If your company has investments or operational investments are your core business, the climate impacts of investment activities can be significant for your organization. In carbon footprint calculations, the ‘follow the money’ principle has been widely recognized as a good way to identify emission sources: where money flows, emissions occur. However, many may be surprised by the significant role that investments often play in organizations’ climate impacts and the emission reduction opportunities they offer.
In this blog post, we will explain how we, together with the Finnish Climate Fund, assessed the emissions of their investment portfolio and its significance to the company’s overall carbon footprint.
The Finnish Climate Fund is a Finnish state-owned special-assignment company. Its operations focus on combating climate change, boosting low-carbon industry and promoting digitalization. The company funds self-supporting projects which can be realized earlier or at a larger scale with the company’s investment. The Climate Fund has financed 24 Finnish companies with nearly €180 million, enabling emissions reductions both domestically and internationally. The Climate Fund’s investment categories are the following:
- facility investments and other climate infrastructure;
- scaling up the deployment of climate solutions;
- and digital climate solutions.
The Climate Fund’s mission is to decrease the carbon footprint and strengthen the carbon handprint by advancing new climate and digital solutions. Emissions reduction potential as well as productivity and business potential are defined as key impact goals in the funding criteria. However, due to the nature of its activities, it is important for the company to also understand the emissions of its own operations. UseLess Company has been supporting the Climate Fund in calculating the company’s and its investment targets’ carbon footprint since 2022.
How can the climate impacts of investment activities be assessed?
The Climate Fund wanted to include the scope 1 and 2 emissions of its investment targets in its carbon footprint. Capital loans are the company’s primary financing instrument, and the portfolio also includes fund investment. In addition to the climate impacts of the investment portfolio, the emissions generated by liquid assets were considered. Cash reserves have been invested not only in bank accounts and fixed-term deposits but also in liquid bond funds. The calculation included the Climate Fund’s share of the scope 1 and 2 emissions of these funds.
For the Climate Fund’s investment portfolio, the calculation was carried out by collecting primary data directly from the investment targets, of which a total of 14 were included in the 2023 calculation. Portfolio companies were extensively surveyed about various scope 1 and 2 emission sources such as vehicle and facility energy consumption. The calculations were based on consumption data provided by the companies, supplemented by assumptions as needed. The emissions of the fund targets were obtained directly from the respective funds. Finally, the total emissions of each investment target were allocated to the Climate Fund based on the amount of funding paid by the Climate Fund relative to the companies’ total equity and debt.
The calculation of emissions from liquid assets was much simpler. Emission intensities were obtained directly from the Climate Fund’s asset managers. Then, the allocated emissions were calculated by multiplying the amount of invested capital by the given emission factors.
Utilizing carbon footprint calculation results in sustainability work
Calculating the carbon footprint of investment portfolios is important for investors. With an understanding of the climate impacts, they can, for example, encourage their investment targets to reduce their emissions or select fund investments with lower emission intensity. The Climate Fund seeks to minimize not only the emissions of its investment portfolio but also the carbon footprint of its own operations. Through carbon footprint calculation, the Climate Fund gains an understanding and a better opportunity to also influence the relatively small emissions from its own operations.
The investment targets also benefited from the calculations as the results were shared with the management of each company. Hence, they could directly see from which emission sources the climate impacts of their own operations arise. This makes it possible to plan for potential emission reduction measures, maximizing the companies’ potential carbon handprint.
“Our company’s primary goal is to maximize the positive climate and environmental impacts realized through our investment targets. Equally important to us is to develop the sustainability of our own operations, aiming for continuous positive development. An essential part of this is calculating our carbon footprint, covering not only our own operations but also liquid assets and our investment portfolio.
The collaboration with UseLess has been very smooth, sticking to schedules precisely, and the work has been of very high quality. We appreciate UseLess’ expertise, and it has been important for us to brainstorm together the development of carbon footprint calculation.”
— Saara Mattero, Communications and Sustainability Director, the Finnish Climate Fund
At UseLess, we look forward to seeing how the Climate Fund’s investment targets striving for the common good will grow and develop in the coming years.
If you’re interested in our project, methods, and results, you can read more in the Climate Fund’s 2023 annual report (available in Finnish). We are also happy to assist in assessing the climate impacts of your organization – just contact us!