WACI and financed emissions metrics: formulas and a worked example
WACI (weighted average carbon intensity) is a portfolio's exposure to carbon-intensive companies: each holding's emissions per million of revenue, weighted by its share of the portfolio. It sits alongside three other financed emissions metrics — absolute financed emissions, carbon footprint and economic emission intensity — and each answers a different question. This guide gives the formulas, a worked example and when to use each.
The four core financed emissions metrics
Banks, asset managers and insurers use a small set of portfolio metrics. They come from the PCAF Standard and from the guidance originally developed by the Task Force on Climate-related Financial Disclosures (TCFD), whose work has since been taken over by the ISSB.
| Metric | Unit | Question it answers |
|---|---|---|
| Absolute financed emissions | tCO₂e | How much of the investees' emissions is attributable to us? |
| Carbon footprint | tCO₂e per million invested | How carbon-heavy is each unit of money we invest? |
| Economic emission intensity | tCO₂e per million lent or invested | The same idea, applied to loans and investments together |
| WACI | tCO₂e per million of investee revenue | How exposed are we to carbon-intensive business models? |
Absolute financed emissions are the figure that disclosure rules require. PCAF's Part A says institutions shall disclose absolute financed emissions, and IFRS S2 asks banks, asset managers and insurers for financed emissions information. The intensity metrics are mainly for comparison and steering.
Formulas
1. Absolute financed emissions
Financed emissions = Σ (outstanding amounti ÷ company valuei) × company emissionsi
Company value is EVIC (enterprise value including cash) for listed equity and bonds, and total equity plus debt for private companies and business loans. The ratio is the attribution factor. Our PCAF guide covers the other asset classes.
2. Carbon footprint
Carbon footprint = financed emissions ÷ current portfolio value (in millions)
This normalises the absolute figure so that portfolios of different sizes, or the same portfolio in different years, can be compared.
3. Economic emission intensity
Economic emission intensity = financed emissions ÷ loans and investments (in millions)
This is PCAF's term for the same normalisation. Banks typically apply it to a loan book or a sector segment; asset managers usually call it carbon footprint.
4. Weighted average carbon intensity (WACI)
WACI = Σ (holding valuei ÷ portfolio value) × (company emissionsi ÷ company revenuei in millions)
WACI uses no attribution factor. Each company's own carbon intensity is weighted by how much of the portfolio it represents. That makes it simple to compute and easy to break down by holding, which is why it became a common metric for listed equity and bond portfolios.
Illustrative worked example
An illustrative portfolio of 100 million holds three listed companies. All figures are invented for the example and cover Scope 1 and 2 only.
| Company A | Company B | Company C | |
|---|---|---|---|
| Holding (millions) | 40 | 35 | 25 |
| EVIC (millions) | 400 | 700 | 250 |
| Emissions (tCO₂e) | 200,000 | 1,400,000 | 25,000 |
| Revenue (millions) | 1,000 | 2,000 | 500 |
| Attribution factor | 0.10 | 0.05 | 0.10 |
| Financed emissions (tCO₂e) | 20,000 | 70,000 | 2,500 |
| Carbon intensity (tCO₂e per million revenue) | 200 | 700 | 50 |
- Absolute financed emissions: 20,000 + 70,000 + 2,500 = 92,500 tCO₂e.
- Carbon footprint: 92,500 ÷ 100 = 925 tCO₂e per million invested.
- WACI: (0.40 × 200) + (0.35 × 700) + (0.25 × 50) = 80 + 245 + 12.5 = 337.5 tCO₂e per million revenue.
Company B accounts for about three quarters of both the financed emissions and the WACI. Selling half of the B holding and buying more of C would cut every metric — but for different reasons, which is why reporting more than one helps readers.
WACI vs carbon footprint: strengths and limits
WACI
- Strengths: needs no EVIC or ownership data; works across asset classes where revenue is known; easy to attribute to individual holdings and sectors.
- Limits: it is not an emissions total and cannot be added to your Scope 1 and 2. Because it divides by revenue, it moves with commodity prices, inflation and currency even when emissions are unchanged.
Carbon footprint and economic intensity
- Strengths: consistent with absolute financed emissions and with PCAF attribution; directly linked to what you own or lend.
- Limits: sensitive to market values. A rise in share prices lifts EVIC, lowers attribution factors and can reduce the footprint with no real-world change. PCAF's latest edition puts more weight on explaining such fluctuations.
Whichever metric you use, state the scopes covered, the reporting year of company data, the share of the portfolio covered and the PCAF data quality score.
Physical intensity and sector pathways
For target setting, financial metrics are often too blunt. Banks steering a power, steel or cement book usually track physical intensity — tCO₂e per MWh, per tonne of steel or per tonne of cement — and compare it with sector decarbonisation pathways. These metrics are unaffected by prices and map directly onto the targets in our net-zero target setting guide.
Which financed emissions metrics to report
- Banks: absolute financed emissions by sector and asset class, economic emission intensity, and physical intensity for carbon-intensive sectors.
- Asset managers and owners: absolute financed emissions, carbon footprint and WACI by fund or mandate.
- Insurers: financed emissions for the investment portfolio; insurance-associated emissions under PCAF Part C where relevant.
- Everyone: the data quality score and coverage. See PCAF data quality scores explained.
For disclosure under IFRS S2 and local rules, see climate risk disclosure for banks.
Common calculation errors
- Using market capitalisation instead of EVIC for attribution, which overstates attribution factors for indebted companies.
- Mismatched years: combining this year's holdings with emissions and revenue from different years without recording which year each figure belongs to.
- Currency drift: converting revenue and holdings at different exchange rates, which distorts carbon intensity.
- Silent gaps: rescaling weights to the covered holdings without disclosing what share of the portfolio was left out.
How EKOFIN helps
EKOFIN calculates absolute financed emissions with the right PCAF method for each asset class, and produces carbon footprint, economic emission intensity and WACI from the same approved data. Each metric can be broken down by asset class, sector and holding, with the data quality score and coverage shown alongside, and tracked against sector pathways. Outputs are prepared for IFRS S2 and TCFD-style reporting. Learn more on our financed emissions page.
Frequently asked questions
What is the difference between WACI and carbon footprint?
Carbon footprint divides attributed financed emissions by the amount invested, so it reflects ownership share. WACI averages each company's emissions per unit of revenue, weighted by portfolio weight, with no attribution. A portfolio can have a low footprint but a high WACI if it holds small stakes in very carbon-intensive companies.
Does WACI include Scope 3?
It can, but most published WACI figures cover investees' Scope 1 and 2. If you add Scope 3, report it separately, because investee Scope 3 data is less reliable and double-counts emissions across companies.
Is WACI required under IFRS S2?
IFRS S2 requires financed emissions information from banks, asset managers and insurers, not WACI specifically. Many institutions still report WACI as an additional metric because readers know it from TCFD-style reports.
Why did our carbon footprint fall when emissions did not?
Market values rose. Higher EVIC lowers each attribution factor, so attributed emissions fall. Explain such movements and consider showing results at constant values.