Should I report emissions associated with equity investments in subsidiaries or joint ventures in scope 3 Category 15?

The selection of a consolidation approach affects which activities in the company’s value chain are categorized as direct emissions (i.e., scope 1 emissions) and indirect emissions (i.e., scope 2 and scope 3 emissions). Operations or activities that are excluded from a company’s scope 1 and scope 2 inventories as a result of the organizational boundary definition (e.g., leased assets, investments, and franchises) may become relevant when accounting for scope 3 emissions.  

Scope 3 includes emissions from investments that are excluded from the company’s organizational boundary but that the company partially or wholly owns or controls.  For example, if a company selects the equity share approach, emissions from any asset the company partially or wholly owns are included in its direct emissions (i.e., scope 1), but emissions from any asset the company controls but does not partially or wholly own (e.g., a leased asset) are excluded from its direct emissions and should be included in its scope 3 inventory.

Similarly, if a company selects the operational control approach, emissions from any asset the company controls are included in its direct emissions (i.e., scope 1), but emissions from any asset the company wholly or partially owns but does not control (e.g., investments) are excluded from its direct emissions and should be included in its scope 3 inventory (Scope 3 Standard, p. 28-29).  

If emissions from equity investments are not included in scope 1 or scope 2 (because the reporting company uses either the operational control or financial control consolidation approach and does not have control over the investee), companies account for equity investments in scope 3, category 15 (Investments).

This includes equity investments in subsidiaries, associate companies, and joint ventures where partners have joint financial control. Refer to Table 5.9 (Scope 3 Standard, p. 52).

For reporting companies using the equity share consolidation approach, the scope 1 and scope 2 emissions of investees should be reported in the reporting company’s (investor’s) scope 1 and scope 2 emissions, respectively.  

For more information and further reading:  

• Scope 3 Standard, Category 15 (Investments), p. 51-54, Table 5.9 (Accounting for emissions from investments (required)), and Table 5.10 (Accounting for emissions from investments (optional))  
• Scope 3 Calculation Guidance, Chapter 15 (Investments), p. 136