ICE calls for avoided emissions to be adopted into investment analysis 

August 25th, 2023

Intercontinental Exchange (ICE) is pressing for avoided emissions to be included in mainstream investment analysis after developing a new framework with Ecofin Advisors to address the often-overlooked area.

Avoided emissions are emission reductions that occur outside of a product’s life cycle or value chain, but as a result of the use of that product.

In collaboration with Ecofin Advisors, ICE Climate Transition Finance (CTF) has developed a framework to address the gap in environmental and climate analysis that overlooks the positive impact of an investment.

The framework focuses on three stages: the collection, assessment, and analysis of emissions data; modelling, including bespoke company level bottom-up models and sector-specific methodologies; and comparative scenario analysis, including “what-if” scenarios and forward-looking analysis to help put the results of the process into context.

ICE said most metrics focus on the risk side of the climate equation, such as carbon footprinting, net zero alignment and temperature scores. As a result, climate-related policy and regulation also tends to focus on encouraging companies to reduce emissions across both their own direct operations and their value chains (Scope 3).

However, ICE said the need for companies to develop innovative low or zero emissions solutions is important for global decarbonisation.

If more data and information was available on a company’s avoided emissions, investors would be able to identify which companies have the most meaningful opportunities in sustainability, ICE argued.

Additionally, ICE said it was not uncommon for companies with large avoided emissions potential not to report that information due to their focus on the risk side of the equation in their sustainability reports.

As ESG reporting regulations are being discussed and introduced across the world, ICE said there is an opportunity to encourage the development and use of metrics aimed at promoting positive climate impact.