The Coming Smorgasbord of Climate Disclosure

Impact Reflection

Over the past two decades, national commitments at global climate conferences and an array of new regulations have pushed companies to measure and publicly share information about the environmental impact of their operations. Frameworks have been developed that companies can use to measure their current carbon footprint, establish emissions reduction targets for their operations, and publicize their efforts. 

When you scratch the surface of climate reporting, an initial level of unfamiliar detail is the distinction between different sources of greenhouse gas (GHG) emissions.  

  • Scope 1 emissions include GHGs emitted directly from a facility (e.g., on-site combustion in boilers and turbines).  
  • Scope 2 includes indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling generated elsewhere.  
  • Scope 3 includes indirect emissions not included in Scope 2, such as those that occur in the value chain of the reporting company both upstream and downstream. 

Most people are acutely aware of Scope 1 emissions, leading to widespread conviction that there is a need to reduce or eliminate the use of fossil fuels. Scope 2 emissions are, by definition, indirect and more difficult to bring to mind, such as the fact that electric-powered machinery or an electric delivery van may be drawing on electricity generated from fossil fuel use. Lastly, Scope 3 emissions include the entire value chain, including component suppliers and financing, as well as consumption and disposal. 

What’s Already Being Shared: Scope 1 & 2 Data

In 2017, an industry-led Task Force on Climate-Related Financial Disclosure (TCFD) was established to create workable recommendations on corporate disclosures. The Task Force was asked to develop voluntary, consistent climate-related financial disclosures that would be useful to investors, lenders, and insurance underwriters in understanding material risks. Their recommendations also encouraged inclusion of not only risks but opportunities for the transition to a lower-carbon global economy.  

The UK-based Climate Disclosure Project is an international nonprofit that compiles and publicizes carbon footprint reporting.[1] Their standards are aligned with the TCFD standards and currently include disclosure information for half the world’s publicly traded companies. The data includes both Scope 1 and Scope 2 data, but only modelling of Scope 3 emissions. 

What’s Coming Next: Incorporating Scope 3 Data

Three new efforts will accelerate the information disclosed and, therefore, the changes that are possible in the next several years. 

First, in Europe, the Corporate Sustainability Reporting Directive was put into place in 2023. It requires mandatory inclusion of Scope 3 emissions in corporate reporting, with a phased rollout. Large companies will be required to report 2024 emissions beginning in 2025. All companies, including smaller European companies, non-European companies doing business in Europe, and remote parent companies, will be included by 2029.  

Their Scope 3 reporting categories are comprehensive and include: 


  • Purchased goods & services 

  • Capital goods 

  • Fuel and energy-related activities not included in Scope 1 or Scope 2 

  • Upstream transportation and distribution 

  • Business travel 

  • Employee commuting 

  • Upstream leased assets 


  • Downstream transportation and distribution 

  • Processing of sold products 

  • Use of sold products 

  • End-of-life treatment of sold products 

  • Downstream leased assets 

  • Franchises 

  • Investments 

The second set of new regulatory requirements comes from the SEC and applies to US-based public companies. The SEC proposal mandates the inclusion of both relevant climate risks as well as Scope 1, 2, & 3 emissions in regular public filings. The proposed rules were released for comments in early 2022 and are expected to be published in their final form in Q2 of 2024. 

The third policy shift comes from the state of California, which has been a leader in developing climate-related policies. In October 2023, Governor Newsom signed two new bills that step up the pace of required corporate disclosure in California. Dubbed the “Climate Corporate Data Accountability Act” (CCDAA), the legislation governs disclosure of greenhouse gas emissions, including not only Scope 1 and 2, but also Scope 3 emissions. The bill affects both public and private companies based anywhere in the US with total revenues in excess of $1B if they are doing business in California. Reporting must begin with disclosure for Scope 1 and 2 emissions in 2026 and for Scope 3 emissions beginning in 2027.  

Aligning Your Investment Capital

In the publicly traded investment universe, conversations continue with company management to discuss the reputational and financial merits of adapting their operations to move towards net zero emissions and to comply voluntarily with disclosure via all the relevant protocols. New mandatory rules will support those efforts. 

Within North Berkeley’s ESG and Carbon Conscious investment strategies, portfolios are composed of investments that have lower overall carbon intensity compared to the broader stock market – ranging from about 60% of the benchmark to as low as 25% of the benchmark. With increased disclosure, and the operational changes and technical innovation that disclosure will support, we expect those intensity levels to be further reduced in the years ahead. Behind the scenes, new and more comprehensive disclosure regulations will better support the development of global renewable energy infrastructure. 


[1]  In recent years, their reporting has expanded to become a more comprehensive global environmental reporting database, including issues such as water security and deforestation. See the CDP website for more information.

Kate King, CFP - Partner and Chief Investment Officer 

About Kate Campbell King, CFP®

Kate Campbell King is the Founding Partner and Chief Investment Officer at North Berkeley Wealth Management. Kate provides clients with a unique approach to their financial decision-making.

Read more about Kate

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This commentary on this website reflects the personal opinions, viewpoints, and analyses of the North Berkeley Wealth Management (“North Berkeley”) employees providing such comments, and should not be regarded as a description of advisory services provided by North Berkeley or performance returns of any North Berkeley client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. North Berkeley manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

By |2024-01-26T13:36:32-08:00January 12th, 2024|