Why Climate Risk Must Be Central to Your Decarbonization Strategy

2. Scope 2 Emissions Are a Strategic Lever—If You Use Them Right

“Scope 2 is essential to help understand how a utility company could use different levers from a utilities angle for decarbonization purposes”. - Kaleb Boyl

Scope 2 emissions—those from purchased electricity—are often overlooked in favor of Scope 1 or Scope 3. But utilities have a unique opportunity to influence Scope 2 outcomes through energy procurement strategies.

There are two ways to report Scope 2:

• Location-based: Reflects the average emissions intensity of the local grid.
• Market-based: Reflects the emissions from the specific electricity a company chooses to purchase (e.g., RECs, green tariffs, PPAs).

Companies reporting only location-based emissions miss opportunities to demonstrate leadership and accelerate decarbonization. “Reporting on Scope 2 market-based enables companies to demonstrate leadership by choosing low-carbon sources,” Kaleb noted. Using Scope 2 market-based reporting will help to tailor decarbonization pathways.

Companies can benchmark their operational performance and carbon intensity at various levels, providing a clear picture of their sustainability journey. The S&P Global Corporate Sustainability Assessment can be used to understand where companies exceed expectations, offering a competitive edge.

3. Strategic Targeting with ESG Data and PPA contracts

Utilities can use ESG scores, emissions profiles, and net-zero commitment data to identify high-potential corporate clients. The S&P Capital IQ Pro screening tool enables filtering by:

• Scope 2 Emissions (location-based vs. market-based): Distinguishing between location-based and market-based reporting helps identify companies that are actively choosing low-carbon electricity sources—ideal candidates for renewable energy contracts.
• Climate Governance Scores: These scores reflect how well a company integrates climate risk into its decision-making. Higher scores often correlate with stronger sustainability commitments and readiness to engage in clean energy procurement.
• Energy Management Programs: Companies with robust energy programs are more likely to pursue PPAs, RECs, or green tariffs to meet their goals.
• Renewable Energy Consumption Ratios: This metric reveals how much of a company’s energy mix is already renewable—useful for identifying leaders and laggards in the transition. This allows utilities to pinpoint companies that are either underperforming or poised for leadership—and tailor their outreach accordingly.

Once high-potential companies are identified, utilities can dive deeper into their procurement behavior using S&P’s Corporate Renewables Contract Database. This includes:

Contract Duration & Pricing Trends: Understanding typical contract lengths and pricing benchmarks helps utilities tailor offers that are competitive and aligned with market expectations.

Technology Preferences: Whether a company favors solar, wind, or battery storage can guide utilities in proposing the right mix of solutions.

Regional Procurement Patterns: Knowing where companies are sourcing energy geographically helps utilities align their offerings with local grid conditions and interconnection opportunities.

4. Site Selection Must Balance Decarbonization with Resilience

“If utilities and power producers can develop products that value decarbonization, resilience, and affordability, they’ll see less turmoil and more stability.” – Chad Singleton

The Power Evaluator, a tool designed to help utilities model project feasibility, forecast energy revenues, and assess climate risks at the site level. The importance of portfolio stress testing was underscored as a means to understand the financial risks associated with climate change. Chad Singleton described it as a “one-stop shop for a lot of the questions we asked at the beginning of resilience, decarbonization, and economic opportunities.”