GREEN HOUSE GAS EMISSIONS REPORT 1

Green House Gas Emissions Report

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GREEN HOUSE GAS EMISSIONS REPORT 2

Green House Gas Emission Report

Executive Summary

To have a constructive understanding and strategy for climate change within a corporation, you

must have comprehensive experience of greenhouse gas emissions (GHG). Companies in various

sectors have shifted their attention explicitly to calculating and reporting emissions from their

own operations, commonly referred to as Scope 1 and Scope 2 emissions. Despite this,

businesses have only lately begun to realize the need to accurately calculate and report emissions

that occur outside of their operations but still impact the value chain.

The information and computation of Scope 3 emissions are vital not only to understand the

environmental impact of a corporation but also to manage risks associated with greenhouse gas

emissions thoroughly. This is why these emissions have acquired relevance in the discourse

about climate change. The purpose of this study is to serve as a supporting material that will

offer MGMA Consulting and its clients both theoretical understanding and practical direction on

calculating Scope 3 emissions. This paper will not only provide a user manual and essential types

of findings, but it will also cover data understanding, data modification, techniques of

calculation, benchmarking, and model assessment in a step-by-step manner.

Introduction

According to an article published in The Standard, scientists believe that the average

temperature of the planet Earth will have risen by anywhere from 2.1 degrees Celsius to 3.9

degrees Celsius beyond its pre-industrial values by the year 2100. To hold global warming to 1.5

degrees Celsius below what it was before industrialization, every industry must achieve zero
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emissions by the year 2050. Emissions of greenhouse gases are present in the atmosphere and

directly influence the current state of the earth's environment and its energy balance. They are

categorized into scopes, namely Scope 1, Scope 2, or Scope 3 emissions, depending on whether

they are considered direct or indirect emissions. The most frequent ones are carbon dioxide,

methane, and nitrous oxide, and since the beginning of the previous century, the fraction of them

caused by manufactured sources has increased enormously.

With the calculator for financed emissions, financial institutions can assess the total

quantity of Scope 3 (indirect) greenhouse gas emissions that they invest in through the lending

that they do. This estimation will be used when it comes time to disclose them to the SEC based

on the new standards. In addition, MGMA Consulting will be utilizing the GHG emissions

calculator to assist financial institutions in accurately estimating the quantity of GHG emissions.

Given the limited amount of data and information available, making several assumptions was

necessary to develop the most accurate and precise calculator feasibly. After discussing this

matter with MGMA Consulting, we concluded that no determined clients would profit from

using this calculator. Despite this, we would like everyone, mainly medium to large banks, to

have access to the tool.

As a means of providing structure and direction for our efforts to design a GHG

calculator, our investigation is making use of both the Partnership for Carbon Accounting

Financials (PCAF) and the Greenhouse Gas Protocol resources. The protocols provide a simple

equation for calculating financed emissions. This equation will serve as our primary reference for
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calculating financed emissions. In addition, we will provide a detailed analysis of the method we

are employing to construct our calculator by outlining the various assumptions we are working

with, breaking down the primary function we are operating to perform the calculations, and

detailing the attribution factor for each company and the role it plays in our overall research.

Finally, we'll share some conclusions regarding regions and industries, as well as a guide for

efficiently using the tool.

Data Analysis

There are two primary sources of data, the SBA loan data and the results from the US

Environmentally Extended Input and Output (USEEIO) models. The SBA loan data will serve as

our sample portfolio to calculate the financed carbon emissions. The sample portfolio contains

information regarding the loans administered by the SBA and several key data points. These

include information regarding the borrower and the bank approving the loan. It also contains

critical data points about the amount of loan approved, the delivery method of the loan, the

borrower's business type (individual, partnership, or corporation), the age of the business, and the

North American Industry Classification Code System (NAICS). The calculator can be set up

using the above two datasets and a set of assumptions.

Some key data points need to be included that are required to calculate the attribution

factor. These include the outstanding amount of the loan (i.e., For business loans, this is defined

as the value of the debt that the borrower owes to the lender) and the total equity of the business.

Due to the missing data points, the first assumption will be that the only external source of funds

that a borrower use is the SBA loan. In addition, for the outstanding amount of the attribution

factor, we are considering the "Gross Approval" as our primary source from the 7(a) SBA loans.
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The second dataset is the USEEIO model developed by the Environmental Protection Agency

(EPA), which offers a variety of sources for determining the potential economic and

environmental impact of the consumption of goods and services.

This model aims to calculate the indirect environmental impact of any downstream

economic activity, such as the sale of bread. Using this model, the GHG emission generated by

producing $1 of output from any sector can be established. Multiplying the revenue generated by

any company by its corresponding figure from the USEEIO model will be used to estimate its

carbon emissions.

Findings

The analysis showed that insurance-related emissions account for a significant portion of

total emissions in the United States. In particular, the study found that the insurance industry is

held accountable for approximately 3.5 percent of all emissions in the country. This is a

significant finding, as it indicates that the insurance industry has a considerable environmental

impact. The study also found that the insurance industry is responsible for a substantial portion

of emissions in the transportation sector. In particular, the study found that the insurance industry

is responsible for approximately 8.5 percent of all emissions in the transportation sector. This is a

significant finding, as it indicates that the insurance industry has a considerable environmental

impact. Overall, the analysis showed that insurance-related emissions account for a substantial

portion of total emissions in the United States. In particular, the study found that the insurance

industry is responsible for approximately 3.5 percent of all emissions in the country. This is a

significant finding, as it indicates that the insurance industry substantially impacts the

environment.
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The analysis showed that most companies surveyed believe that corporate value chain

(Scope 3) emissions are material to their business. Reduction strategies for these emissions are

therefore warranted. Furthermore, the analysis showed that a majority of companies are already

measuring and reporting their Scope 3 emissions, although there is still room for improvement in

this area. Overall, the analysis showed that companies are increasingly aware of the importance

of reducing Scope 3 emissions and are taking steps to do so. The report analyzed the results of a

survey of corporate managers on their understanding and use of scope 3 GHG accounting. The

results showed that while most managers know scope three accounting, only some use it to track

and report their GHG emissions. The reasons cited for this include lack of awareness of the

benefits of scope three accounting, a lack of data, and a need for guidance on how to account for

scope three emissions. The report recommends that governments and NGOs provide more

information and advice on scope three accounting to encourage more companies to adopt it. The

chart below shows the results that were obtained from the analysis.

Geographical Analysis
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To identify pathways leading to reductions in the impacts of the environment,

consumption of materials and generation of refuse across the entire circle of consumer products

and services purchased in the United States, the Environmental Effects, Incentives, and

Opportunities (EEO) matrix was developed. You can't use either of these data sources well

without first mastering their fundamental principles. To better understand environmental

impacts, the EPA created environmentally extended input-output (EEIO) matrices (EPA).

Therefore, EEIO has become the preferred approach for producing life cycle inventory data

globally, not only in the USA. One of the numerous advantages of this method is that it uses

readily-available data on economic inputs and outputs; its widespread adoption has likely

contributed to the method's high level of accuracy.

The building blocks of an EEIO Model are a mix of two distinct data sources. The first

category of information consists of economic data and is typically presented as an input-output

table. These tables quantify the monetary flows and interdependence between various economic

sectors. The most up-to-date report (2020) is based on data from 389 commodities used by 389

different sectors. The BEA compiled it and presented it in the "Make" and "Use" way, a form of

the input-output technique. The agencies of the economy in a country are the usual sources for

such information. Environment-related data can also be gleaned from satellite tables, which

provide still another data source. Criteria for air pollutants, greenhouse gas emissions, harmful

chemical releases to air, soil, and water, and nutrient releases to land and water, water, energy,

and mineral resource utilization are all included in this data set. The United States federal

government has supplied this data so that we can learn more about emissions, economic activity,

and resource consumption.

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Industrial Analysis

Because of their prominence and sway, financial institutions are ideally positioned to aid

in achieving the net-zero goal by channeling funds toward initiatives that reduce emissions of

greenhouse gases. Stakeholders in the financial sector can better advocate for decarbonization if

they are aware of the climate risks to their portfolio and the GHG emissions (or climate effect) of

their loans and investments. As a first step in developing more effective environmental policies,

they measured financed emissions as essential for businesses. Several financial organizations

will benefit from accurate calculations and public reporting of these emissions since it raises

awareness of climate change and provides valuable insight into the best practices of leading

businesses in environmental risk management.

Revising greenhouse gas emissions is keeping track of and reporting on an organization's

emissions, removals, and avoidances of greenhouse gases. Hydrofluorocarbons (HFCs),

perfluorocarbons (PFCs), sulfur hexafluoride (SF6), nitrogen trifluoride (N3F), and carbon

dioxide (CO2) are the gases monitored for emissions (NF3) and used frequently by governments,

businesses, and other organizations to determine the total emissions caused by their operations,

both internal and external. Indirect emissions result from the functions of the reporting firm.

Still, they are emitted from sources controlled by other companies, while direct emissions are

those emitted from sources owned or controlled by the reporting company. In addition, the extent

of direct and indirect emissions is distinguished according to where and when they occur in the

value chain of the organization:

1. To begin, we'll focus on the first category of GHG emissions, those produced directly by

the organization itself.

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2. Scope 2: Greenhouse Gas Emissions Not Produced Internally by the Reporting

Organization This category includes emissions that are not directly produced by the

reporting organization but rather result from its use of externally generated power,

steam, heating, and cooling. Physically, those emissions occur in a building owned by

someone other than the organization.

3. Scope 3: Other indirect greenhouse gas emissions caused by the company's operations

(not covered by Scope 2).

a. Upstream emissions: extraction of oil

b. Downstream emissions: Utilization of organization’s private jet.

Conclusion
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Any claims of avoided emissions concerning a project need to be stated in a manner that

is different from the way the company discloses its scope 1, scope 2, and scope three inventories.

To arrive at an accurate estimate of the emissions that will be produced throughout an asset's

lifetime, it is generally essential to make assumptions regarding the asset's functioning and its

expected lifespan. The kind of project being carried out will determine the need for the data

necessary to conduct an accurate assessment of the standard emissions. The anticipated annual

average emissions from the project, for instance, can be computed based on the capacity and heat

rate of a power plant, in addition to the carbon content of the fuel and the facility's forecast

capacity utilization.
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References

Corporate Value Chain (Scope 3) Accounting and Reporting Standard Supplement to the GHG

Protocol Corporate Accounting and Reporting Standard. (n.d.). Retrieved November 27,

2022, from http://pdf.wri.org/ghgp_corporate_value_chain_scope_3_standard.pdf

The Global GHG Accounting and Reporting Standard for the Financial Industry. (n.d.). PCAF.

https://carbonaccountingfinancials.com/standard