Financed avoided emissions: what PCAF's guidance allows banks to report
Financed avoided emissions are the emissions that a project or company prevents outside its own value chain — compared with what would otherwise have happened — attributed to the bank or investor that financed it. Since December 2025 PCAF has published guidance on how to report them, together with two forward-looking metrics. This guide explains what the guidance allows, what it rules out and how to keep green finance claims credible.
Why this matters now
Banks and investors finance wind farms, grid batteries and efficient buildings, and want to show the effect. Absolute financed emissions cannot: a loan to a solar developer adds a little to financed emissions and says nothing about the fossil generation it may displace. Until recently there was no common method for that side of the ledger.
On 2 December 2025 the Partnership for Carbon Accounting Financials (PCAF) released the third edition of its Financed Emissions Standard (Part A) together with supplemental guidance on financed avoided emissions and forward-looking metrics. In July 2026 PCAF named transition finance — including use of proceeds, financed avoided emissions and forward-looking metrics — as one of its priority areas for implementation resources in its 2026–2028 development cycle.
What PCAF means by financed avoided emissions
Avoided emissions are the reduction in emissions that results from a project, product or service, compared with a counterfactual scenario in which it did not exist. They happen outside the inventory of the company that delivers them: a wind farm's own emissions are low, and the avoided emissions sit in the grid power it displaces. Financed avoided emissions are the share of those avoided emissions that can be attributed to a financial institution that provided capital to the project or company.
The PCAF guidance is written for financial institutions only. Companies estimating their own avoided emissions are pointed to other bodies, such as the GHG Protocol and WBCSD; where an institution relies on an external method, it must state which one it used.
Five rules that shape the numbers
- It is optional. PCAF states that reporting avoided emissions is optional for financial institutions, and the same applies to the forward-looking metrics. Absolute financed emissions remain the required disclosure.
- Only climate solutions and dedicated enablers count. Climate solutions reduce emissions directly through what they deliver, such as renewable electricity. Enabling activities count only when they are exclusively dedicated to climate solutions. The two must be disclosed separately.
- The counterfactual must be credible and conservative. Benefits that would have occurred anyway are excluded, and the most conservative market average available should be used as the baseline. The method and assumptions must be disclosed.
- No economic estimates. Institutions shall not estimate avoided emissions from economic intensities. Figures must rest on reported data or physical activity data, so the weakest PCAF data quality scores (4 and 5) are not available. A data quality score should be disclosed alongside the figure.
- Never net. Financed avoided emissions are disclosed separately from, and in addition to, absolute financed emissions. PCAF recommends stating that they cannot be compared with or deducted from financed (generated) emissions. Removals are disclosed separately too.
Which loans and investments qualify
The guidance distinguishes two kinds of instrument:
- Specific corporate instruments — loans and investments in identified projects, assets or structures, such as project finance for a solar plant or a loan for a building retrofit. The avoided emissions of the asset can be attributed with the matching PCAF attribution method.
- General corporate instruments — general-purpose loans and investments in a company. Here avoided emissions may be counted only where they occur outside the counterparty's value chain, which in practice points to companies whose products are themselves climate solutions.
Attribution follows the same logic as financed emissions. If a bank provides a quarter of a project's total equity and debt, it can attribute a quarter of the project's avoided emissions — and a quarter of its generated emissions, which still go into the absolute inventory. Our PCAF guide covers the attribution factor for each asset class.
An illustrative example
The figures below are invented to show the arithmetic. A bank finances 25% of a wind project's total equity and debt. In the reporting year the project's own emissions are 2,000 tCO₂e. Under a conservative grid-average counterfactual, producing the same electricity would have emitted 50,000 tCO₂e, so the project avoids 48,000 tCO₂e.
- Financed emissions: 25% × 2,000 = 500 tCO₂e, reported in Scope 3 Category 15 with the rest of the portfolio.
- Financed avoided emissions: 25% × 48,000 = 12,000 tCO₂e, reported in a separate line as a climate solution, with the counterfactual and data quality score stated.
The two figures appear side by side. The bank's footprint is still 500 tCO₂e for this exposure, not minus 11,500.
The forward-looking metrics: EER and EAE
The same supplement adds two metrics that look ahead rather than at the reporting year.
Expected emissions reductions (EER)
EER captures the institution's share of the reduction in a counterparty's own absolute emissions that its plans and targets imply between a base year and a future year. It is calculated only in the year of contracting. Because expectations can be over-optimistic, institutions then report achieved emissions reductions (AER) — base-year emissions minus reporting-year emissions — in later years, so readers can compare promise with delivery.
Expected avoided emissions (EAE)
EAE estimates the avoided emissions a project is expected to deliver over its life, compared with the counterfactual. It must be calculated on an annualised basis and reported each year until the institution no longer has exposure to the counterparty. The guardrails on counterfactuals and disclosure that apply to avoided emissions apply here too.
| Metric | What it measures | Boundary |
|---|---|---|
| Financed emissions | Attributed emissions in the reporting year | Counterparty's inventory |
| Financed avoided emissions | Attributed reduction against a counterfactual in the reporting year | Outside the counterparty's value chain |
| EER, then AER | Expected, then achieved, fall in the counterparty's own emissions | Counterparty's inventory |
| EAE | Annualised expected avoided emissions over the project's life | Outside the value chain |
How to start without overclaiming
- Get the inventory right first. Avoided emissions add context to a complete financed emissions figure; they do not replace it. Report coverage and data quality scores for the core inventory.
- Start with specific instruments. Project finance and use-of-proceeds lending for renewable energy or efficiency have identifiable assets and physical data, which makes the calculation defensible.
- Document every counterfactual. Record the baseline, its source and year, and why it is conservative. Keep it with the exposure record so a reviewer can retrace it.
- Label everything. Separate climate solutions from enablers, avoided from generated emissions, and expected from achieved. State the PCAF edition and any external method used.
- Track delivery. If you publish EER, plan from day one to collect the counterparty emissions needed to report AER.
How EKOFIN helps
EKOFIN calculates financed emissions across PCAF asset classes and records, for every exposure, the attribution factor, the data source, the reporting year and the data quality score. That exposure-level evidence is the base any avoided emissions or forward-looking figure has to rest on, and it keeps the core inventory complete and auditable. Read more on our financed emissions page.
Frequently asked questions
Can banks subtract avoided emissions from financed emissions?
No. PCAF requires financed avoided emissions to be disclosed separately from absolute emissions and recommends stating that they cannot be deducted from financed emissions.
Is reporting financed avoided emissions mandatory?
No. Under the PCAF supplemental guidance it is optional. Absolute financed emissions remain the core PCAF disclosure.
Can avoided emissions be estimated from revenue?
No. The guidance prohibits estimates based on economic intensities. Avoided emissions need reported figures or physical activity data, such as electricity generated.