For financial institutions (asset managers, commercial banks, and insurers), Scope 3 Category 15 is not a distant supply chain issue. It is their core business. Financed emissions are the GHG emissions embedded in the loans they make and the investments they hold, and IFRS S2 requires specific disclosures that go beyond standard Scope 3 reporting.
What Are Financed Emissions?
IFRS S2 Appendix A defines financed emissions as the portion of gross GHG emissions of an investee or counterparty that is attributed to the loans and investments that a reporting entity has made to that investee or counterparty.
In simpler terms: when a bank lends to a steel company, it is financially supporting the steel company's operations. A share of the steel company's emissions, proportional to the bank's lending, can be attributed to the bank. These are the bank's financed emissions.
Financed emissions are part of Scope 3 Category 15 (Investments). But for financial institutions, they require more detailed disclosure than a simple total figure.
Why Financial Institutions Face Unique Requirements (B58)
Application Guidance B58 explains why financial sector entities face specific financed emissions requirements: entities in financial activities face particular climate-related risks related to their counterparties' GHG emissions. These include:
- Credit risk: Borrowers in high-emission sectors may face business disruption, asset stranding, or regulatory penalties that impair their ability to repay
- Market risk: Investments in high-emission companies may decline in value as transition policies tighten
- Reputational risk: Association with high-emission industries may damage the institution's brand
- Operational risk: Physical climate risks to collateral assets (for example, flood-damaged real estate securing a mortgage)
These risks are systemic across the entire lending and investment portfolio, making financed emissions a critical input for the financial sector's own climate risk management.
Which Institutions Are In Scope? (B59)
Application Guidance B59 identifies three types of financial activities subject to the enhanced financed emissions requirements:
- Asset management: Managing investment portfolios on behalf of clients
- Commercial banking: Providing loans, credits, and other banking services
- Insurance: Providing insurance coverage and managing insurance-related financial assets
An entity involved in multiple financial activities must apply the relevant requirements for each activity type separately.
Standard corporate Scope 3 reporting is like counting the carbon footprint of your company's supply chain: you bear indirect responsibility for emissions generated by the businesses you buy from. Financed emissions flip this perspective. Financial institutions are on the other side. Instead of buying from companies, they fund them. Their financed emissions count the carbon footprint of the businesses they enable through loans and investment, which is why it is a different calculation and a different disclosure challenge.
The Link to Category 15 (Para 29(a)(vi)(2))
IFRS S2 paragraph 29(a)(vi)(2) requires financial sector entities to disclose additional information about financed emissions as part of their Category 15 Scope 3 disclosure. This additional information includes:
- Total financed emissions (Scope 1, Scope 2, Scope 3 of counterparties attributed to the institution)
- Portfolio and methodology details specific to each financial activity type
The 2025 Amendments: Clarity on Category 15 (Paragraphs 29A to 29C)
The December 2025 amendments (effective 1 January 2027, early application permitted) added clarity on a longstanding ambiguity: what exactly must be included in Category 15?
- Paragraph 29A: An entity is permitted to limit its measure of Scope 3 Category 15 GHG emissions to only its financed emissions (attributed to loans and investments). Entities may also exclude emissions attributable to derivatives from their Category 15 measure.
- Paragraph 29B: If an entity applies the 29A limitation, it must: (a) explain what it treated as a derivative, and (b) describe the financial activities it excluded.
- Paragraph 29C: If an entity includes Category 15 in its Scope 3, it must disclose: the total Category 15 GHG emissions and the subtotal of financed emissions included within that total.
This creates a clear presentation framework: total Category 15, of which financed emissions are X, with the remainder being other investment-related emissions (facilitated emissions, insurance-associated emissions, etc. that the entity chose to include).
"Loans and Investments": What Is Included?
The term "loans and investments" for financed emissions purposes includes:
- Loans (including syndicated loans and project finance)
- Bonds (corporate and sovereign bonds held as investments)
- Equity investments (listed and unlisted)
- Undrawn loan commitments
It excludes (under the Para 29A option):
- Derivatives (options, futures, swaps)
- Other facilitated emissions (advisory, underwriting, agency activities)
Key Takeaways
- 1Financed emissions attribute a share of borrower or investee GHG emissions to the financial institution proportional to its lending or investment position
- 2Three types of financial activities face enhanced requirements: asset management, commercial banking, and insurance - each with tailored disclosure rules
- 3The 2025 amendments (Para 29A) permit entities to limit Category 15 to financed emissions only, excluding facilitated emissions and derivatives
- 4If the Category 15 limitation is applied, entities must explain what they treated as a derivative and describe excluded financial activities
- 5Para 29C requires disclosure of both total Category 15 GHG emissions and the financed emissions subtotal within that total for transparent presentation