Greenhouse gas accounting at project and portfolio level

Explanation

Portfolio level GHG accounting

Every year since 2002, the EBRD has published GHG estimates consisting of an estimate of the net carbon footprint that will result from Bank-financed projects signed in a representative year as part of its annual Sustainability Report. The calculation is based on estimated emissions reductions from climate mitigation projects and estimates of additional GHG emissions from greenfield projects or significant capacity expansions. However, the EBRD does not currently appear to aggregate or disclose gross portfolio-wide emissions.

Portfolio level GHG targets

One of the two high-level targets adopted by the Green Economy Transition (GET) 2.1 approach is to achieve a net GHG emissions reduction of 25–40 million tonnes CO₂e/year over the approach’s implementation period (2021–2025) based on cumulative ex ante estimates.

This number is supposedly based on the will to build and progress on the cumulative GHG emissions reductions by the previous GET (2016–2019) projects, which were estimated to exceed 23 million tonnes CO₂e/year. However, it seems that this target is not linked to any 1.5 °C temperature goal or corresponding reductions needed for a net zero by mid-century scenario.

Project level GHG accounting

According to the latest EBRD 2024 Environmental and Social Policy (ESP) (still in draft at the time of publication) all direct investment projects with gross or net (positive or negative) emissions exceeding 20 ktCO₂e/year are assessed. This is a major improvement from the 2019 ESP, where the threshold for assessment was gross emissions exceeding 100 ktCO₂e/year, or a net change in emissions (positive or negative) exceeding 25 ktCO₂e/year. The new thresholds are the lowest ones in use by MDBs, on par with the European Investment Bank (EIB) and the Asian Development Bank (ADB), and represent best practice.

The assessment is conducted according to the rationale and process for GHG accounting provided by the EBRD Methodology for the economic assessment of EBRD projects with high greenhouse gas emissions, published in 2019. The assessment covers scope 1 and 2 emissions. Scope 3 emissions are generally not included but may be taken into consideration in some applicable infrastructure projects where they are deemed relevant. The emissions are calculated against a “without-project” scenario.   

Recommendations: 

• The EBRD should publish aggregated results for both absolute and relative portfolio level GHG emissions annually. Based on these results, it should complement its existing relative GHG emissions target by establishing an absolute portfolio-wide emissions reduction target consistent with a 1.5 °C temperature rise scenario trajectory, which would make it the first MDB to have both and become “Paris aligned” in this metric.
• The EBRD should work towards integrating scope 3 emissions into the GHG accounting practices of projects. Their inclusion can substantially change the assessment of the environmental impact and is therefore relevant to investment decisions.