Adequacy of Emissions Intensity Disclosures for Portfolio Construction with Mining Companies

The global transition to a low-carbon economy requires significant investment in the production of copper, a key mineral critical to electrification. The authors examine the disclosures of the 25 largest mining companies to compare the relative carbon intensities of major copper producers. They find that wide variation in business models, product mix, and stages of production kept in-house versus outsourced to the external value chain, combined with limited Scope 3 disclosures, render virtually meaningless a common metric of revenue-based carbon intensity that is used for portfolio construction. The authors demonstrate examples of inconsistencies and misleading disclosures that prevent investors from making sound capital allocation choices. They demonstrate that, for the copper sector, just 5 out of 15 Scope 3 categories are material for investor choices. The authors also highlight disclosures of an alternative metric of unit output carbon intensity, which a handful of issuers reveal. This metric, if available consistently for all issuers, can dramatically improve the investment decision relevance of carbon emissions intensity disclosures.