Financed emissions explained: a practical PCAF guide

Financed emissions are the greenhouse gas emissions of the companies, projects and assets that a bank, investor or insurer lends to or invests in. For most financial institutions they are by far the largest part of the footprint. This practical PCAF guide explains how financed emissions are measured, which metrics regulators expect, and how to improve data quality over time.

What financed emissions are

Under the GHG Protocol, financed emissions sit in Scope 3, Category 15: Investments. A bank's own offices and data centres (its Scope 1 and 2) are usually small by comparison. The emissions of a power company it lends to, or a cement producer whose bonds it holds, are not. Read the basics on our Financed Emissions page.

The Partnership for Carbon Accounting Financials (PCAF) publishes the Global GHG Accounting and Reporting Standard for the Financial Industry, which most institutions now use. It has three parts: Part A for financed emissions from loans and investments, Part B for facilitated emissions from capital-markets activity, and Part C for insurance-associated emissions.

The attribution factor

The core idea is simple: you count the share of a borrower's or investee's emissions that matches your share of its financing.

Financed emissions = attribution factor × the company's emissions, where attribution factor = outstanding amount ÷ company value.

What counts as "company value" depends on the asset class. For listed companies it is enterprise value including cash (EVIC). For private companies it is total equity plus debt. For a mortgage it is the property value at origination.

The seven asset classes

PCAF Part A sets out methods for seven asset classes:

1. Listed equity and corporate bonds — attributed by outstanding amount over EVIC.
2. Business loans and unlisted equity — over total equity plus debt.
3. Project finance — over total project equity plus debt.
4. Commercial real estate — over property value at origination.
5. Mortgages — over property value at origination.
6. Motor vehicle loans — over vehicle value at origination.
7. Sovereign debt — over purchasing-power-adjusted GDP, reported separately.

Data quality: scores 1 to 5

Few institutions have reported emissions for every counterparty. PCAF accepts this and asks you to score each figure from 1 (best) to 5:

• Score 1–2: reported emissions from the company, verified or unverified, or primary physical activity data.
• Score 3: physical activity data with average emission factors.
• Score 4–5: estimates from revenue, assets or sector averages.

Most portfolios start heavily weighted to scores 4 and 5. The practical goal is to move exposure up the ladder year after year by requesting reported data from the counterparties that matter most, and to disclose the weighted score so readers can judge reliability.

Metrics you are expected to report

• Absolute financed emissions in tCO₂e, by asset class and sector.
• Economic emission intensity — financed emissions per million invested or lent.
• Weighted average carbon intensity (WACI) — portfolio-weighted emissions per million of company revenue.
• Data quality score, weighted by exposure.

IFRS S2 requires entities in asset management, commercial banking and insurance to disclose financed emissions information, including the approach used and the share of the portfolio covered. Jurisdictions adopting ISSB standards are bringing these requirements into local rules, so check the timetable that applies to you.

Common pitfalls

• Mixing company values. Using market capitalisation instead of EVIC for listed companies, or valuing a property at today's price instead of at origination, distorts attribution.
• Double counting. Holding a company's bonds and its loans means attributing against the same company value, not counting its emissions twice.
• Hiding estimates. A single total without a data quality score invites challenge. Show how much rests on reported data and how much on proxies.
• Stale emissions. Company emissions often lag by a year. Record the reporting year used for each counterparty so comparisons are fair.
• Ignoring Scope 3 of investees. PCAF asks for investees' Scope 3 to be reported for certain sectors. Plan for it, even if coverage starts small.

A practical roadmap

1. Map the book: which exposures fall into which PCAF asset class.
2. Calculate a first baseline using the best data you have, even if mostly score 4–5.
3. Identify the counterparties where better data moves the weighted score and the total most.
4. Request reported data from them and track responses.
5. Set sector targets and track intensity against decarbonisation pathways.
6. Disclose with method, coverage and quality clearly stated.

How EKOFIN helps

EKOFIN is Ekobon's platform for financed emissions. You add companies, funds and other assets; EKOFIN applies the right PCAF method for each asset class, scores data quality, and lets you send data requests to counterparties. Dashboards show financed emissions by asset class and sector, economic intensity, WACI, and alignment against sector pathways. Your own operations can be measured in EKOTRACE, so the whole footprint lives in one place.

Frequently asked questions

Do we need data for every counterparty before we start?

No. PCAF expects estimates where reported data is missing, with a quality score that shows it.

Are facilitated and insurance emissions required?

That depends on your regulator and business model. Many institutions start with Part A and add Parts B and C later.