Greenhouse gas accounting at project and portfolio level

Project level GHG accounting

The IDB has a comprehensive system for assessing GHG emissions at project level. Applied since 2011, the approach covers projects in the seven sectors that dominate GHG emissions footprint of the Bank’s portfolio: energy, industry, agriculture, water and sanitation, transport, urban development, and tourism. All direct investment projects with emissions, or emissions savings, exceeding 25 kilotons CO₂-equivalents (CO₂e) per annum are assessed. This is among the lower thresholds in use by MDBs and represents one of the leading, best-practice approaches. Moreover, the Bank’s ESG department estimates gross emissions for all projects that are assigned environmental category A or B as part of the project screening process and that have a greenfield conversion or infrastructure component (regardless of whether they fall above or below this inclusion threshold).[1] The IDB published its GHG Accounting Manual in 2021, providing further insight into its internal rationale and process for GHG accounting at the project level.  

Portfolio level GHG accounting

The IDB tracks the emissions reduced (avoided net emissions) and generated (gross emissions) across its portfolio:

1. The IDB’s previous corporate results framework included a target to reduce emissions by a total of 8 million tons CO₂e over 2016–19 across its approvals. This was set against a reference baseline of 6.9 million tons CO₂e over 2012–14. The target included scopes 1, 2 and 3 and was exceeded, with 14.4 million tons CO₂e reportedly avoided. However, the basis for this target is not clear, nor whether it was sufficient to align with Paris Agreement goals. The corresponding 2020 and 2021 figures both of 1 million tons CO₂e, reflecting the Bank’s prioritisation of COVID-19 recovery. However, annual figures rebounded to 2.3 million tons CO₂e avoided in 2022 and 7.1 million tons CO₂e avoided in 2023. The subsequent corporate results framework (covering 2020–2023) did not include a new target for emissions reduction across approvals. From 2024, the IDB Group tracks and reports emissions reductions under its new Impact Framework.
2. The IDB reports gross GHG emissions across its approvals, covering primarily scope 1 and scope 2 emissions (unlike the full scope 1, 2 and 3 included for emissions reductions accounting), with some exceptions, as part of its annual sustainability report. The most recent publicly available report is that of 2022, which shows an inconsistent trend in gross emissions across its annual approvals over the period 2018–2022 (with emissions first falling from 240 million tons of CO₂e in 2018 to a low of 108 million tons of CO₂e in 2020, before rising again to 198 million tons of CO₂e in 2022).[2] There is no evidence of a dedicated IDB target to reduce gross portfolio emissions. From 2024, the IDB Group tracks and reports gross emissions under its new Impact Framework.

Specifically regarding transportation, the IDB has published its “Mitigation Strategies and Accounting Methods for Greenhouse Gas Emissions from Transportation”. This document is intended to help urban planners in Latin America to understand how to assess the GHG emissions reduction benefits of sustainable transport projects, policies and strategies. The document should aid planners accessing climate finance to support sustainable transport initiatives, as well as to assist evaluators in understanding and measuring GHG benefits of proposed investments.

Recommendations: 

• The IDB should adopt a decreasing, multi-year, absolute emissions target across its approvals as part of its corporate results framework. This target should be anchored in a temperature trajectory for the IDB’s portfolio that aims to limit warming to 1.5 °C (with a 2 °C ceiling) in a manner consistent with the decarbonisation trajectories of the IDB’s countries of operation. With appropriately sensitive target setting, absolute emissions accounting across its approvals and an accompanying target, can be a useful metric (among others, for example investment in climate solutions; investment in early fossil phase-out and investment in long-term infrastructure to support the transition) for monitoring the IDB’s support for the energy transition.
• The IDB should additionally reintroduce a multi-year, increasing, emissions reduction target across its approvals as part of its corporate results framework.
• The IDB should ensure that indirect emissions, even if not directly controlled by the project (scope 3) are included throughout its GHG accounting practices. Their inclusion can substantially change the assessment of the environmental and climate impact and are therefore relevant to investment decisions. In particular, gross portfolio emissions should be calculated accounting for the same breadth of emissions (scopes 1–3) as when calculating emissions reductions.

[1] For more information on project level climate risk screening procedures, see the “Climate risk, resilience, and adaptation” metric.

[2] The Bank has suggested that this initial dip reflects the effect of COVID-19 response on the Bank’s lending portfolio, with this subsequently returning to “a more typical composition in terms of infrastructure investments” in the years following.