The UN-convened Net-Zero Asset Owner Alliance (NZAOA) is advocating for mandatory global regulations on Scope 3 emissions disclosure to overcome barriers in addressing up to 75% of corporate emissions. The Alliance highlights that inconsistent frameworks, poor data quality, and double counting are significant obstacles preventing effective integration of Scope 3 emissions into corporate climate strategies.

In its latest report, the NZAOA argues that only through top-down regulatory mandates can consistent and credible Scope 3 disclosures become a reality. Citing existing initiatives like the EU’s Corporate Sustainability Reporting Directive (CSRD) and emerging frameworks in Japan and California, the Alliance views these as pivotal examples of progress toward standardized reporting.

According to Udo Riese, Global Head of Sustainable Investing at Allianz Investment Management, credible data on Scope 3 emissions is critical for achieving systemic carbon reductions. Riese emphasized the need for both regulatory action and proactive leadership from asset owners to make meaningful progress.

Scope 3 emissions, which arise from a company’s supply chain and product lifecycle, remain the most complex to measure and manage. Key challenges include poor data quality, variations in reporting methodologies, and risks of double counting emissions across sectors. These barriers limit the ability of asset owners to integrate Scope 3 emissions into portfolio management and climate strategies effectively.

The NZAOA’s report outlines five practical steps asset owners can take to address these challenges: enhance disclosure by demanding audited and verified data from issuers, prioritize investments in companies with clear Scope 3 reduction targets, focus on high-emission sectors with limited reporting, incorporate Scope 3 emissions into sector-specific reduction goals, and establish distinct reduction goals for Scope 3 alongside Scope 1 and 2 emissions.

By addressing these areas, asset owners can play a critical role in advancing global decarbonization efforts. While regulatory frameworks are evolving, the NZAOA stresses the importance of immediate action from asset owners. The report emphasizes that voluntary efforts alone are insufficient and that clear, actionable mandates are essential for systemic progress.

The Alliance’s recommendations seek to align portfolios with net-zero targets, positioning asset owners as leaders in closing the gap between policy and practice.