Climate accounting for financial portfolios has seen growing prominence in the past years, thanks to both private and public sector initiatives. Over 200 financial institutions have conducted some form of portfolio analysis. In the context of this growing prominence, the academic and practitioner's discussion of climate accounting has largely focused on questions of climate data quality and choices for estimation models. Missing in this debate is an analysis of the underlying accounting principles related to climate data. There is no overview of the climate accounting principles and the implications of choosing different principles and rules. This article provides a taxonomy of key accounting choices currently applied for climate accounting of financial portfolios, notably regarding units of accounting, boundaries of accounting, normalization rules, and allocation rules. Based on a review of data providers accounting approaches in practice, as well as sample applications of different accounting principles, it distills key accounting categories and highlights the potential sensitivity of the ultimate results to these choices. The article concludes that climate assessments of portfolios may be equally sensitive to accounting choices as to the quality of underlying data, suggesting more attention and standards are needed.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.