlord’s proportional share of emissions, minimising disclosure but obscuring portfolio-wide vulnerabilities.
2. Scope 2 emissions – Market-based vs. location-based accounting
Market-based: Allows use of renewable energy certificates (RECs) to claim zero-emission electricity, even when consumption relies on fossil fuels. This can overstate progress, masking exposure to risks tied to actual grid reliance.
Location-based: Reflects the real grid mix, giving a truer baseline for assessing risk (e.g. energy price volatility, carbon taxes). However, uptake remains limited due to the appeal of lower reported emissions.
3. Scope 3 emissions – Subjective exclusions and methodological inconsistency
The GHG Protocol’s relevance criteria permit companies to exclude categories that often account for 70–90% of emissions. This reduces reporting burdens but undermines investors’ ability to evaluate supply chain risks, such as supplier exposure to regulation or disruption.
Within Scope 3, methodologies vary widely across categories, producing inconsistent data and limiting comparability.
Reporting is also backward-looking, with little emphasis on forward projections (e.g. normalising for weather impacts in real estate), restricting its usefulness for risk management.
Taken together, these practices highlight a broader challenge: while accounting frameworks focus on comparability and minimisation, asset owners require expansive, transparent data to assess climate-related risks.
Actions for asset owners: Improving transparency and engagement
Asset owners are both users and enablers of emissions data. By demanding clearer methodologies and engaging with holdings, they can bridge the gap between compliance-driven reporting and strategic risk management.
Insist on methodological transparency: Require disclosure of accounting choices (e.g. market- vs. location-based Scope 2; Scope 3 exclusions). This can be built into investment agreements or data request templates and aligned with PCAF guidance for financed emissions. For unlisted investments, where data gaps are common, platforms like Pathzero provide standardised, methodology-tagged data to clarify assumptions and boundaries.
Engage directly and indirectly with holdings: Direct engagement may include stewardship activities, shareholder resolutions, or targeted discussions to encourage adoption of comprehensive approaches like PCAF’s whole-building method. Indirect engagement through asset managers can embed expectations in due diligence and reporting mandates. Periodic reviews of Scope 3 hotspots, for example, can improve accountability without overburdening companies.
Advocate for stronger standards: Push for adoption of PCAF alignment, dual reporting of Scope 2 (market- and location-based), and full Scope 3 coverage under voluntary frameworks such as the Science Based Targets initiative (SBTi). For regulatory regimes like the EU’s CSRD, call for audited disclosures to minimise subjectivity and exclusion.
By embedding these practices, asset owners can turn GHG reporting from a compliance exercise into a strategic tool for risk mitigation.
The role of networks
In private markets, emissions data is often fragmented. Networks like Pathzero address this by connecting asset owners with portfolio companies, aggregating and standardising disclosures, and tagging methodologies for clarity. This reduces the burden of bespoke data collection and ensures investors can access decision-useful information aligned with evolving standards.
Emerging parallels in physical risk reporting
As physical risks such as extreme weather events gain prominence, similar dynamics may arise. Companies may avoid granular reporting out of concern for reputational or financial impacts, such as higher insurance premiums or asset devaluation. Asset owners should monitor these developments to ensure physical risks are integrated into disclosures alongside transition risks.
Looking ahead
The conflicts in current GHG reporting frameworks reflect a broader trade-off between comparability and comprehensiveness. Asset owners that challenge narrow reporting practices and advocate for stronger standards will be better positioned to manage transition and physical climate risks. Pathzero supports this shift by enabling access to consistent, transparent emissions data – helping asset owners move beyond compliance and towards resilience.