Climate risk has become unprecedentedly concerned nowadays. The recent COP26 ended up with the Glasgow Climate Pact (available here) which consists of a range of agreed items, including strengthened efforts to build resilience to climate change, curb greenhouse gas emissions, and provide the necessary finance for both. As one of the joint efforts across the border, the Task Force on Climate-Related Financial Disclosures (TCFD) provides information to investors about what companies are doing to mitigate the risks of climate change, as well as be transparent about the way in which they are governed. 

One of the metrics recommended by the TCFD is the disclosure of scope 1, scope 2 and if appropriate, scope 3 greenhouse gas (GHG) emissions. Compared to scope 1 and scope 2 emissions, scope 3 emissions (those related to an organization’s value chain) are inherently difficult to measure. To reduce carbon emissions and reach the goal of net zero, it is essential to have a reliable measure of carbon emissions. Thank the advances in technology, Artificial intelligence (AI) has been adopted to measure emissions. See the blog by BCG here. 

Required: 

Transparency of information has always been a centric focus in accounting and auditing. The improvement of transparency has traditionally been driven by regulators and market participants. With the recent development of emerging technologies and their rapid applications in the industry, the accounting profession has already been reshaped. In your opinion and explain in your own words, explain 

1) why climate change is more than ever important; 

2) what are the traditional ways of measuring carbon emissions; 

3) what are the advantages of using AI in measuring carbon emissions; 

4) how would the enhanced transparency in carbon emissions help mitigate climate risk and eventually help achieve net-zero.