Financed emissions accounting does not exist in isolation. It sits within a broader ecosystem of climate-related standards, frameworks, and regulatory initiatives that together shape how financial institutions measure, manage, and disclose their climate impact. Understanding this landscape is essential for positioning PCAF within the bigger picture.
The Standards Ecosystem
| Framework | Focus | Relationship to Financed Emissions |
|---|---|---|
| GHG Protocol | Corporate GHG accounting and reporting | Provides the overarching Scope 1/2/3 framework; PCAF supplements Category 15 |
| PCAF | Financial industry GHG accounting | The primary standard for measuring financed, facilitated, and insurance-associated emissions |
| TCFD | Climate-related financial disclosures | Recommends disclosure of financed emissions under Metrics and Targets |
| ISSB (IFRS S2) | Sustainability-related financial disclosures | Requires disclosure of Scope 3 Category 15 emissions for financial institutions |
| SBTi | Science-based target setting | Uses financed emissions as the baseline for portfolio decarbonisation targets |
| NZBA / NZAOA | Net-zero commitments for banks and asset owners | Members commit to measuring and reporting financed emissions using PCAF |
| EU SFDR | Sustainability disclosure for EU financial products | PAI indicators include GHG intensity and carbon footprint of portfolios |
| Basel Pillar 3 | Banking prudential disclosures | ESG risk disclosures increasingly reference financed emissions metrics |
PCAF: The Three-Part Standard
The PCAF Global GHG Accounting and Reporting Standard is structured into three complementary parts, each addressing a different type of financial activity:
Part A: Financed Emissions
Part A is the flagship standard. Now in its Third Edition (December 2025), it covers on-balance-sheet lending and investment activities across 10 asset classes:
- Listed Equity and Corporate Bonds
- Business Loans and Unlisted Equity
- Project Finance
- Commercial Real Estate
- Mortgages
- Motor Vehicle Loans
- Use of Proceeds Structures
- Securitizations and Structured Products
- Sovereign Debt
- Sub-sovereign Debt
Each asset class has its own attribution methodology, data quality scoring system, and practical examples. Over 540 financial institutions globally have signed up to PCAF and committed to disclosing their financed emissions using Part A.
Part B: Facilitated Emissions
Part B (First Version, December 2023) addresses emissions associated with capital market activities where the financial institution acts as a facilitator rather than a direct lender or investor. This includes:
- Underwriting of bond and equity issuances (bookrunner roles)
- Syndicated loans
- Private placements
The key distinction from Part A is that facilitated emissions involve off-balance-sheet, temporary relationships rather than ongoing lending or investment positions. Part B introduces a 33% weighting factor to reflect this difference in the nature of the relationship.
Part C: Insurance-Associated Emissions
Part C (First Version, December 2023) covers emissions linked to re/insurance underwriting portfolios. It introduces the "follow the risk" principle (as opposed to Part A's "follow the money" principle) and currently covers:
- Commercial lines of business
- Personal motor insurance
The attribution for insurance-associated emissions uses premium-to-revenue ratios (for commercial lines) and total cost of ownership percentages (for personal motor), reflecting the fundamentally different nature of the insurer-insured relationship compared to lender-borrower.
Although the three parts share common GHG accounting principles (derived from the GHG Protocol), they use different attribution approaches because the underlying financial relationships differ. A bank loan creates a direct capital relationship. An underwriting mandate creates a temporary facilitation role. An insurance policy creates a risk-transfer relationship. Each demands its own methodology.
TCFD and the Drive Toward Mandatory Disclosure
The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board in 2015, provided the initial impetus for financial institutions to disclose portfolio-level climate metrics. The TCFD's Metrics and Targets recommendations explicitly call on asset owners, asset managers, and banks to disclose:
- Weighted average carbon intensity (WACI) of their portfolios
- Total carbon emissions associated with their holdings
- Exposure to carbon-related assets in their portfolios
PCAF's financed emissions methodology directly feeds these TCFD metrics. Financial institutions that calculate their financed emissions using PCAF can produce the data required for TCFD-aligned disclosures.
SBTi for Financial Institutions
The Science Based Targets initiative (SBTi) enables financial institutions to set emissions reduction targets that are consistent with climate science. The SBTi's Financial Institutions framework accepts portfolio-level financed emissions as the baseline measurement for target setting.
Financial institutions can choose between several approaches:
- Sectoral Decarbonisation Approach (SDA): Aligns sector-level emission intensity with climate scenarios
- Portfolio coverage approach: Targets a percentage of borrowers/investees with their own SBTs
- Temperature rating approach: Assesses whether the portfolio's implied temperature trajectory is consistent with Paris goals
All of these approaches begin with measuring financed emissions.
ISSB (IFRS S2) Requirements
The International Sustainability Standards Board (ISSB) published IFRS S2 (Climate-related Disclosures) in June 2023, establishing a global baseline for climate-related financial reporting. IFRS S2 requires companies, including financial institutions, to disclose their Scope 3 emissions when they are material.
For banks, asset managers, and insurers, Scope 3 Category 15 emissions are virtually always material. IFRS S2 therefore effectively mandates financed emissions disclosure for the financial sector in jurisdictions that adopt the standard.
Regulatory convergence
The ISSB's standards are intentionally designed to be compatible with TCFD recommendations (which the ISSB has effectively absorbed), EU CSRD requirements, and jurisdictional regulations. For financial institutions, this means that investing in PCAF-based financed emissions measurement creates a dataset that can serve multiple disclosure obligations simultaneously, rather than requiring separate calculations for each framework.
EU Regulatory Context
In the European Union, several regulations directly or indirectly reference financed emissions:
- EU SFDR: The Principal Adverse Impact (PAI) indicators include "carbon footprint" and "GHG intensity of investee companies," which require emissions data at the portfolio level
- EU Taxonomy Regulation: Requires disclosure of what proportion of portfolios align with environmentally sustainable activities, which complements financed emissions data
- CRR/CRD (Basel Pillar 3): The European Banking Authority's Pillar 3 ESG risk disclosure requirements include templates for financed emissions reporting
Think of the standards landscape as a symphony orchestra. The GHG Protocol is the musical score that everyone follows. PCAF is the section leader who translates the score into precise instructions for the financial instruments section. TCFD, ISSB, and SBTi are the conductors who bring different performances (disclosure, target setting, risk management) to life using the same underlying music.
PCAF's Global Reach
As of the Third Edition publication (December 2025), PCAF has grown into the dominant standard for financial sector GHG accounting:
- Over 540 financial institutions have committed to PCAF
- Signatories span six continents and include banks, asset managers, insurers, and development finance institutions
- The standard is referenced by major regulatory bodies including the ISSB, EBA, and national supervisory authorities
- PCAF provides a web-based emission factor database and technical assistance to help signatories implement the methodology
Understanding the PCAF Standard and its place within this broader ecosystem is essential for anyone working in sustainable finance, climate risk, or regulatory compliance in the financial sector.
Key Takeaways
- 1PCAF sits within a broader ecosystem of standards including the GHG Protocol, TCFD, ISSB (IFRS S2), SBTi, EU SFDR, and Basel Pillar 3 ESG disclosures
- 2Parts A, B, and C of the PCAF Standard use different attribution approaches because lending, underwriting, and insurance create fundamentally different financial relationships
- 3SBTi uses financed emissions as the baseline for setting portfolio decarbonisation targets using sectoral, coverage, or temperature-rating approaches
- 4IFRS S2 effectively mandates financed emissions disclosure for financial institutions in jurisdictions that adopt the standard
- 5Investing in PCAF-based measurement creates a single dataset that serves multiple disclosure obligations simultaneously