Listed Equity & Corporate Bonds

Listed equity and corporate bonds represent the first and most widely discussed asset class in the PCAF Standard. This covers shares in publicly listed companies and debt instruments (bonds, notes) issued by corporations and traded on public markets. For many large banks and asset managers, this asset class represents a substantial portion of their total financed emissions.

Asset Class Definition

This asset class includes:

• Listed equity: Shares in companies that are publicly traded on a stock exchange
• Corporate bonds: Debt instruments issued by corporations and traded in public markets, including corporate medium-term notes and sustainability-linked bonds (except green bonds with known use of proceeds, which fall under Chapter 5.7)

The key characteristic distinguishing this asset class from business loans is that the investee company has a publicly observable market capitalisation, which enables the use of EVIC as the denominator.

Emission Scopes Covered

Financial institutions shall report Scope 1, Scope 2, and Scope 3 emissions of borrowers and investees across all sectors. Starting with reports published in 2025, this encompasses all three scopes.

Scope 3 emissions of borrowers and investees shall be disclosed separately from Scope 1 and 2 emissions. PCAF acknowledges that this may lead to double counting (particularly when investing in other financial institutions), and recommends disclosing financed emissions to the financial sector separately for transparency.

Attribution of Emissions: The EVIC Formula

For listed equity and corporate bonds, the attribution factor uses EVIC (Enterprise Value Including Cash) as the denominator:

EVIC is defined as the sum of:

• Market capitalisation of ordinary shares at fiscal year end
• Market capitalisation of preferred shares at fiscal year end
• Book value of total debt (current and long-term)
• Minorities' interests

No deductions of cash or cash equivalents are made, to avoid negative enterprise values.

For equity: The outstanding amount is the market value of the equity holding at fiscal year end. For bonds: The outstanding amount is the book value of the bond position at fiscal year end.

The financed emissions formula aggregates across all investees:

Data Quality Options

PCAF provides three options for obtaining company emissions data for this asset class:

• Option 1 (Scores 1 and 2): Use reported emissions from sustainability reports, CDP disclosures, or third-party data providers (Bloomberg, MSCI, Sustainalytics, S&P/Trucost, ISS ESG)
• Option 2 (Score 2): Estimate from primary physical activity data (energy consumption or production volumes)
• Option 3 (Scores 3 to 5): Estimate from economic activity data using sector-average emission factors from EEIO databases

For listed companies, third-party data providers (CDP, Bloomberg, MSCI) typically make Scope 1 and 2 emissions data available. PCAF advises using the same provider consistently to minimise variability between reporting periods.

Emission Removals and Carbon Credits

Companies in a financial institution's portfolio may report emission removals (nature-based or technology-based CO2 removal from the atmosphere). FIs must account for and report attributed emission removals separately from absolute emissions, using the same attribution factor:

Companies may also generate or retire carbon credits. Carbon credits retired may optionally be reported; carbon credits generated should be reported. These figures provide context but do not offset the absolute emissions reported under the PCAF Standard.

Key Limitations

Market Value Fluctuations

When using EVIC as the denominator, the attribution factor moves inversely with the company's market capitalisation. If a company's share price rises significantly, the EVIC increases and the attribution factor falls, automatically reducing the financial institution's reported financed emissions — even if the company's actual physical emissions are unchanged.

PCAF requires all financial institutions to report their uncorrected absolute financed emissions as the minimum. Adjustments for market price fluctuations may optionally be reported separately with full transparency on the methodology applied.

Consistency Requirement

The date (calendar year-end or fiscal year-end) for both the outstanding amount and the EVIC must be consistent. Financial institutions must also use the most recent available emissions data, clearly disclosing any lag between the financial year and the emissions data year.