FAQ

No. Depreciation is one component of “depreciation, depletion and amortization,” or DD&A. Of the 451 companies in the 2024 CQ500 Index, 300 (67%) separately disclose Depreciation; the remaining 151 (33%) disclose only the combined DD&A figure, which the index uses in its place. Using the combined figure has the effect of marginally reducing PPE Life and the Carbon Quotient Ratio — i.e., understating the risk — for those 151 companies, since Depletion and Amortization add to the denominator without belonging to PPE specifically.

We looked into whether a company-specific Depreciation figure could instead be reconstructed for the 167 companies on the fallback at the time (before the October 2026 data corrections) from the year-over-year change in their disclosed Accumulated Depreciation balance, matched to the same 10-K’s own comparative figures to avoid the restatement pitfalls described elsewhere on this page. That reconstruction was even technically possible for 106 of them — the rest either don’t disclose a current-year Accumulated Depreciation balance at all, or don’t report a matching prior-year comparative in the same filing. Among those 106, the result undershot the company’s own reported DD&A by roughly half at the median, differed from it by more than 20% in 86% of cases, and came out negative — an accounting impossibility for a real expense — in 14 cases, because Accumulated Depreciation also moves with asset disposals, impairments, and business combinations that have nothing to do with the period’s actual depreciation expense. A balance-sheet reconstruction turned out to be less reliable than the company’s own reported figure, not more, so we use the reported DD&A figure directly rather than a derived approximation — see Methodology for the full investigation.

The fallback also isn’t spread evenly across the index — Energy (67%) and Real Estate (57%) rely on it far more than Health Care (12%) — so it’s fair to ask whether that skews comparisons between sectors, not just between individual companies. Testing it says no: approximating each fallback company’s Carbon Quotient Ratio under a Depreciation-only figure (scaling by 1.46, the median gap between DD&A and Depreciation among companies that report both) leaves every sector’s rank by mean Carbon Quotient Ratio unchanged, and within-sector company rankings hold at a Spearman correlation of 0.95 or better in all 11 sectors. See Methodology for the full sensitivity check.

For the 2024 base year, the CQ500 Index includes 451 of the 500 Reference Index companies (90.2%); 49 (9.8%) are excluded because they didn’t disclose the data needed to calculate a Carbon Quotient Ratio — either Scope 1 emissions, or the financial-statement fields (PPE, and either Depreciation or combined DD&A) needed to compute PPE Life.

Exclusions are concentrated, not evenly spread:

Financials accounts for the most exclusions — 21 companies, over 40% of the total — and Communication Services has the highest excluded share, a third of the sector. Real Estate — REITs in particular — used to look similarly exposed in an earlier pull, but that turned out to be a data-collection gap (REITs tag their real property under different XBRL concepts than the standard PPE fields), not a real disclosure shortfall; fixed, it now sits at 3.2%, in line with the Reference Index overall.

The Carbon Quotient Ratio is built specifically around the physical correlation between long-lived tangible assets and the direct emissions those assets produce — which is a Scope 1 concept by definition. Scope 2 (purchased electricity) and Scope 3 (everything in a company’s value chain, including how customers use its products) don’t have that same direct link to a company’s own balance sheet, and they’re far less consistently or reliably disclosed across the Reference Index today.

Scope 2 carries an additional, more mechanical problem specific to an index-wide ratio: it is, by definition, the emissions-generating company’s own Scope 1 — the same physical ton of CO2 counted once at the utility or power producer and again at the purchasing company. Aggregating Scope 1 and Scope 2 across every constituent in the Reference Index would double-count that ton wherever a utility and its customer are both scored.

Including Scope 2 and Scope 3 would trade CQR’s core design principle — that every input is drawn directly from a company’s own required disclosures, with no estimation or third-party modeling — for a broader but far less verifiable, less comparable, and in Scope 2’s case, doubly-counted number. This means CQR understates full climate exposure for sectors, like oil and gas, whose primary impact is downstream. Expanding coverage of Scope 3 product-use emissions for oil and gas producers, using data reported under SEC Regulation S-K, is on our roadmap.

The Carbon Quotient Ratio is calculated with no deduction for offsets a company may have purchased or retired. This reflects both a data constraint and a definitional one.

The data constraint: there is no standardized, machine-readable disclosure of offset purchases and retirements in SEC filings comparable to the financial data the index already draws from EDGAR. Building a reliable, auditable offset figure for 500 companies would require pulling from voluntary registries with inconsistent reporting formats and no common assurance standard — a level of third-party verification the index’s source-responsibility principle is designed to avoid.

The definitional reason goes deeper. An offset, as the term is generally used, represents a claim that emissions were avoided or reduced somewhere else in the economy — not that the ton of CO2 a company put into the atmosphere this year was taken back out. Realized Emissions measures a physical event: greenhouse gases added to the atmosphere in the current period. An offset purchase does not undo that event; it is a separate transaction, often for a different gas, in a different place, verified against a different baseline. Netting the two together in a single number would conflate a physical quantity with a financial and contractual one.