Climate Change

Climate change represents the first planetary boundary and is currently in a transgressed state, with atmospheric CO₂ concentrations exceeding safe operating limits. This boundary affects global temperature, precipitation patterns, sea levels, and extreme weather frequency, with transgression increasing the risk of crossing irreversible tipping points.

Boundary Definition

Control Variables:

• Atmospheric CO₂ concentration
• Energy imbalance at top-of-atmosphere (radiative forcing)

Safe Operating Space:

• CO₂: 350 ppm (pre-industrial: 280 ppm)
• Radiative forcing: +1.0 W/m² above pre-industrial

Current Status (2026):

• CO₂: ~420 ppm (transgressed)
• Radiative forcing: +2.3 W/m² (transgressed)

Source: Richardson et al. (2023)

Why This Matters

Climate change driven by greenhouse gas emissions affects global temperature, precipitation patterns, sea levels, and extreme weather frequency. Transgressing this boundary increases risk of crossing tipping points (ice sheet collapse, permafrost thaw, Amazon dieback).

Paris Agreement Target: Limit warming to well below 2°C, preferably 1.5°C above pre-industrial levels.

GHG Protocol Scopes 1/2/3 Explained

The GHG Protocol Corporate Accounting and Reporting Standard defines three scopes of emissions that companies must measure and report:

Scope 1: Direct Emissions
Greenhouse gas emissions from sources owned or controlled by the company. This includes emissions from combustion in owned or controlled boilers, furnaces, vehicles, and fugitive emissions from refrigeration and air conditioning equipment.

Examples: Company-owned vehicles, on-site fuel combustion, manufacturing process emissions, fugitive emissions from equipment leaks.

Scope 2: Indirect Energy Emissions
Emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the company. While these emissions physically occur at the facility where electricity is generated, they are attributed to the company's operations because they result from the company's energy use.

Examples: Purchased electricity for offices and facilities, purchased steam for industrial processes, district heating and cooling.

Scope 3: Other Indirect Emissions
All other indirect emissions that occur in a company's value chain, including both upstream and downstream emissions. The GHG Protocol identifies 15 categories of Scope 3 emissions, from purchased goods and services to end-of-life treatment of sold products.

Examples: Business travel, employee commuting, purchased goods and services, transportation and distribution, waste disposal, use of sold products, investments.

Scope 3 typically represents 70-90% of most companies' total carbon footprint, making it the most significant but also the most challenging to measure and reduce. The GHG Protocol Scope 3 Standard provides detailed calculation methodologies for each category.

Key Metrics & KPIs for Companies

Companies should track the following climate-related metrics for comprehensive ESG reporting:

Emissions Metrics

• Absolute GHG emissions (tonnes CO₂e): Total Scope 1, 2, and material Scope 3 emissions
• Emissions intensity (tonnes CO₂e per unit): Emissions per revenue, per employee, per product unit, or per square meter
• Year-over-year emissions change (%): Progress toward reduction targets
• Scope 3 category breakdown: Identification of material categories (typically categories 1, 3, 11)

Target & Performance Metrics

• Science-based target status: Committed, near-term target set, long-term target set, target achieved
• Progress to net-zero (%): Percentage reduction achieved vs. baseline year
• Renewable energy procurement (%): Percentage of electricity from renewable sources
• Carbon offset purchases (tonnes CO₂e): Volume and quality of carbon credits retired

Financial Metrics (IFRS S2 Requirements)

• Climate-related capital expenditure: Investments in emissions reduction technologies
• Internal carbon price ($/tonne CO₂e): If used for decision-making
• Climate-related revenue: Revenue from low-carbon products and services
• Transition costs: Costs associated with decarbonization initiatives

Physical Risk Metrics

• Assets exposed to physical climate risks (% or value): Facilities in high-risk locations
• Climate-related incidents: Number and financial impact of extreme weather events
• Supply chain disruptions: Climate-related disruptions to operations

Key Standards & Frameworks

Disclosure Standards

• IFRS S2 — Climate-related Disclosures (ISSB, 2024)
• TCFD — Task Force on Climate-related Financial Disclosures
• GRI 305 — Emissions reporting

Accounting & Target-Setting

• GHG Protocol — Corporate Accounting Standard (Scope 1/2/3)
• SBTi — Science Based Targets initiative
• CDP — Climate disclosure platform
• PCAF — Financed emissions accounting

Primary Source Documents

Scientific Assessment

• IPCC Sixth Assessment Report (AR6) — Full report + Synthesis
  • Climate Change 2021: Physical Science Basis
  • Climate Change 2022: Impacts, Adaptation, Vulnerability
  • Climate Change 2022: Mitigation

Global Treaties

• Paris Agreement (2015) — UNFCCC
• Glasgow Climate Pact (COP26) — 2021

National Commitments

• Nationally Determined Contributions (NDCs) — UNFCCC Registry

Regional Regulations

Hong Kong & China

• HK Climate Action Plan 2050
• China's Dual Carbon Goals — Carbon peak by 2030, neutrality by 2060
• HKEX Climate Disclosure Requirements

Asia-Pacific

• Japan Net-Zero by 2050 — Ministry of Environment
• Singapore Green Plan 2030

Book Resources

From ESG Series:

Carbon Accounting in Practice — Mathematical guide to GHG measurement
Download PDF: Carbon_Accounting_in_Practice.pdf

Key chapters:

• Scope 1/2/3 calculation methodologies
• Emission factor databases
• Uncertainty analysis

Climate Risk Quantification in Practice — Financial impact of climate change
Download PDF: Climate_Financial_Impact_in_Practice.pdf

Key chapters:

• Physical risk modeling
• Transition risk assessment
• Climate Value-at-Risk (VaR)
• Scenario analysis (NGFS, IEA)

Carbon Credits Made Simple — Voluntary carbon markets
Download PDF: Carbon_Credits_Made_Simple.pdf

Tools & Data

• IPCC Data Distribution Centre — Climate model outputs
• Climate Watch — World Resources Institute GHG data
• Global Carbon Project — Annual emissions budgets
• SBTi Target Dashboard — Corporate commitments

Related Pages

• Environmental Hub
• Ocean Acidification — Climate change impact
• Standards Hub
• GHG Protocol
• IFRS S2