PCAF Global GHG Standard

The GLOBAL GHG
ACCOUNTING
& REPORTING Standard
F OR T H E F I NA NC I A L I N DUS T RY
Global GHG Accounting and Reporting Standard for the Financial Industry
This standard has been reviewed by the GHG Protocol and

is in conformance with the requirements set forth in the
Corporate Value Chain (Scope 3) Accounting and Reporting
Standard, for Category 15 investment activities.
The GLOBAL GHG

ACCOUNTING
Please cite this document as:

PCAF (2020). The Global GHG Accounting and Reporting
Standard for the Financial Industry. First edition.
November 18, 2020
2
Understand Identify Review Review and apply

accounting and accounting Report
Introduction what GHG business
reporting principles methodologies for emissions
accounting is goals and rules each asset class
6
5
3
2
1
R
R
R
R
R
TE
TE
TE
TE
TE
TE
AP
AP
AP
AP
AP
AP
CH
CH
CH
CH
CH
CH
Table of contents
Acknowledgements 4
Foreword by the PCAF Steering Committee 6
Foreword by Mark Carney 7
Executive summary 8
1. Introduction 11
2. The importance of GHG accounting 18
3. Using GHG accounting to set and achieve business goals 24
4. Principles and requirements of GHG accounting for financials 32
4.1 GHG accounting requirements derived from the GHG Protocol’s principles 33
4.2 Additional requirements for accounting and reporting financed emissions 35
5. Methodology to measure financed emissions 41
5.1 Listed equity and corporate bonds 47
5.2 Business loans and unlisted equity 58
5.3 Project finance 69
5.4 Commercial real estate 77
5.5 Mortgages 83
5.6 Motor vehicle loans 89
6. Reporting recommendations and requirements 97
7. Glossary 105
8. Acronyms 110
9. References 113
10. Annex 116
18-11-2020 3
Acknowledgements
In September 2019, the Partnership for Carbon Accounting Financials (PCAF) was launched
globally to harmonize greenhouse gas (GHG) accounting methods and enable financial
institutions to consistently measure and disclose the GHG emissions financed by their loans and
investments. These emissions are also called financed emissions or portfolio climate impact.
As an industry-led partnership, PCAF is governed by a Steering Committee of ABN AMRO,

Amalgamated Bank, ASN Bank, the Global Alliance for Banking on Values, Morgan Stanley, NMB
Bank, Triodos Bank, and a representative from the United Nations (UN)-convened Net-Zero
Asset Owner Alliance. At the time of publishing this document, more than 85 banks and investors
participate in PCAF.1 Out of this group, 16 volunteered to form the PCAF Core Team to co-create
the Global GHG Accounting and Reporting Standard for the Financial Industry with the ultimate
goal of harmonizing greenhouse gas accounting. The PCAF Global Core Team is depicted below:
The PCAF Secretariat facilitated the Core Team’s work by moderating their technical discussions,
reviewing the content, and compiling and editing this document. The PCAF Secretariat is
operated by Guidehouse, a global consultancy firm specialized in energy, sustainability, risk, and
compliance for the financial industry.
Observers to the process of developing the Global GHG Accounting and Reporting Standard
for the Financial Industry include Barclays, the Green Climate Fund, the General Council for
Islamic Banks and Financial Institutions, and other organizations. As observers, these financial
entities were proactively informed and involved in the development process of the Global GHG
1 The full list of PCAF participants can be found at:

https://carbonaccountingfinancials.com/financial-institutions-taking-action#overview-of-institutions
4
Accounting and Reporting Standard and had the opportunity to provide input and feedback.
Observers’ participation does not imply official endorsement nor commitment to PCAF.
Throughout the development of the Global GHG Accounting and Reporting Standard (October
2019-November 2020), PCAF engaged with civil society organizations to consider their ideas,
discuss PCAF methodological approaches, and receive feedback. During August and September
2020, PCAF also held a public consultation with financial institutions, policy makers, data
providers, consultants, and nongovernmental organizations (NGOs).
This standard has been reviewed by the GHG Protocol and conforms with the requirements set
forth in the Corporate Value Chain (Scope 3) Accounting and Reporting Standard for Category 15
investment activities.
5
Foreword by the PCAF Steering Committee

As the urgency of the climate emergency grows with still-rising global greenhouse gases and proliferating
physical impacts, increasing efforts are now being directed at how to prepare the global financial system to
manage carbon risks and bring solutions to the climate challenge, by bringing emissions down to net-zero.
It is against that back drop that, as members of the Steering Committee for the Partnership for Carbon
Accounting Financials (PCAF), we have been building what we believe to be an essential and crucial
component of the broader climate finance ecosystem. Since our global launch in September 2019, there has
been a surge of interest from banks and investors worldwide to have a clear and transparent set of rules
to measure their financed emissions to assess risk, manage impact, meet the disclosure expectations of
important stakeholders, and assess progress to global climate goals.
We owe the globalization of PCAF to the pioneering work of the Dutch financial industry. In 2015, fourteen
Dutch financial institutions, led by ASN Bank, started the journey to develop methods to understand their
portfolios’ contribution to climate change—they strongly believed that measuring financed emissions would
enable them to take informed actions to decarbonize their portfolios in order to minimize climate risks
and maximize opportunities. They were right. By measuring financed emissions, they were able to identify
carbon-intensive hotspots and develop innovative low carbon products for their clients and investees. Their
work reveals that measuring financed emissions is the cornerstone of informed climate actions. It is one of
the first steps any financial institution should take when embarking upon a process to understand climate
risks and opportunities and assessing portfolio alignment in the context of the Paris Agreement.
The PCAF Netherlands success led to the uptake of greenhouse gas accounting methods by North
American financial institutions in 2018. After being tried and tested in the Netherlands, Canada and the
United States, and bolstered by a public commitment from pioneers of values-based banking from all
corners of the world to adopt this approach, many other financial institutions around the globe began to
inquire about how this experience could be applied in other countries.
We listened to our peers and understood that it was time to have harmonized methodologies to measure
financed emissions that can be used by financial institutions of various sizes and with diverse models
wherever they are in the world. The Global GHG Accounting and Reporting Standard that you are about to
read is a response to this global request.
The Standard is the result of the tenacious work of financial institutions who are part of the PCAF Global
Core Team, who volunteered their time to create it.
We thank the William & Flora Hewlett Foundation and the Ikea Foundation for their generous support of this
work, we thank the institutions we work for who provided us with the time to work on something that is of
benefit to the industry as a whole, and we thank the hundreds of financial institutions, governmental and
nongovernmental organizations who have helped bring this important idea to life.
The PCAF Steering Committee

Tjeerd Ivan Jeroen James Sean Dinesh Lizzy Peter
Krumpelman Frishberg Loots Niven Wright Dulal Eilbracht Sandahl
forthcoming representative of the
UN-convened
Net-Zero Asset
Owner Alliance
6
Foreword by Mark Carney

To achieve net zero emissions by 2050, we need a whole economy transition - every company,
every bank, every insurer and investor will have to adjust their business models, develop credible
plans for the transition and implement them. Private finance will fund the initiative and innovation
of these plans, provided that it has the necessary information, tools and markets.
Financial firms will need to review more than the emissions generated by their own business
activity. They must measure and report the financed emissions generated by the companies,
properties and projects to which they lend. Some of the largest firms have already committed to
doing so and the PCAF initiative will help many more to follow.
The PCAF’s industry-led process demonstrates the sector’s recognition that climate change and
the transition to net zero is a risk that needs to be managed as well as an enormous commercial
opportunity to grasp. For this to happen, the sector requires robust, clear and harmonized
disclosure of financed emissions; it needs to embed climate risk management into business
decisions; and direct capital to economic activities that enable the transition to net zero no later
than 2050.
The Global GHG Accounting and Reporting Standard for the Financial Industry is an important
milestone that will serve to make significant progress on climate-related financial disclosures,
addressing these three important requirements. By using the Standard, the industry will be able
to measure financed emissions, a metric that provides the starting point to assess and disclose
climate-related risks in line with the Task Force on Climate-related Financial Disclosures (TCFD);
set science-based targets using emission-based methods developed by organizations like the
Science Based Targets initiative (SBTi); and inform climate strategies and actions that direct
capital to support the alignment of financial flows with the Paris Agreement’s goals.
As we enter the one year countdown to COP26, now is the time to raise ambition and take action.
Every bank, asset manager, asset owner and insurance company should consider how to set net
zero targets and use the PCAF guidance to help the world achieve net zero.
Mark Carney
Finance Adviser to the Prime Minister for COP 26 and UN Special Envoy for
Climate Action and Finance
7
Executive summary
The Partnership for Carbon Accounting Financials (PCAF) is an industry-led initiative. Created
in 2015 by Dutch financial institutions, PCAF extended to North America in 2018, and scaled up
globally in 2019. PCAF helps financial institutions assess and disclose the greenhouse gas (GHG)
emissions from their loans and investments through GHG accounting.
GHG accounting enables financial institutions to disclose these emissions at a fixed point in
time and in line with financial accounting periods. Measuring financed emissions allows financial
institutions to make transparent climate disclosures on their GHG emissions exposure, identify
climate-related transition risks and opportunities, and set the baseline emissions for target setting
in alignment with the Paris Agreement.
Until now, there has not been a globally accepted standard for the measurement and disclosure of
financed emissions. The absence of harmonized methodologies and reporting rules has led to the
poor uptake of the accounting of financed emissions and inconsistent disclosures across financial
institutions.
Responding to industry demand for a global, standardized GHG accounting approach, PCAF
developed the Global GHG Accounting and Reporting Standard for the Financial Industry
(the Standard). This Standard has been reviewed by the GHG Protocol and conforms with
the requirements set forth in the Corporate Value Chain (Scope 3) Accounting and Reporting
Standard for category 15 investment activities.
The Standard provides detailed methodological guidance for asset classes. Widely tested by
banks and investors, these methods assist in the measurement and disclosure of GHG emissions
associated with six asset classes:
Listed equity and Business loans and Project finance

corporate bonds unlisted equity
Commercial real estate Mortgages Motor vehicle loans
8
The Standard provides detailed guidance for each asset class to calculate the financed emissions
resulting from activities in the real economy that are financed through lending and investment
portfolios. Emissions are attributed to financial institutions based on robust, consistent
accounting rules specific to each asset class. By following the methodologies for each, financial
institutions can measure GHG emissions for each asset class and produce disclosures that are
consistent, comparable, reliable, and clear.
Limited data is often the main challenge in calculating financed emissions; however, data
limitations should not deter financial institutions from starting their GHG accounting journeys.
Beginning with estimated or proxy data can help identify carbon-intensive hotspots in lending
and investment portfolios. The Standard provides guidance on data quality scoring per asset
class, facilitating data transparency and encouraging improvements to data quality in the medium
and long term. The Standard also provides recommendations and requirements for disclosures,
which include a minimum disclosure threshold with flexibility to report beyond this level. Any
requirements not fulfilled must be accompanied by an explanation.
Using this Standard equips financial institutions with standardized, robust methods to measure
financed emissions and enables them to:
• Assess climate-related risks in line with the Task Force on Climate-related Financial
Disclosures (TCFD).
• Set science-based targets (SBTs) using methods developed by the Science Based Targets
initiative.
• Report to stakeholders like the Carbon Disclosure Project (CDP).
• Inform climate strategies and actions to develop innovative products that support the
transition toward a net-zero emissions economy.
9
WRI and WBCSD published
Corporate Value Chain PCAF founded by PCAF launches Global GHG
(Scope 3) Accounting and Dutch financial PCAF launched in PCAF published 2 reports on Accounting and Reporting Standard
Reporting Standard institutions North America GHG accounting methods PCAF launched globally for the Financial Industry
2011 2015 2018 2019 2019 2020
Harmonizing and implementing a

carbon accounting approach for the
financial sector in North America
Corporate Value Chain SF

6
(Scope 3) Accounting
PFCs
and Reporting Standard Accounting GHG emissions

of
processing
HFCs
products
and taking action:
sold
harmonised approach for the

n
transportatio
distribution
Supplement to the GHG Protocol Corporate sold financial sector in the Netherlands
O
products
2
N
of
and
use
Accounting and Reporting Standard PCAF The Netherlands, report 2019
Accounting GHG emissions and taking action: harmonised approach for the financial sector in the Netherlands PCAF The Netherlands, report 2019
end-of-life
of
products
4
treatment
CH
franchises
sold
company
facilities
steam,
use
assets
2
CO
own
leased
electricity,
for
cooling
purchased
company
&
vehicles
heating
and
related
energyfuel
activities
business
capital
travel
goods
investments
in
waste
purchased
generated
operations
and
goods
services
assets
transportatio
distribution
leased
and
employee
commuting
The GLOBAL GHG

ACCOUNTING
Using the Standard is the first step in the journey

to align with the Paris Agreement
Steering
Measure Develop Take

& Set Targets Strategy Actions
Disclose
Scenario Analysis Net-zero emissions
by 2050
Monitor Progress
!"#$%&'()!"#)*+*#,)-./)011234/540.6).6)7589):;)54)4
./@9/)79/)53394)A1533)53)3<.B6)=91.BC)
)
!"#$%&'()!"#)*+*#,)-./)011234/540.6).6)7589
!"! #$%&'()'*+$&,)-.()/01201-&')30.(%)
) ./@9/)79/)53394)A1533)53)3<.B6)=91.BC)
!"#$%&'()!"#)*+*#,)-./)011234/540.6).6)7589):;)54)4<9)=.44.>)?719539)239)4<9)35>9)
!"#$#%&'(&)*%+,"&#
./@9/)79/)53394)A1533)53)3<.B6)=91.BC) )
-./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:#
; 0,+5%&6*7+($$(,&$!
) !"! #$%&'()'*+$&,)-.()/01201-&')30.(%)
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>!
)
!"! #$%&'()'*+$&,)-.()/01201-&')30.(%) )
) !"#$#%&'(&)*%+,"&#
!"#$%&'()!"#)*+*#,)-./)011234/540.6).6)7589):;)54)4<9)=.44.>)?719539)239)4<9)35>9)
!"#$%&'()!"#)*+*#,)-./)011234/540.6).6)7589):;)54)4<9)=.44.>)?719539)239)4<9)35>9)
4"! 5+%$.'%%)60-.%)-.()+.6$%&'()'*+$&,)
-./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:#
; 0,+5%&6*7+($$(,&$!
This Standard was reviewed by the GHG Protocol and
Over 85 financial institutions,
./@9/)79/)53394)A1533)53)3<.B6)=91.BC) ./@9/)79/)53394)A1533)53)3<.B6)=91.BC)
!"#$#%&'(&)*%+,"&#
; 0,+5%&6*7+($$(,&$!
)
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>!
-./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:# is in conformance with the requirements set forth in the
with) over $ 17 Trillion in financial assets ) -./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! Corporate
!"#$#%&'(&)*%+,"&#
Value) Chain (Scope 3)9 '7:#
-./0*,1*2,#%3*4,+5%&6*78"(#6
; 0,+5%&6*7+($$(,&$!
Accounting and Reporting
committed (November 2020).
!"! #$%&'()'*+$&,)-.()/01201-&')30.(%) !"! #$%&'()'*+$&,)-.()/01201-&')30.(%)
)
Standard, 4"!for5+%$.'%%)60-.%)-.()+.6$%&'()'*+$&,)
Category 15 investment activities.
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>!
) ) )
4"! 5+%$.'%%)60-.%)-.()+.6$%&'()'*+$&,) )
!"#$#%&'(&)*%+,"&# !"#$#%&'(&)*%+,"&#
!"#$#%&'(&)*%+,"&# ) 7"! 8109'/&):$.-./')
!"#$%&'()!"#)*+*#,)-./)011234/540.6).6)7589):;)54)4<9)=.44.>)?719539)239)4<9)35>9)
; 0,+5%&6*7+($$(,&$! -./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:#
; 0,+5%&6*7+($$(,&$!
-./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:#
; 0,+5%&6*7+($$(,&$!
-./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:#
./@9/)79/)53394)A1533)53)3<.B6)=91.BC) !"#$#%&'(&)*%+,"&# )
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! ; 0,+5%&6*7+($$(,&$! -./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>!
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! -./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:#
!"#$#%&'(&)*%+,"&#
) ) ) ) ; @1,?74#*7+($$(,&$!
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! 2,#%3*51,?74#*78"(#6 9 '7:#
4"!!"!5+%$.'%%)60-.%)-.()+.6$%&'()'*+$&,)
#$%&'()'*+$&,)-.()/01201-&')30.(%) 4"! 5+%$.'%%)60-.%)-.()+.6$%&'()'*+$&,)
) ) 7"! 8109'/&):$.-./')
Listed) Equity
)
and Corporate Bonds Business
)
7"! Loans and Unlisted Equity
8109'/&):$.-./')
)
Project Finance
;"! <0=='1/$-6)>'-6)?%&-&')
!"#$#%&'(&)*%+,"&# !"#$#%&'(&)*%+,"&# ) !"#$#%&'(&)*%+,"&#
!"#$#%&'(&)*%+,"&# ; 0,+5%&6*7+($$(,&$! ) ; 0,+5%&6*7+($$(,&$! ; @1,?74#*7+($$(,&$!
-./0*,1*2,#%3*4,+5%&6*78"(#6 ; 0,+5%&6*7+($$(,&$!
9 '7:# -./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:# 2,#%3*51,?74#*78"(#6 9 '7:#
-./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:#
!"#$#%&'(&)*%+,"&# !"#$#%&'(&)*%+,"&#
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! ; @1,?74#*7+($$(,&$!
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! ) ; A"(3'(&)*7+($$(,&$!
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! 2,#%3*51,?74#*78"(#6 9 '7:# @1,571#6*=%3"7*%#*,1()(&%#(,&
) )
7"!4"!8109'/&):$.-./')
5+%$.'%%)60-.%)-.()+.6$%&'()'*+$&,)
GHG accounting for six asset classes
) )
7"! 8109'/&):$.-./')
;"! <0=='1/$-6)>'-6)?%&-&')
) ;"! <0=='1/$-6)>'-6)?%&-&')
)
@"! A01&B-B'%)
) ) ) ) ) !"#$#%&'(&)*%+,"&#
; A"(3'(&)*7+($$(,&$!
@1,571#6*=%3"7*%#*,1()(&%#(,&
!"#$#%&'(&)*%+,"&# !"#$#%&'(&)*%+,"&# !"#$#%&'(&)*%+,"&#
!"#$#%&'(&)*%+,"&# ; 0,+5%&6*7+($$(,&$! !"#$#%&'(&)*%+,"&#
; @1,?74#*7+($$(,&$!
; @1,?74#*7+($$(,&$!
-./0*,1*2,#%3*4,+5%&6*78"(#6 9 '7:# 2,#%3*51,?74#*78"(#6 9 '7:# ; A"(3'(&)*7+($$(,&$! ) ; A"(3'(&)*7+($$(,&$!
2,#%3*51,?74#*78"(#6 9 '7:# @1,571#6*=%3"7*%#*,1()(&%#(,& @1,571#6*=%3"7*%#*,1()(&%#(,&
)
-./0 < 7&#7151($7*=%3"7*(&43"'(&)*4%$>! ) ) ! @"! A01&B-B'%)
) ;"! <0=='1/$-6)>'-6)?%&-&') )
;"! <0=='1/$-6)>'-6)?%&-&') @"! A01&B-B'%) C"! A0&01)D'E$/6')60-.%)
Commercial Real Estate
7"!) 8109'/&):$.-./')
) ) Mortgages ) Motor Vehicle Loans
!"#$#%&'(&)*%+,"&#
@1,571#6*=%3"7*%#*,1()(&%#(,&
; A"(3'(&)*7+($$(,&$!
)
!"#$#%&'(&)*%+,"&#
!"#$#%&'(&)*%+,"&#
!"#$#%&'(&)*%+,"&# !"#$#%&'(&)*%+,"&#
; A"(3'(&)*7+($$(,&$! ; .7>(437*7+($$(,&$!
; A"(3'(&)*7+($$(,&$! @1,571#6*=%3"7*%#*,1()(&%#(,& ; A"(3'(&)*7+($$(,&$! !
@1,571#6*=%3"7*%#*,1()(&%#(,&
!"#$#%&'(&)*%+,"&# @1,571#6*=%3"7*%#*,1()(&%#(,& 2,#%3*=%3"7*%#*,1()(&%#(,&
; @1,?74#*7+($$(,&$!
)
2,#%3*51,?74#*78"(#6 9 '7:# ) ! ! C"! A0&01)D'E$/6')60-.%)
) @"! A01&B-B'%) )
@"! A01&B-B'%) C"! A0&01)D'E$/6')60-.%)
) ) !"#$#%&'(&)*%+,"&#
;"!) <0=='1/$-6)>'-6)?%&-&')
)
The Partnership for Carbon Accounting Financials
!"#$#%&'(&)*%+,"&#
(PCAF); .7>(437*7+($$(,&$!
2,#%3*=%3"7*%#*,1()(&%#(,& is an
!"#$#%&'(&)*%+,"&# !"#$#%&'(&)*%+,"&# ; A"(3'(&)*7+($$(,&$!
; A"(3'(&)*7+($$(,&$! @1,571#6*=%3"7*%#*,1()(&%#(,& ; .7>(437*7+($$(,&$!
!
@1,571#6*=%3"7*%#*,1()(&%#(,&
!"#$#%&'(&)*%+,"&#
@1,571#6*=%3"7*%#*,1()(&%#(,&
; A"(3'(&)*7+($$(,&$!
!
industry-led initiative enabling financial institutions to measure and
2,#%3*=%3"7*%#*,1()(&%#(,&
! !
)
C"! A0&01)D'E$/6')60-.%)
disclose greenhouse gas (GHG) emissions of loans and investments.
C"! A0&01)D'E$/6')60-.%)
)
@"!) A01&B-B'%)
)
!"#$#%&'(&)*%+,"&#
!"#$#%&'(&)*%+,"&#
; .7>(437*7+($$(,&$!
; .7>(437*7+($$(,&$! 2,#%3*=%3"7*%#*,1()(&%#(,&
1. Introduction 1
1. Introduction
Understand Understand
Identify IdentifyReview Review
Review and apply Review and apply
Report Report
Introduction
Introduction
Introduction
what GHG what GHG
business
accounting and accounting
business
reporting principlesreporting
accounting
and
methodologies
accounting
emissions
principles for methodologies for emissions
accounting is accounting
goals
is goalsand rules andeach
rules
asset class each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
ER
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
PT
AP
AP
1
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH
1 FAKE FOOTNOTE TO START AT 2

The role of the financial sector

Under current national and international policies, the planet is on a trajectory to reach a global
increase in temperature between 2.1°C and 3.9°C by 2100 compared to pre-industrial levels.2
There is an urgent need to act in the short term for our long-term benefit. To limit global warming
to 1.5°C above preindustrial levels, all sectors of society need to decarbonize and collectively
reach net-zero emissions by 2050. The financial sector can help facilitate the transition in line
with a 1.5°C scenario by directing capital to support decarbonization.
To trigger changes in capital flows and signals for all sectors, the financial industry must
acknowledge and endorse the need for and pace of decarbonization. The industry should begin
by better understanding the climate risks to their portfolio and the greenhouse gas (GHG)
emissions (or climate impact) associated with their loans and investments. Measuring financed
emissions is crucial in providing this understanding. If financial institutions know the emissions
financed by loans and investments, they can better identify and manage risks, navigate emissions
reduction goals, act to reduce their portfolio climate impact, and disclose progress. This
understanding then triggers internal discussions and engagements with stakeholders to identify
concrete actions that help lower financed emissions.
The role of PCAF and GHG emissions accounting in reporting,

managing risks and opportunities, and aligning financial flows with
the Paris Agreement
Previously, financial institutions used different approaches and accounting methodologies to
measure financed emissions and opted for various reporting metrics, leading to inconsistent
assessments of the industry’s climate impact. This lack of standardization hampers transparency,
comparability, and accountability of the financial sector.
With this issue in mind, banks, investors, and fund managers from five continents partnered
to create the Partnership for Carbon Accounting Financials (PCAF).3 Committed to the
measurement and disclosure of the absolute GHG emissions of their portfolios (financed
emissions), this industry-led initiative is rapidly expanding in North America, Latin America,
Europe, Africa, and Asia Pacific.4 PCAF aims to standardize the way financial institutions measure
and disclose financed emissions and increase the number of financial institutions that commit to
measuring and disclosing financed emissions.
Measuring financed emissions is critical for financial institutions that want to improve their
climate reporting. Measuring and transparently reporting financed emissions helps financial
institutions and their stakeholders understand the climate impact of the organization’s lending
and investment activities.
Additionally, financed emissions provide useful information to identify and manage climate-
related transition risks and opportunities. For example, financed emissions can be used as a
2 (New Climate Institute and Climate Analytics, 2020)

3 More information about PCAF is found at: https://carbonaccountingfinancials.com/
4 A full list of PCAF participants is found at:
https://carbonaccountingfinancials.com/financial-institutions-taking-action#overview-of-institutions
12
metric to stress test the resilience of portfolios against climate policies that could have a material
effect on the viability of an activity (e.g., carbon pricing). This information is helpful to develop
risk management strategies and to identify business opportunities that could support risk
management and the transition to a low carbon economy.
Lastly, accounting for financed emissions is an important part of the process that banks and
investors take when aligning their lending and investment portfolios with the goals of the Paris
Agreement. This process has five non-linear stages:
• Measuring and disclosing financed emissions

• Setting science-based targets (SBTs)
• Designing strategies to reach the targets
• Implementing concrete actions to achieve the targets
Financial institutions also measure financed emissions to evaluate their progress against their
emissions-based targets.
Relationship with other financial sector climate initiatives

Multiple climate initiatives for financial institutions have been launched, including high level
commitments, scenario analysis, target setting, and concrete climate action and reporting. High
level commitments and policies endorsed by C-suite executives drive financial institutions to
address climate change. Measuring financed emissions provides the base year emissions for
scenario analysis and target setting, informs climate actions, and enables reporting (Figure 1-1).
Figure 1-1. Measuring financed emissions as the foundation for other initiatives
Source: (PCAF, 2020)
13
There are a number of climate initiatives with a specific target audience and focus in each of
these areas (Figure 1-2).
PCAF focuses on measuring financed emissions, complementing the work and services that other
initiatives offer to financial institutions. Building synergies is core to PCAF’s work, which has led to
collaborations with the following initiatives:
• United Nations Environment Programme Finance Initiative (UNEP FI) Principles for
Responsible Banking and its Collective Commitment to Climate Action
• United Nations-convened Net-Zero Asset Owner Alliance
• Task Force on Climate-related Financial Disclosures (TCFD)
• Science Based Targets initiative for Financial Institutions (SBTi-FIs)
• Center for Climate-Aligned Finance of Rocky Mountain Institute
• Carbon Disclosure Project (CDP)
• European Commission Technical Expert Group on Sustainable Finance (EU TEG)
Figure 1-2. Cluster of climate initiatives
For whom?
Focus of
B Banks I Investors BI Banks & Investors Initiative High-level Measuring
Scenario Target- Enabling
Commitment Financed Reporting
to Act Emissions Analysis setting Action
UN Environment Program for Financial Institutions (UNEP FI) Principles

B for Responsible Banking (PRB): Collective Commitment on Climate Action
B Climate Action in Financial Institutions
I Investor Agenda: Investor Agenda Climate Plan (IACP)
BI UN Global Compact: Business Ambition for 1.5°C
I U.N.-Convened Net-Zero Asset Owner Alliance
BI Task Force on Climate-related Financial Disclosures (TCFD)
BI Partnership for Carbon Accounting Financials (PCAF)
BI RMI Center for Climate-Aligned Finance
B I 2dii Paris Agreement Capital Transition Assessment (PACTA)

I IIGCC Paris Aligned Investment Initiative (PAII)
BI SBTi-Finance
I Climate Action 100+

B Climate Safe Learning Lab
BI Powering Past Coal Alliance Finance Principles
BI Bankers for Climate
BI 2dii Evidence for Impact
BI CDP Financial Services Questionnaire
Source: (PCAF, 2020)
14
Standardizing GHG emissions accounting for financial institutions

This document is the first edition of the Global GHG Accounting and Reporting Standard for
the Financial Industry. Throughout this document, the Global GHG Accounting and Reporting
Standard is commonly referred to as the Standard. The purpose of the Standard is to provide
financial institutions with transparent, harmonized methodologies to measure and report the
emissions they finance through loans and investments in conformance with the requirements of
the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
The Global GHG Accounting and Reporting Standard was developed by the PCAF Global
Core Team, a heterogeneous group of banks and investors of varied sizes and from different
regions. This Core Team has wide experience in GHG accounting and consists of: ABN AMRO,
Access Bank, Amalgamated Bank, Banco Pichincha, Bank of America, Boston Common Asset
Management, Crédit Coopératif and its subsidiary Ecofi, FirstRand Ltd., FMO, KCB, Landsbankinn,
Morgan Stanley, Produbanco, Robeco, Triodos Bank, and Vision Banco.
At the end of October 2019, the PCAF Global Core Team kicked off its activities by selecting a set
of asset classes that are typical for banks, asset owners, and asset managers globally. These asset
classes are the focus of this first edition of the Global GHG Accounting and Reporting Standard.
As the Standard and PCAF evolve, additional asset classes and case studies will be added. The
Standard currently covers the following asset classes:


Throughout the development of the Standard (October 2019-November 2020), PCAF engaged
with civil society organizations to consider their ideas, discuss PCAF methodological approaches,
and receive feedback. During August and September 2020, PCAF also held a public consultation
with financial institutions, policy makers, data providers, consultants, and nongovernmental
organizations (NGOs). More than 200 stakeholders were reached via targeted webinars and 50
stakeholders provided direct feedback to the Standard.
15
Built on the GHG protocol

This Global GHG Accounting and Reporting Standard for the Financial Industry builds on the GHG
Protocol standards for corporate reporting such as the GHG Protocol Corporate Accounting and
Reporting Standard,5 the Corporate Value Chain (Scope 3)6 Accounting and Reporting Standard,
and the supplemental Technical Guidance for Calculating Scope 3 Emissions.7 More specifically,
this Standard supplements the GHG Protocol Corporate Value Chain (Scope 3) Accounting and
Reporting Standard8 by providing additional detailed guidance per asset class.
The Standard has been reviewed by the GHG Protocol and conforms with the requirements set
forth in the Corporate Value Chain (Scope 3) Accounting and Reporting Standard for category 15
investment activities.
Beyond reporting the scope 3 category 15 emissions covered by this Standard, financial
institutions shall also measure and report their scope 1 and 2 emissions as well as any other
relevant scope 3 emissions categories in line with the GHG Protocol’s Standards as mentioned
above.
Expected users of this standard

This standard is written primarily for financial institutions that wish to measure and disclose the
GHG emissions associated with their loans and investments, including:
• Commercial banks
• Investment banks
• Development banks
• Asset owners/managers (mutual funds, pension funds, close-end funds, investment trusts)
• Insurance companies
5 (WRI and WBCSD, 2004)

7 (WRI and WBCSD, 2011) and (WRI and WBCSD, 2013)
16
How to read this standard

The Global GHG Accounting and Reporting Standard uses precise language to indicate which
provisions are requirements, which are recommendations, and which are allowable options that
financial institutions may choose to follow. The following terms are used throughout this Standard:
• “Shall” or “required”: Indicates what is required for a GHG inventory to conform with this
Standard.
• “Should”: Indicates a recommendation but not a requirement.
• “May”: Indicates an allowed option.
• “Needs,” “can,” and “cannot”: May be used to provide guidance on implementing a
requirement or to indicate when an action is or is not possible.
Figure 1-3 provides the structure of this Standard and the steps for disclosing financed emissions.
Figure 1-3. Overview of the Standard and steps for disclosing financed emissions
Understand Identify Review Review and apply

Introduction what GHG business
reporting principles methodologies for emissions
accounting is goals and rules each asset class
4
6
5
3
2
1
R
R
R
R
R
TE
TE
TE
TE
TE
TE
AP
AP
AP
AP
AP
AP
CH
CH
CH
CH
CH
CH
17
2. The importance of
GHG accounting
2. The importance of
GHG accounting
Understand
Understand Understand
accounting and accounting accounting
and Report
accounting Report
Introduction what GHGwhat GHG
Introduction
what GHG business business
methodologies emissions
accounting is
accountinggoals
rules
accounting is
4
6
5
5
3
3
2
2
1
R
R
R
R
ER
R
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
2 PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH
What is GHG accounting?

GHG emissions accounting refers to the processes required to consistently measure the
amount of GHGs generated, avoided, or removed by an entity, allowing it to track and report
these emissions over time. The emissions measured are the seven gases mandated under the
Kyoto Protocol and to be included in national inventories under the United Nations Framework
Convention on Climate Change (UNFCCC) – carbon dioxide (CO2), methane (CH4), nitrous
oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6)
and nitrogen trifluoride (NF3). For ease of accounting, these gases are usually converted to and
expressed as carbon dioxide equivalents (CO2e).
GHG accounting is most commonly used by governments, corporations, and other entities to
measure the direct and indirect emissions that occur throughout their value chains as a result
of organizational and business activities. According to the GHG Protocol Corporate Accounting
and Reporting Standard,9 direct emissions are emissions from sources owned or controlled by the
reporting company. Indirect emissions are emissions that are a consequence of the operations of
the reporting company but that occur at sources owned or controlled by another company.
Direct and indirect emissions are further categorized by scope and distinguished according to the
source of the emissions and where in an organization’s value chain the emissions occur. The three
scopes defined by the GHG Protocol – scope 1, scope 2 and scope 3 – are briefly described below
and are illustrated in Figure 2-1.
• Scope 1: Direct GHG emissions that occur from sources owned or controlled by the
reporting company – i.e., emissions from combustion in owned or controlled boilers,
furnaces, vehicles, etc.
• Scope 2: Indirect GHG emissions from the generation of purchased or acquired electricity,
steam, heating, or cooling consumed by the reporting company. Scope 2 emissions
physically occur at the facility where the electricity, steam, heating, or cooling is generated.
• Scope 3: All other indirect GHG emissions (not included in Scope 2) that occur in the
value chain of the reporting company. Scope 3 can be broken down into upstream
emissions that occur in the supply chain (for example, from production or extraction of
purchased materials) and downstream emissions that occur as a consequence of using the
organization’s products or services.
The GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard10
categorizes scope 3 emissions into 15 categories, which are listed in Figure 2-1. As the figure
shows, the emissions resulting from a reporting company’s loans and investments fall under
Scope 3 downstream emissions, more precisely under Scope 3 category 15 (investments).
GHG accounting of financial portfolios is the annual accounting and disclosure of scope 3
category 15 emissions at a fixed point in time in line with financial accounting periods.

19
Figure 2-1. Overview of GHG Protocol scopes and emissions across the value chain
CO 2 CH 4 N 2O HFCs PFCs SF 6 NF3
Scope 2 Scope 1
INDIRECT DIRECT
Scope 3 Scope 3
INDIRECT INDIRECT
purchased
goods and
services transportation
and distribution
investments
purchased electricity,
steam, heating & cooling leased assets company
for own use facilities
capital
goods
franchises
employee processing of
commuting sold products
fuel and
energy related
activities
business company leased assets
travel vehicles use of sold
transportation products
and distribution waste end-of-life
generated in treatment of
operations sold products
Upstream activities Reporting company Downstream activities
Source: (WRI and WBCSD, 2011)
The importance of GHG accounting of loans and investments

To limit dangerous global warming and achieve the goals of the Paris Agreement, global GHG
emissions must be cut drastically. GHG accounting is a necessary step for organizations to better
manage their emissions and align with the Paris Agreement. For a financial institution, scope 3
category 15 emissions (i.e., financed emissions) are often the most significant part of its GHG
emissions inventory and special consideration must be made regarding how these are measured.
The Global GHG Accounting and Reporting Standard aims to provide a standardized approach
to account for financed emissions, ensuring that the approach used by financial institutions is
robust, transparent, and comparable over time and across asset classes. This is crucial because
measuring financed emissions is an important step financial institutions take to assess climate-
related risks and opportunities, set targets in line with the Paris Agreement, and develop effective
strategies to support the decarbonization of society.
As shown in Figure 1-1, measuring financed emissions is central to activities that enable financial
institutions to embed climate action throughout their lending and investment activities. Financed
emissions reporting is important for showing stakeholders the climate impact of a financial
institution’s activities, and the act of making a public disclosure shows that the organization holds
itself accountable for these impacts.
Financed emissions are a necessary input for climate scenario analysis. As such, financed
emissions are a key metric for financial institutions that want to understand and manage climate-
related transition risks and opportunities. As countries strive to meet the commitments defined in
20
their nationally determined contributions (NDCs),11 national climate policies will be strengthened
and efforts will increase to develop policies that support decarbonization and potentially price
carbon-intensive activities through carbon pricing.12 These policies could have material impacts
on the viability of certain loans and investments in carbon-intensive industries. Measuring
financed emissions can help financial institutions uncover carbon-intensive hotspots in their
portfolios and enable them to take the necessary actions to minimize their exposure to riskier
assets and encourage them to develop climate-friendly products such as low carbon funds, green
bonds, sustainability-linked bonds, green mortgages, and more.
Figure 2-2 illustrates the five stages financial institutions follow to align with the Paris Agreement.
Measuring financed emissions allows financial institutions to identify the emissions baseline for
scenario analysis and target setting. Without measuring a clear baseline, financial institutions do
not have the knowledge necessary when assessing scenarios and defining their climate targets,
let alone gauging their progress in aligning with the Paris Agreement. A robust, transparent, and
harmonized approach to measuring financed emissions helps financial institutions make informed
decisions on target setting, strategy, and the actions required to decarbonize the economy.
Figure 2-2. The Paris alignment value chain for financial institutions
Steering
Measure Develop Take

& Set Targets
Disclose Strategy Actions
Scenario Analysis Net-zero emissions
by 2050
Monitor Progress
As described in Chapter 1, multiple climate initiatives support the financial sector in

decarbonizing their portfolios. Each initiative plays a key role in the Paris Alignment process:
• PCAF focuses on standardizing the measurement and reporting of financed emissions.

• TCFD and CDP provide a framework for disclosure.
• The SBTi-FIs guide setting SBTs.
• Other initiatives, such as Climate Action 100+ and Climate Safe Lending Network, support
financial institutions on defining concrete climate strategies and actions.
11 The Paris Agreement (Article 4, paragraph 2) requires each Party to prepare, communicate and maintain successive NDCs
that it intends to achieve. Parties shall pursue domestic mitigation measures, with the aim of achieving the objectives of such
contributions.
12 (World Bank Group, 2020)
21
GHG accounting helps measure three types of climate impact: generated

emissions, emission removals, and avoided emissions
GHG accounting is the annual corporate accounting and disclosure of GHG emissions financed
by loans and investments in the portfolio of a financial institution at a fixed point in time in line
with financial accounting periods. Financed emissions can be measured as amounts of GHGs
generated, avoided, or removed by an institution. The volume of GHG emissions emitted and
financed by an institution is commonly referred to as its generated emissions. To limit climate
change and meet the goals of the Paris Agreement, financiers must actively seek out actions that
reduce generated emissions in absolute terms (i.e., absolute emissions13).
Not all loans and investments result in GHG emissions, and some may result in mitigating
activities. For instance, project-specific loans and investments in the forestry and land use sector,
carbon capture and utilization, or carbon capture and storage can result in CO2 being sequestered
or removed from the atmosphere and stored in solid or liquid form, removing its harmful global
warming effect. Investments in afforestation projects can directly result in newly planted trees
absorbing CO2 from the air. The volume of CO2 absorbed is considered an emission removal
that can also be quantified and reported, demonstrating a type of positive contribution toward
decarbonization.
Measuring emission removals is complex, especially where issues of permanence and land
use change come into play. While PCAF acknowledges that emission removals are integral in
combatting climate change, due to the complexity of the calculations and the data requirements,
this edition of the Standard does not provide guidance on how to measure these emission
removals. The GHG Protocol is, however, developing additional accounting guidance on carbon
removals and emissions from land use. For more information on the reporting of carbon removals,
PCAF refers to this forthcoming guidance from the GHG Protocol.
Similarly, project-specific loans and investments in renewable energy projects can result in
emissions being avoided as they displace the emissions that normally would have occurred
without the project’s implementation. These emissions are referred to as avoided emissions and
reporting them is a way to demonstrate a quantifiable positive contribution to decarbonization.
For the financial sector, which finances projects that lead to avoided emissions, quantifying this
effect is relevant.
Reporting on emission removals and avoided emissions shall always be done separately from the
financial institution’s scope 1, 2, and 3 GHG inventories.
GHG accounting enables benchmarking

Measuring financed emissions in absolute terms (i.e., absolute emissions) provides financial
institutions with the necessary baseline for climate action to align with the Paris Agreement.
However, normalized data is often also useful for banks and investors to manage climate
transition risk, set targets, or create new products. Normalizing the data means translating the
absolute financed emissions to an emission intensity metric (emissions per a specific unit), and
13 The GHG Protocol often refers to generated emissions as absolute emissions. In this standard, where the term “absolute
emissions” is used, it is referring to generated emissions and not values relating to avoided emissions or emission removals.
22
different intensity metrics can be used for different purposes. A wide array of intensity metrics is
applied in the market and each has its own merits. Table 2-1 lists the most common metrics.
All of the intensity metrics shown in Table 2-1 can be useful for steering. As the table shows,
economic emissions intensity is the absolute emissions divided by the loan and investment
volume, expressed as tCO2e/€M invested or loaned. It can be useful for comparing different
portfolios or parts of portfolios and for managing climate transition risks. Physical emissions
intensity is the absolute emissions divided by an output value, expressed as tCO2e/MWh, tCO2e/
ton product produced. It can be useful for setting SBTs and for comparing the emissions intensity
of companies operating in the same sector. The weighted average carbon intensity (WACI)14 is
expressed as tCO2e/€M company revenue15 and can be used to understand a portfolio’s exposure
to carbon-intensive companies.
Table 2-1. Financed emissions metrics16
Metric Purpose Description

Absolute emissions To understand the climate impact of The total GHG emissions of an
loans and investments and set a baseline asset class or portfolio
for climate action
Economic emissions To understand how the emissions Absolute emissions divided by
intensity intensity of different portfolios (or parts the loan and investment volume,
of portfolios) compare to each other per expressed as tCO2e/€M invested
monetary unit
Physical emissions To understand the efficiency of a Absolute emissions divided by an
intensity portfolio (or parts of a portfolio) in terms output value, expressed as tCO2e/
of total carbon emissions per unit of a MWh, tCO2e/ton product produced
common output
Weighted average To understand exposure to carbon- Portfolio’s exposure to carbon-
carbon intensity intensive companies intensive companies, expressed as
(WACI)17 tCO2e/€M company18 revenue
14 (TCFD, 2017)
15 The word company refers to the financial institution’s borrower or investee.
16 Adapted from (CRO Forum, 2020)
17 (TCFD, 2017)
18 The word company refers to the financial institution’s borrower or investee.
23
3. Using GHG
accounting to set
3. and achieve
Using GHGbusiness
goals
accounting to
set and achieve
business goals
Understand
Identify
Understand
accounting and accounting accounting
and Report
accounting Report
Introduction Introduction
what GHG what GHGbusiness
business business
methodologies emissions
goals
rules
goals
4
6
5
5
3
3
2
2
1
R
R
ER
R
R
R
R
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
3T
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
R
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH
Understanding the climate impact of financial portfolios makes good business sense for financial
institutions. GHG accounting can help financial institutions achieve multiple objectives, such as
creating transparency for stakeholders, managing financial risks associated with climate policies
and regulations, creating new financial products to further the transition to net zero, and aligning
financial flows with the goals of the Paris Agreement (Figure 3-1). Financial institutions cite these
business goals (which this chapter describes in greater detail) as the key reasons for undertaking
an assessment of financed emissions, but this list is by no means exhaustive.
Figure 3-1. GHG accounting can help financial institutions meet multiple business goals
Business Goal 1 Business Goal 2 Business Goal 3 Business Goal 4

Create transparency Manage climate-related Develop climate-friendly Align financial flows with
for stakeholders transition risks financial products the Paris Agreement
Measurement of financed emissions
The level of detail captured in the financed emissions assessment could dictate how well the
inventory can meet the financial institution’s business goals. For example, if a financial institution
wishes to use the inventory to manage risk, it may consider measuring and recording sector-level
emissions from its borrowers or investees to identify carbon-intensive industry investments in its
portfolios. Other financial institutions may want to structure their inventory in a way that helps
them track their financed emissions reduction goals year over year. In the end, what is captured in
the inventory should serve the business goals of the financial institution.
Business goal 1: Create transparency for stakeholders

Financial institutions motivated to be more transparent about their climate impact can use GHG
accounting to measure the financed emissions associated with their loans and investments.
Since the economic crisis of 2007-2009, a wide range of stakeholders have demanded more
transparency around how their money is invested. In response to demand and the consensus that
climate change poses a considerable threat to the global economy, the Financial Stability Board
(FSB) launched the industry-led TCFD. The remit of the TCFD was to develop recommendations
for “consistent, comparable, reliable, clear and efficient climate-related disclosures by
companies.”19 The TCFD framework20 has expanded since the recommendations were launched
in 2017 to be the global guidance on how companies should disclose their climate-related risks
and opportunities. At the time of this Standard’s publication, TCFD-recommended disclosures are
voluntary.21 However, with strong backing from the central banks, the Supervisors Network for
Greening the Financial System, and the industry itself, it is likely that companies will be faced with
new regulatory requirements in this arena.
19 More information about FSB can be found at:

https://www.fsb.org/work-of-the-fsb/policy-development/additional-policy-areas/climate-related-financial-disclosures/
20 (TCFD, 2017)
21 Except in New Zealand, where the government introduced mandatory TCFD disclosures in September 2020:
https://bit.ly/2TWUxwm Also, the UK announced its intention to make TCFD-aligned disclosures mandatory across the economy
by 2025, with a significant portion of mandatory requirements in place by 2023. https://bit.ly/3kpe6bB
25
For financial institutions, a key facet of TCFD disclosure relates to their lending and investment
activities. This facet is recognized by CDP, which—in aligning with the TCFD framework—adapted
its 2020 climate questionnaire for the financial sector to include a section on the reporting of
scope 3 category 15 (investment) emissions. The first step of this disclosure is measurement.
Information on how the PCAF methodologies support CDP in creating transparent reporting can
be found in Box 1.
Creating transparency for internal stakeholders can also be a business goal for financial
institutions. Carrying out an assessment of financed emissions allows a financial institution’s
board members and senior management to get a better picture of their organization’s impact
on the climate and how to steer activities toward the Paris Agreement goals. By measuring and
disclosing financed emissions, and thereby creating opportunities for climate disclosure, financial
institutions can internally align on their role, as well as the financial sector’s responsibility as a
whole, in the transition to a net-zero economy.
Box 1. PCAF supports CDP in creating transparency for stakeholders

Since its inception in 2000, CDP has evolved to become the globally accepted disclosure
system for investors, companies, cities, states, and regions to report and manage their
environmental impacts. In response to the TCFD’s recommendations highlighting the
importance of indirect financing impacts (alongside the disclosed operational impacts),
CDP adapted its climate change questionnaire for the financial services sector to include
questions about financed emissions. From 2020 onward, CDP asks financial institutions to
disclose their scope 3 category 15 (investments) emissions, along with the breakdown of
these emissions by asset class, sector, and geography. The Global GHG Accounting and
Reporting Standard directly supports financial institutions in answering these questions
by providing asset class-specific methodologies and guidance for calculating financed
emissions that allow for disclosures on these levels. In its questionnaire, CDP names PCAF
as a key framework that can be used for measuring and reporting.
PCAF and CDP collaborate closely to provide transparent disclosures for stakeholders to
better understand financial institutions’ portfolio alignment to global climate goals and their
exposure to carbon-intensive industries.
26
Figure 3‑2. Extract from the CDP climate change 2020 questionnaire
C-FS14.1 Do you conduct analysis to understand how your portfolio impacts the climate? (Scope 3 portfolio impact)
‘Yes’ ‘No’
What are your organization's Scope 3

FS14.1b portfolio emissions?
(Category 15 "Investments" total emissions) Why do you not conduct analysis to
understand how your portfolio impacts the climate?
FS14.1c (Scope 3 Category 15 "Investments" emission or
alternative carbon footprinting and/or
What is your organization's Scope 3 exposure metrics)
FS14.1b portfolio impact?
(Category 15 "Investments" alternative carbon
footprinting and/or exposure metrics)
FS14.2 Are you able to provide a breakdown of your organization's Scope 3 portfolio impact?
'Yes, by asset class' 'Yes. by industry' 'Yes. by country/region'
Break down your Break down your Break down your

organization's Scope 3 organization's Scope 3 organization's Scope 3
FS14.2b FS14.2b FS14.2c
portfolio impact by portfolio impact by portfolio impact by
asset class. industry. country/region.
DISCLOSURE INSIGHT ACTION
Note: This is a snapshot of the questionnaire from 2020; the questionnaire might be updated in the future. For the most recent
information consult with CDP.
Source: (CDP, 2020)
Business goal 2: Manage climate-related transition risks

Financial institutions are increasingly inclined to understand the exposure of their portfolios to
risks posed by climate-related policies and regulations. GHG accounting helps these institutions
screen and identify areas of their lending and investment activities that fall under carbon-
intensive assets. Such lending and investment activities could suffer setbacks due to the
introduction of carbon prices and anti-fossil fuel policies and regulations.
Understanding the exposure to risk is at the heart of TCFD’s mission. TCFD’s guidance notes that
financial institutions that provide loans to or invest in companies with direct exposure to climate-
related risks (e.g., fossil fuel producers, fossil fuel-based utilities, property developers and owners,
or agricultural and food companies) may accumulate climate-related risks through their credit
and equity holdings.22
Additionally, financial institutions that do not disclose their climate-related risks could face
reputational risk, especially when peers are increasingly doing so. Measuring and disclosing
financed emissions according to the Standard and reporting according to TCFD recommendations
is a way for financial institutions to manage their climate-related reputational risk.
22 (TCFD, 2017)
27
Applying the GHG accounting methods in this Standard, financial institutions can identify areas of
significant exposure to carbon-intensive assets across their lending and investment portfolio and
use this information as the basis to assess climate risk scenarios. By disclosing in line with the
recommendations and requirements in Chapter 6 and the TCFD framework, financial institutions
can show they are serious about climate action. Box 2 describes how the Standard aligns with and
adds value to the TCFD framework.
Box 2. PCAF supports the TCFD framework in identifying and managing climate risk
One of the goals of the TCFD framework is to measure and disclose the risks posed to
organizations by climate-related policies and regulations that are implemented to further
the transition to a net-zero economy. PCAF directly supports this objective by providing
financial institutions with methodologies to measure financed emissions and a total value for
the absolute emissions associated with asset classes in their loan and investment portfolios.
As a result of emission assessments, financial institutions can identify carbon-intensive
hotspots that could be subject to higher transition risk.
The quantification of financed emissions, the expected trajectory of these emissions, and
the ability of banks and investors to reduce emissions over time are important metrics to
estimate the impact of transition risks and to mitigate these risks by steering portfolios in
line with the transition to a net-zero economy.
Business goal 3: Develop climate-friendly financial products

Included in the TCFD framework is disclosure related to business opportunities associated
with the transition to a low carbon economy.23 According to the framework, opportunities are
categorized as resource efficiency, energy source, products and services, markets, and resilience.
For financial institutions, significant opportunities exist in each category, especially relating to
sustainable finance products. For example, as Figure 3-3 shows, sustainable finance products
such as bonds have evolved—from green bonds used to finance a specific corporate purpose
(e.g., green-eligible projects such as wind farms) to bonds that are solely focused on general
corporate sustainability purposes, such as sustainability-linked bonds (i.e., the full business of
the issuer commits to a sustainable target, meaning the bond is connected to the sustainable
transition of the business).
23 (TCFD, 2017)
28
Figure 3-3. Evolution of green products in the bond market
Specific corporate purpose General corporate purpose
Funding is for Funding is for Funding supports Funding supports Funding supports
specific green aggregated green the green portion the green portion sustainability-linked
expenditures expenditures of the balance sheet of the income KPIs
or projects or portfolios statement
With the transition to a low carbon economy, financial institutions can develop innovative
products and services that enable their clients to decarbonize their business activities. By
measuring financed emissions and using the intensity metrics listed in Table 2-1, financial
institutions can see which sectors and businesses require the most help in their decarbonization
efforts and how best to support them in their transition to a net-zero future.
Business goal 4: Align financial flows with the Paris Agreement

Financial institutions’ commitments to set SBTs,24 transition their investment portfolios to net-
zero GHG emissions by 2050 (e.g., Net-Zero Asset Owner Alliance25), and align their lending with
the objectives of the Paris Agreement (e.g., Banks Collective Commitment to Climate Action26) are
examples of this business goal.
Financial institutions that want to align their financial flows with the goals of the Paris Agreement
implement portfolio GHG accounting to understand the absolute emissions they finance in the
real economy. These institutions use this information as the basis for analyzing decarbonization
scenarios and setting emission-based targets at the asset class or sector level. While other
climate initiatives focus on scenario analysis and target setting (see Chapter 1), PCAF has
been established to focus solely on GHG accounting of financial portfolios. By undertaking
GHG accounting, financial institutions are equipped with a metric that can help track absolute
emissions year over year and compare it with their financed emissions goals.
Box 3 shows how the PCAF GHG accounting methods offered in this Standard align with SBTi’s
framework for setting science-based emission reduction targets. SBTi’s target-setting guidance
for financial institutions was published in October 202027 and includes case studies of banks and
investors using PCAF GHG accounting methods as a precursor to SBTs.28
Next to setting targets, aligning financial flows with the Paris Agreement means that financial
institutions take concrete actions to transition their portfolio to net-zero financed emissions by
2050. In this process, banks and investors could identify opportunities to develop new products
that help borrowers and investees reduce their own emissions.
24 Information about SBTs for financial institutions can be found at: https://sciencebasedtargets.org/financial-institutions
25 Information about the Net Zero Asset Owner Alliance can be found at: https://www.unepfi.org/net-zero-alliance
26 Information about the Collective Commitment to Climate Action by signatories of the Principles of Responsible Banking can be
found at https://www.unepfi.org/banking/bankingprinciples/collective-commitment
27 (SBTi, 2020)
28 More information about the SBTi for financial institutions can be found at: https://sciencebasedtargets.org/financial-institutions
29
Box 3. Steering decarbonization: from GHG accounting to setting SBTs

Financial institutions that decide to set SBTs by using the Sectoral Decarbonization
Approach (SDA) need to measure their financed emissions to identify the baseline from
which targets would be established and to measure progress against the targets.
The SBTi framework for the financial sector enables financial institutions to align lending
and investment portfolios with the Paris Agreement’s goals. Financial institutions that set
SBTs and work toward attaining those targets act on opportunities to finance the net-zero
emission transition.
The SDA is an SBT method that involves setting emissions-based targets, in which GHG
accounting is a fundamental step of the process. The asset classes covered in the Global
GHG Accounting and Reporting Standard match the four asset classes included in the SBT
framework.
Figure 3-4. Asset classes covered by PCAF and SBTi
Asset classes covered in the

Global GHG Accounting Asset classes covered by the
and Reporting Standard Science Based Targets initiative
Listed equity and corporate bonds Corporate instruments
(equity, bonds, loans)
Business loans and unlisted equity
Project finance Electricity generation project finance
Commercial real estate Real estate (commercial & residential)
Mortgages Mortgages
Motor vehicle loans
Financial institutions may use GHG accounting to screen and prioritize the parts of
the portfolio that would be the focus for target setting (i.e., asset classes and sectors).
Additionally, financial institutions measure financed emissions to determine the emission
baselines from which emission-based SBTs are set. To track progress against the emissions-
based target, financial institutions also need to measure and disclose their financed
emissions annually.
Determining sector-specific emissions intensity at the asset class or sector level is the
starting point to apply the SDA for target setting. Sector-specific emissions intensity refers
to financed emissions per unit of activity data (e.g., kgCO2e/m2, gCO2e/kWh, tonCO2e/ton
cement). Three steps are taken to derive emission intensities, as Figure 3-5 shows:
30
Figure 3-5. From GHG accounting to setting SBTs
Select
Measure
Calculate decarbonisation
GHG emissions Calculate
financial institution's pathway and set an
per loan and emission intensity
share of emissions emissions-based
investment
SBT
Scope 1 & 2 emissions Attributed emissions ∑ financed emissions

per loan and investment per borrower / ∑ total attributed activity Current emission intensity
(borrower's and investee's per investee is the baseline for an
(tCO2e/m2, tCO2e/kWh, emissions-based SBT
emissions in tCO2e) (financed emissions in tCO2e)
tCO2e/tonne products)
For the latest Financial Sector Science-Based Targets Guidance, consult the SBT initiative at
https://sciencebasedtargets.org/financial-institutions
31
4. Principles and
requirements of
4. GHG accounting
Principles and for
financials
requirements of
GHG accounting for
financials
Review
IdentifyReview Review
Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
accounting and
business
accounting
and Report
accounting Report
reporting principlesreporting emissions
principles for methodologies
methodologies for emissions
goals
is reporting principles
goalsand rules andeach
rules
and rules
4
6
5
5
3
3
2
2
1
ER
R
R
R
R
R
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
TE
4 PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH
To create this Standard, PCAF harnessed the GHG accounting principles from the GHG Protocol
Corporate Accounting and Reporting Standard29 and the GHG Protocol Corporate Value Chain
(Scope 3) Accounting and Reporting Standard.30 Based on these principles, PCAF developed an
additional set of five overarching rules to guide accounting and reporting for financial institutions.
4.1 GHG accounting requirements derived

from the GHG Protocol’s principles
Like financial accounting and reporting, GHG accounting and reporting follows generally
accepted principles to ensure that an organization’s disclosure represents an accurate, veritable,
and fair account of its GHG emissions. The core principles of GHG accounting are set out in the
GHG Protocol Corporate Accounting and Reporting Standard31 and the GHG Protocol Corporate
Value Chain (Scope 3) Accounting and Reporting Standard.32 The GHG Protocol’s five core
principles are completeness, consistency, relevance, accuracy, and transparency. The Global GHG
Accounting and Reporting Standard for the Financial Industry follows these five core principles
and provides additional requirements on the application of these principles that are directly
relevant for financial institutions wishing to assess their financed emissions (Figure 4-1).

33
Figure 4-1. Additional PCAF requirements of GHG accounting and reporting

are derived from the GHG Protocol’s five principles
GHG Protocol principles for Additional PCAF

scope 3 inventories requirements
Completeness Recognition
Account for and report on all GHG emission Financial institutions shall account for all
sources and activities within the inventory financed emissions under Scope 3 category
boundary. Disclose and justify any specific 15 (Investment) emissions, as defined by
exclusions. the GHG Protocol Corporate Value Chain
Consistency (Scope 3) Accounting and Reporting
Use consistent methodologies to allow Standard. Any exclusions shall be disclosed
for meaningful performance tracking and justified.
of emissions over time. Transparently Measurement
document any changes to the data, Financial institutions shall measure and
inventory boundary, methods, or any other report their financed emissions for each
relevant factors in the time series. asset class by “following the money”
Relevance and using the PCAF methodologies. As
Ensure the GHG inventory appropriately a minimum, absolute emissions shall be
reflects the GHG emissions of the company measured, however avoided and removed
and serves the decision-making needs of emissions can also be measured if data is
users — both internal and external to the available and methodologies allow.
company Attribution
Accuracy The financial institution’s share of
Ensure that the quantification of GHG emissions shall be proportional to the
emissions is systematically neither over nor site of its exposure to the borrower’s or
under actual emissions, as far as can be investee’s total (company or project) value.
judged, and that uncertainties are reduced Data quality
as far as practicable. Achieve sufficient Financial institutions shall use the highest
accuracy to enable users to make decisions quality data available for each asset class
with reasonable confidence as to the and improve the quality of the data over
integrity of the reported information. time.
Transparency Disclosure
Address all relevant issues in a factual and Public disclosure of the results of PCAF
coherent manner, based on a clear audit assessments is crucial for external
trail. Disclose any relevant assumptions stakeholders and financial institutions
and make appropriate references to the using the methodology to have a clear,
accounting and calculation methodologies comparable view of how the investments of
and data sources used. financial institutions contribute to the Paris
climate goals.
34
4.2 Additional requirements for

accounting and reporting financed
emissions
This subchapter describes the additional requirements for GHG accounting for financials and how
these requirements guide accounting for and reporting financed emissions regardless of the loan
and investment type. Chapter 6 includes additional details on reporting.
Recognition
According to the GHG Protocol Corporate Accounting and Reporting Standard,33 organizations
can choose from three approaches when defining their organizational boundaries and
consolidating the GHG emissions measured and reported in their inventories:
• Equity approach
• Financial control approach
• Operational control approach
The selection of one of these approaches affects which activities in the company’s value chain
are categorized as direct emissions (i.e., scope 1 emissions) and indirect emissions (i.e., scope 2
and scope 3 emissions).34
For consistency in reporting across organizations and reporting periods, this Standard requires
financial institutions to measure and report their GHG emissions using either the operational
or financial control approach. As explained in Box 4, this means that emissions from financial
institutions’ loans and investments (without operational or financial control35) will be reported
under their scope 3 category 15 (investments) emissions, as defined by the GHG Protocol
Value Chain (Scope 3) Accounting and Reporting Standard.36 This requirement eliminates
inconsistencies in accounting that could arise from using the equity control approach, which
would require scope 1 and 2 emissions from all equity investments to be reported under the
financial institution’s scope 1 and 2 emissions (according to its share of equity in the operation).
As a result, the Standard provides a harmonized approach that can be used by financial
institutions wishing to account for and disclose their scope 3 category 15 (investments) emissions
(otherwise known as their financed emissions), and these are the sole focus of this Standard.
Financial institutions following the Standard are required to report all financed emissions under
scope 3 category 15 and disclose and justify any exclusions.

35 Only in cases that a financial institution has control (operational or financial, depending on the approach chosen) over the
operations of the borrower, or investee, 100% of their emissions will be included within the organizational boundaries of the
financial institution and, as a result, included under scope 1 and 2 emissions. This can occur when a financial institution holds a
controlling equity share in the investee. In general, however, most of the financial sector’s loans and investments are not held to
gain control over their borrower or investee.
35
Beyond reporting the scope 3 category 15 emissions covered by this Standard, financial
institutions shall also measure and report their own scope 1 and 2 emissions as and any other
relevant scope 3 emissions categories in line with the GHG Protocol’s standards.
Box 4 details consolidation approaches as applied to the financial sector.
Box 4. Why the Global GHG Accounting and Reporting Standard requires financial
institutions to measure and report financed emissions using the operational or financial
control approach
The GHG Protocol Corporate Accounting and Reporting Standard37 presents three
consolidation approaches when preparing GHG emission inventories: the equity approach,
the financial control approach, and the operational control approach. These consolidation
approaches are intended to define the organizational boundaries of the company for
the purposes of accounting and reporting GHG emissions. The selection of one of these
approaches affects which activities in the company’s value chain are categorized as
direct emissions (i.e., scope 1 emissions) and indirect emissions (i.e., scope 2 and scope 3
emissions).
Under the equity approach, an organization accounts for GHG emissions from operations
according to its share of equity—or ownership—in the operation. So, holding a 15% equity
share in another organization would require including 15% of its emissions across all its
emission scopes.
Alternatively, an organization can report using the control approach, whereby the company
reports 100% of the GHG emissions over which it has control as if these emissions were
its own (i.e., 100% of direct emissions are reported under scope 1 and 100% of indirect
emissions are reported under scope 2 or 3, respectively). Where the company owns an
interest but does not have control, it does not account for GHG emissions from operations
as part of its scope 1 and 2 emissions. However, emissions from such operations will be
reported under scope 3 emissions according to its relative share of ownership.38
A control approach can be subclassified as either financial control or operational control, and
companies using the control approach must pick between these two options for reporting.
Using the financial control approach, the organization shall report 100% of emissions for
all activities in the company where it can directly influence financial and operational policies
and has the potential to benefit economically from the company’s activities. Using the
operational control approach, an organization shall account for 100% of emissions from
operations over which it or one of its subsidiaries has control and the authority to introduce
and implement operational policies. In most cases, whether an operation is controlled by
the company or not does not differ between the financial control or operational control
approach.
Box continues on next page �>

38 In practice, using a control approach means that when a company has control over an operation 100% of the scope 1 and 2
emissions of this operation are also reported under the companies’ scope 1 and 2 footprint. 36
The consolidation approach used by a financial institution has a significant impact on how
it accounts for its financed emissions. Choosing the equity approach would require scope 1
and 2 emissions from all equity investments to be reported under the financial institution’s
scope 1 and 2 emissions (according to its share of equity in the operation), whereas financed
emissions from other asset classes would end up in scope 3.
However, when choosing a control approach only emissions from those operations where the
financial institution, through its investments, holds a controlling interest would end up in its
scope 1 and 2 emissions. In all other cases financed emissions end up in scope 3 category
15. As financial institutions’ investments in equity or debt are typically not intended to hold a
controlling interest, this Standard requires financial institutions to measure and report their
GHG emissions using either the operational or financial control approach. This requirement
allows for consistent reporting of financed emissions in scope 3 emission category 15.
Measurement
“Follow the money” is a key tenet for GHG accounting of financial assets, meaning that the money
should be followed as far as possible to understand and account for the climate impact in the real
economy (i.e., emissions caused by the financial institution’s loans and investments).
Financial institutions shall measure and report their financed emissions for each asset class using
the methodologies set out in this Standard and covering the seven GHGs required under the
Kyoto Protocol. As a minimum, absolute GHG emissions resulting from loans and investments
(scope 3 category 15 emissions) in the reporting year shall be measured. In addition, and when
relevant, emission removals should be measured and reported separately. Furthermore, avoided
emissions from renewable power projects may be measured and reported separately.
As a basis for reporting emissions, financial institutions shall choose a fixed point in time to
determine its lending and investment positions and calculate an attribution factor, such as the
last day of its fiscal year (e.g., June 30 or December 31). The GHG accounting period shall align
with the financial accounting period.
Attribution
According to the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting
Standard, GHG emissions from loans and investments should be allocated to the reporting
financial institutions based on the proportional share of lending or investment in the borrower
or investee.39 Attribution is based on annual emissions of the borrower and investee; as a result,
GHG emissions are reported on at least an annual basis.
37
The methodologies in the Standard apply the same general attribution principles across all asset
classes (Figure 4-2):
1. Financed emissions are always calculated by multiplying an attribution factor (specific to

that asset class) by the emissions of the borrower or investee.
2. The attribution factor is defined as the share of total annual GHG emissions of the
borrower or investee that is allocated to the loans or investments.
3. The attribution factor is calculated by determining the share of the outstanding amount
of loans and investments of a financial institution over the total equity and debt of the
company, project, etc. that the financial institution is invested in.
The use of this common denominator, including both equity and debt funding, is important
because:
1. It ensures the use of one common denominator across all asset classes, which is in line
with leading practices in the financial sector.
2. It does not differentiate between equity and debt as both contribute to total finance of the
borrower or investee (and indirectly their emissions) and are, therefore, deemed equally
important.
3. It ensures 100% attribution of emissions over equity and debt providers and avoids double
counting of emissions between equity and debt providers. This is specifically important for
financial institutions that hold both equity and debt positions within the same companies
or projects.
Figure 4-2. The general approach to calculate financed emissions
Financed emissions = ∑i Attribution factori x Emissionsi

(with i = borrower or investee)
Outstanding amounti
Total equity + debti
Double counting - which occurs when GHG emissions are counted more than once in the financed
emissions calculation of one or more institutions - should be minimized as much possible. Double
counting occurs between the different scopes of emissions from loans and investments when a
financial institution lends or invests in companies or projects in the same value chain.40 This form
of double counting cannot be avoided but can be made more transparent by separately reporting
the scope 1, 2, and 3 emissions of loans and investments (see requirements on this in Chapter 6).
40 The scope 1 emissions of one company can be the upstream scope 2 or 3 emissions of its customer. For example, scope 1
emissions from a utility providing energy to a company would end up in the scope 2 inventory of that company. If both companies 38
are receiving funding from the same financial institution, these emissions would be double counted within its inventory.
Double counting can take place at five levels:
• Between financial institutions

• In cofinancing the same entity or activity
• Between transactions within the same financial institutions
• Across different asset classes
• Within the same asset class
Double counting between cofinancing institutions and between transactions within the same
asset class of a financial institution are avoided by using the appropriate attribution rules
consistently. PCAF defines attribution rules for each method described in this Standard. By using
the correct attribution method, double counting of emissions between financial institutions can
be minimized.
Additional asset class-specific information on attribution can be found in Chapter 5.
Data quality
Financial institutions shall ensure their GHG accounting appropriately reflects the GHG emissions
of their loans and investments and serves the decision-making needs of internal and external
stakeholders. To safeguard these outcomes, financial institutions should use the highest quality
data available for each asset class for calculations and, where relevant, improve the quality of
the data over time. PCAF recognizes that high quality data can be difficult to come by when
calculating financed emissions, particularly for certain asset classes. However, data limitations
should not deter financial institutions from taking the first steps toward preparing their
inventories, as even estimated or proxy data can help them identify carbon-intensive hotspots
in their portfolios, which can inform their climate strategies. Where data quality is low, financial
institutions can design approaches to improve it over time.
For measuring financed emissions in each asset class, various data inputs are needed to
calculate the financial institution’s attribution factor and the borrower’s or investee’s total
emissions. The data needed to calculate an attribution factor can typically come from the
financial institution itself and its borrower or investee. However, the data required to calculate the
borrower’s or investee’s emissions might not be readily available and must be sought out by the
financial institution. The quality of this data can vary depending on assumptions relating to its
assuredness, specificity, and other variables.
High quality data is often not available to the financial institution for all asset classes. In these
instances, the institution should use the best available data in accordance with the data hierarchy
shown in Figure 4-3. Data quality scorecards specific to each asset class are presented in Chapter
5 and the Annex 10.1.
39
Figure 4-3. General data quality scorecard
Data quality scoring from 1 to 5... ...enables financial institutions to develop a

strategy to improve data over time
Certain
Score 1
Score 2
GHG Emissions
Score 3
Score 4
Score 5
1 2 3 4 5
Uncertain Data Quality Score
PCAF recognizes there is often a lag between financial reporting and required data, such as
emissions data for the borrower or investee becoming available. In these instances, financial
institutions should use the most recent data available even if it is representative of different
years, with the intention of aligning as much as possible. For example, it would be expected and
appropriate that a financial institution’s reporting in 2020 for its 2019 financial year would use
2019 financial data alongside 2018 (or other most recent) emissions data.
Data quality is specific to each asset class. More information on issues related to data quality and
how to employ the hierarchy for each asset class can be found in Chapter 5 and in Annex 10.1.
Disclosure
The public disclosure of absolute financed emissions is crucial for external stakeholders and
financial institutions using the methodology to have an analogous view of the climate impact
of financial institutions. To this end, financial institutions shall disclose absolute financed
emissions. To support their disclosures, financial institutions shall follow the requirements and
recommendations listed in Chapter 6 on how to report information relating to methodology,
calculations, timeframes, and data quality (as scored using the hierarchies provided in Chapter 5).
40
5. Methodology to
measure financed
5. emissions
Methodology to
measure financed
emissions
Review and apply

Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
business
accounting
accounting
and Report
accounting Report
goals
is goalsand rules methodologies for
andeach asset class each asset class
rules
each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
TE
TE
TE
TE
TE
5E
TE
TE
TE
TE
TE
TE
PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH
This chapter describes the methods to calculate financed emissions for six asset classes.

Each asset class has its own section covering methodological guidance on the following elements: 41
• Asset class definition

• Emission scopes covered
• Attribution of emissions
• Equations to calculate financed emissions
• Data required
• Other considerations
• Limitations
Guidance for calculating absolute emissions is covered in each asset class method. Guidance
for calculating avoided emissions is provided in the project finance method only. Methods for
calculating emission removals, including sequestered emissions, were not drafted for this edition
of the Standard but will be considered and developed in later editions.42
This is an initial list of asset classes covered by PCAF. The initiative, with guidance from PCAF
participants and users, intends to both update the methodologies over time and add additional
ones. Developing an accurate, comparable, feasible, and broad-based standard covering
numerous asset classes will be an iterative process.
How to choose the right asset class method?

How financed emissions are measured may vary by the type of financing provided to the borrower
and investee and what is known about the flow of the money. Financial institutions should use
Figure 5-1 and the guidance that follows to select the appropriate asset class method.
41 These are the minimum elements in each asset class section. Some sections include more information, where relevant and specific
to the asset class.
42 Definitions of absolute emissions, avoided emissions, and emission removals can be found in Chapter 2 and in the glossary
(Chapter 7).
42
Figure 5-1 intends to help financial institutions select the appropriate asset class method for
measuring financed emissions. The flowchart should be read from left to right, with each column
representing a choice to be made by the financial institution before ultimately determining the
appropriate asset class method.
Beginning with the far-left side of the figure, financial institutions should select the type and
source of financing provided.43 The choices are:
• Corporate finance: Finance provided to companies, such as listed equity, corporate bonds,
and business loans and equity investments in private companies (i.e., unlisted equity).
• Project finance: Financing provided to projects—such as energy, power, industrial,
infrastructure, and agricultural projects— that rely primarily on the project’s cash flow for
repayment.
• Consumer finance: Finance provided to individual and household consumers, such as
mortgages and motor vehicle loans.
As described in Chapter 4, “follow the money” is a key tenet for GHG accounting of financial
assets. The money should be followed as far as possible to understand and account for the
climate impact of lending and investments. The next columns in Figure 5-1 relate to how much
is known about how the borrower or investee used the money and the activity for which the
financing was used. The “Use of proceeds” column, a term defined by the GHG Protocol Corporate
Value Chain (Scope 3) Accounting and Reporting Standard, distinguishes between investments
and loans with known and unknown use of proceeds. Known use of proceeds relates to
investments and loans for specific (corporate or consumer) purposes (i.e., the financial institution
knows for what activity the money is used), while unknown use of proceeds refers to investments
and loans for general (corporate or consumer) purposes (i.e., the financial institution does not
know exactly for what activity the money is used, which holds for general purposes loans). The
terms will be used interchangeably in the following subchapters.
For the column labeled “Use of proceeds” the financial institution should select “Known” or
“Unknown” depending on whether information is held on how the borrower or investee uses the
money provided. If the use of proceeds is “Unknown,” the tile option in the next column, “Activity
sector,” will default to “All.” If the use of proceeds is “Known,” the financial institution will be
required to select the specific activity sector to which the loan or investment was provided.
Loans and investments can be used to finance different products and activities in various sectors.
The specific methodology for calculating financed emissions in these sectors can differ, as
described in the methods for commercial real estate (CRE), mortgages, and motor vehicle loans.
Financed emissions in all other sectors are treated the same (see “All other” in Figure 5-1). This
may change over time if financial institutions solicit PCAF to develop additional accounting rules
and guidance for other sectors (e.g., financial products for shipping or aviation).
43 Equity is defined as ownership in the company or project. Debt is defined as a financing instrument that requires repayment by
the borrower.
43
By following the guidance in Figure 5-1 thus far, financial institutions should know the appropriate
asset class method(s) to use to start estimating the financed emissions of their portfolio.
Each asset class method currently only covers financial products that are on the balance sheet of
the financial institution at the fiscal year-end. This means that financed emissions from products
such as revolving credit facilities, bridge loans, and letters of credit are only considered if there is
outstanding finance on the financial institution’s balance sheet at financial year-end. In a similar
fashion, assets held for short durations and designated as held for sale are, for now, not included
in the Standard. PCAF will discuss on how to treat such financing in the future and will provide
more guidance in later editions of the Standard.
The Standard only provides guidance on the six asset classes mentioned before. Table 5-1
defines these asset classes, including information on the financial products being covered by the
respective asset class and the location in the document where specific guidance can be found.
The Standard does not provide explicit guidance on methods to calculate financed emissions
for every financial product including the following: private equity that refers to investment funds,
green bonds, sovereign bonds, loans for securitization, exchange traded funds, derivatives
(e.g., futures, options, swaps), initial public offering (IPO) underwriting, and more. More detailed
guidance on such financial products will be considered and published in later editions of the
Standard.
44
Table 5-1. List of asset classes

Asset class Definition Further guidance
Listed equity and This asset class includes all listed corporate bonds Subchapter 5.1
corporate bonds and all listed equity44 for general corporate purposes
(i.e., unknown use of proceeds as defined by the GHG
Protocol) that are traded on a market and are on the
balance sheet of the financial institution.
Business loans and This asset class comprises business loans and equity Subchapter 5.2
unlisted equity investments in private companies, also referred to as
unlisted equity.
Business loans include all loans and lines of credit for
general corporate purposes (i.e., with unknown use of
proceeds as defined by the GHG Protocol) to businesses,
nonprofits, and any other structure of organization45 that
are not traded on a market and are on the balance sheet
of the financial institution.
Unlisted equity includes all equity investments for
general corporate purposes (i.e., with unknown use of
proceeds as defined by the GHG Protocol) to businesses,
nonprofits, and any other structure of organization that
are not traded on a market and are on the balance sheet
of the financial institution.
Project finance This asset class includes all loans or equities to projects Subchapter 5.3
for specific purposes (i.e., with known use of proceeds
as defined by the GHG Protocol) that are on the balance
sheet of the financial institution. The financing is
designated for a defined activity or set of activities,
such as the construction and operation of a gas-fired
power plant, a wind or solar project, or energy efficiency
projects.
Commercial real This asset class includes on-balance sheet loans for Subchapter 5.4
estate specific corporate purposes, namely the purchase and
refinance of CRE, and on-balance sheet investments in
CRE. This definition implies that the property is used for
commercial purposes, such as retail, hotels, office space,
industrial, or large multifamily rentals. In all cases, the
building owner or investor leases the property to tenants
to conduct income-generating activities.
Mortgages This asset class includes on-balance sheet loans for Subchapter 5.5
specific consumer purposes—namely the purchase and
refinance of residential property, including individual
homes and multi-family housing with a small number of
units. This definition implies that the property is used
only for residential purposes and not to conduct income-
generating activities.
Motor vehicle loans This asset class refers to on-balance sheet loans and Subchapter 5.6
lines of credit for specific (corporate or consumer)
purposes (i.e., with known use of proceeds as defined by
the GHG Protocol) to businesses and consumers that are
used to finance one or several46 motor vehicles.
44 Listed equity refers to equity that is traded on a stock exchange or another securities exchange.
45 This also includes governmental-owned enterprises (e.g., state-owned companies such as municipal energy or public transport
providers), while loans to governments themselves are excluded. Loans to governments will be covered in a later edition of the
Standard.
46 A single loan might cover the purchase of several vehicles or fleets. In any case, the methodology presented in this chapter should
be used.
45
Figure 5-1. Guidance for choosing an approach to calculate financed emissions
Financing type & source Use of proceeds Activity sector Asset class
(as defined by PCAF)
Listed equity All

Unknown
(equity) Listed equity
and corporate
Unknown All bonds
Corporate bonds
(debt)
Corporate Known All
finance
Equity in
private companies Unknown All
(equity) Business loans
and unlisted
Unknown All equity
Loans All other

(debt)
Known Real estate Commercial

real estate
Motor Vehicle Motor vehicle
loans
Project Equity & loans
finance (equity & debt)
Known All Project finance
Unknown All
Not yet
Consumer developed
Loans All other by PCAF
finance (debt)
Known Real estate Mortgages
Motor Vehicle
46
5.1 Listed equity
and corporate bonds
5.1 Listed equity and
corporate bonds
Review and apply

Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
business
accounting
accounting
and Report
accounting Report
goals
rules
each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
TE
TE
TE
TE
TE
5E
TE
TE
TE
TE
TE
TE
PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH
Asset class definition

This asset class includes all listed corporate bonds and all listed equity47 for general corporate
purposes (i.e., unknown use of proceeds as defined by the GHG Protocol) that are traded on a
market and are on the balance sheet of the financial institution.
These include:
• All types of corporate bonds for general corporate purposes

• Common stock
• Preferred stock
For indirect investments (e.g., investments in funds) that incorporate listed equity and bonds,
the methodological approach is the same provided the information on the individual holdings is
available.
Green bonds, sovereign bonds, and derivative financial products (e.g., futures, options, swaps)
are not covered by this asset class. The same holds for short and long positions or special cases
of underwriting such as IPO underwriting. Guidance on such financial products are still under
development and will be published in later editions of the Standard.
Equity investments in private companies are not covered by this asset class because that is
finance not traded on a market. For more information on equity investments in private companies,
please refer to the business loans and unlisted equity asset class.
Emission scopes covered

Financial institutions shall report borrowers’ and investees’ absolute scope 1 and scope 2
emissions across all sectors.
For reporting borrowers’ and investees’ scope 3 emissions, PCAF follows a phased-in approach,
which requires scope 3 reporting for lending to and making investments in companies depending
on the sector in which they are active (i.e., where they earn revenues). For sectors where scope
3 emissions reporting is required, the financial institutions shall separately disclose these
absolute scope 3 emissions, including the specific sectors covered. Separate reporting allows for
full transparency, while acknowledging potential double counting issues when adding these to the
borrowers’ and investees’ scope 1 and 2 emissions.
PCAF acknowledges that, to date, the comparability, coverage, transparency, and reliability of
scope 3 data still varies greatly per sector and data source. By requiring scope 3 reporting for
selected sectors over time, PCAF seeks to make scope 3 emissions reporting more common by
improving data availability and quality over time.
Financial institutions shall explain if they are not able to report the required scope 3 emissions
because of data availability or uncertainty. For all sectors where PCAF does not yet require scope
47 Listed equity refers to equity that is traded on a stock exchange or another securities exchange.
48
3 emissions reporting, financial institutions should follow the GHG Protocol Corporate Value Chain
(Scope 3) Accounting and Reporting Standard and only account for scope 3 emissions where
relevant.
PCAF provides a sector list detailing where scope 3 emissions of borrowers and investees
are required to be reported (see Table 5-2). The sector list of PCAF aligns with the phased-in
approach for scope 3 emissions as defined by the EU TEG, which was included in Article 5 of
the Supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council
as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned
Benchmarks.
In practice, this means that financial institutions shall start including scope 3 emissions for the oil,
gas, and mining sectors from 2021 onward and additional sectors will be added from 2024. In the
years toward 2024, PCAF will monitor the data availability and impact for these additional sectors
and will provide additional guidance on the reporting requirements.
Table 5-2. List of sectors with required scope 3 emissions inclusion

as defined by the EU TEG48
Phase in period NACE Level 2 (L2) sectors considered
From 2021 At least energy (oil & gas) and mining (i.e., NACE L2: 05-09, 19, 20)
From 2024 At least transportation, construction, buildings, materials, and industrial activities
(i.e., NACE L2: 10-18, 21-33, 41-43, 49-53, 81)
From 2026 Every sector
Attribution of emissions
As a basic attribution principle, the financial institution accounts for a portion of the annual
emissions of the financed company determined by the ratio between the institution’s outstanding
amount (numerator) and the value of the financed company (denominator). This ratio is called the
attribution factor.49
1. Outstanding amount (numerator): This is the actual outstanding amount in listed equity
or corporate bonds. It should be defined in line with the denominator. Therefore, the value
of outstanding listed equity is defined based on its market value (i.e., market price times
number of shares), and the value of outstanding corporate bonds is defined based on the
book value of the debt that the borrower owes to the lender. Financial institutions should
either use the calendar or financial year-end outstanding amount, provided the approach is
communicated clearly and used consistently.
48 NACE is the abbreviation for the Statistical Classification of Economic Activities in the European Community. The NACE sector
codes provided in the table are identical to the codes of the lnternational Standard Industrial Classification of All Economic
Activities (ISIC) of the UN (see ISIC REV. 4). Non-European financial institutions are referred to the ISIC classification if this
classification better serves their needs.
49 The attribution factor calculation is, in principle, only possible for listed equity and corporate bonds where investee-specific
financial data is available. For listed equity and corporate bonds where such data is unavailable, the attribution factor cannot be
calculated but rough estimations on attribution can still be made based on region- and sector-specific average financial data
and the outstanding amount. This is explained in more detail in the Equations to calculate financed emissions and Data required
sections below (see Option 3b and Option 3c).
49
2. Company value (denominator): For all listed companies, this is the enterprise value
including cash (EVIC) of the respective company. Only for traded bonds to private
companies, this is the sum of total company equity50 and debt,51 which can be found on the
client’s balance sheet, as no market value for equity is available.52
For listed companies:
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎!
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓! =
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝐶𝐶ℎ!
For bonds to private companies:

𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 + 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑!
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑐𝑐 = 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑜𝑜𝑜𝑜 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐)
EVIC is defined as: The sum of the market capitalization of ordinary shares at fiscal year-end,
the market capitalization of preferred shares at fiscal year-end, and the book values of total
debt53 and minorities’ interests. No deductions of cash or cash equivalents are made to avoid the
possibility of negative enterprise values.54
PCAF chose to align the definition of EVIC with the definition provided by the:
1. EU TEG in its Handbook of Climate Transition Benchmarks, Paris-Aligned Benchmark and

Benchmarks’ ESG Disclosure55
50 In cases where the total company equity value according to the client’s balance sheet is negative (this can happen when the
retained earnings are negative while at the same time being higher than the other equity components on the balance sheet of
the client—e.g., this often holds for startups that have high negative profits during their first years of operation), the financial
institution shall set total equity to 0; this means that all emissions are attributed to debt only, while no emissions are attributed to
equity investments. For those companies that are doing well (i.e., they have high retained earnings), financial institutions attribute
more emissions to equity providers; for those companies doing poorly (i.e., they have high retained losses), financial institutions
attribute more emissions to debt providers. This is in line with the attribution factor rationale for listed companies, where the
equity part of EVIC (i.e., market capitalization) also implicitly reflects retained earnings and losses (e.g., if retained earnings
increase, the share price and market capitalization generally also increase).
51 Total debt includes both current and long-term debt on the balance sheet.
52 If total debt or total equity cannot be obtained from a client’s balance sheet for whatever reason (e.g., for some it might be difficult
to obtain these values), financial institutions are allowed to fall back to the total balance sheet value (i.e., the sum of total equity
and liabilities, which is equal to the client’s total assets).
53 In its EVIC definition, the EU TEG refers to “the book values of total debt,” including all debt as listed on the company balance
sheet. This is different from some accounting definitions of book value of debt, which exclude some elements like non-interest-
bearing debt (also see next footnote on precautionary principle).
54 This is the standard definition of EVIC as provided by the EU TEG. For consistency reasons, PCAF decided to align with this
definition to ensure maximum alignment on metrics in the market, which also enables data providers to collect data in a
consistent way. In reality, specific elements of EVIC might not be readily available because data providers are still working on
aligning their data with this definition. For cases where data is missing, the EU TEG (pg. 16 in its handbook of climate-related
benchmarks) recommends conducting corporate GHG data estimations based on the UN’s (1992) precautionary principle: “If in
doubt, err on the side of the planet not the side of the company.” Following this precautionary approach for EVIC calculations,
financial institutions can decide to exclude elements of the EVIC (e.g., minority interests or certain elements of the book value of
debt) as this would lead to a slightly lower EVIC and higher attribution of financed emissions to their own outstanding amount.
These slight deviations from the standard EVIC definition are allowed as long as they are: (1) in line with this precautionary
principle, and (2) the basis of the EVIC definition still includes the market value of equity (market capitalization) plus the total
book value of debt of any given company.
55 (EU Technical Expert Group on Sustainable Finance, 2019)
50
2. Supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council
as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned
Benchmarks, which says EVIC should be used to determine the GHG intensities for the
benchmarks.
Box 5 further clarifies the rationale for using EVIC in the attribution factor of listed equity and
corporate bonds.
Box 5. Rationale for EVIC as denominator in the attribution factor
As described in subchapter 4.2 of the Standard, PCAF applies the same general attribution
principles across all asset classes even though the actual equations and underlying
(financial) data sources might differ per asset class. This principle defines that the
attribution factor for all asset classes is calculated by determining the attribution factor
of the outstanding amount of a financial institution over the total equity and debt of the
company, project, property, etc. in which the financial institution is invested. Applying this
principle means that, for the attribution of listed companies, a metric needed to be defined
that includes both the equity and debt of a listed company.
EVIC was selected as the attribution metric for listed equity and corporate bonds because it:
• Includes both equity and debt in line with PCAF attribution principles and other asset
classes, ensuring alignment with similar asset classes (e.g., business loans).
• Is a common metric in the financial sector of a company’s total value and is expected
to gain more dominance because of its adoption by the EU TEG and the benchmark
regulation.
• Is based on company data (market value of equity and total book value of debt),
which is generally available to financial institutions and data providers. The availability
of this data is expected to be further improved due to the EU benchmark regulation,
which will stimulate all data providers to collect EVIC data.
• Includes market valuation of equity, which is the most common approach in the
financial sector to determine company ownership.
• Avoids issues with negative enterprise values due to the inclusion of cash (not
deducting cash as in the regular enterprise value definition) as well as issues with
attributing more than 100% of a company’s emissions to financial institutions.
The simplified example below highlights how EVIC ensures 100% attribution of company
emissions by not deducting cash.
Example Company: Equity = 50, Debt = 50, Cash = 20

Approaches Enterprise Attribution to Attribution to Total
value equity debt
EV excl. cash 50 + 50 - 20 = 80 50/80 = 63% 50/80 = 63% > 100%
(standard)
EV incl. cash 50 + 50 = 100 50 / 100 = 50% 50 / 100 = 50% 100%
51
Exceptions
If a financial institution only invests in equity and undertakes GHG accounting from a risk
perspective, emissions could also be attributed to the total market capitalization (market value
of a company’s outstanding shares) of the company. Please note, however, that the Standard is
aiming to standardize and harmonize GHG accounting across financial institutions and has a clear
preference for using EVIC. To enable a smooth transition from market capitalization to using EVIC,
the exception to use total market capitalization will remain possible for a maximum of 3 years
(ending in 2023).
Equations to calculate financed emissions

The financed emissions of investment in a company are calculated by multiplying the attribution
factor by the emissions of the respective borrower or investee company. The total financed
emissions of a listed equity and corporate bonds portfolio is calculated as follows:56
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓! × 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒!

!
The attribution factor represents the proportional share of a given company—that is, the ratio of
the outstanding amount to EVIC for listed companies and the total equity and debt for bonds to
private companies:
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ × 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒!
!
For bonds to private companies:
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝑒𝑒𝑑𝑑 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ × 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒!
!

The financed emissions from listed equity and corporate bonds can be calculated in different
ways depending on the availability of borrower- and investee-specific financial and emissions
data. Overall, PCAF distinguishes three different options to calculate the financed emissions from
listed equity and bonds depending on the emissions data used:
56 Wherein a financial institution is lending to or investing in a subsidiary of a larger entity, the attribution should be accounted at
the subsidiary level according to the “follow the money” principle, if the financial institution has balance sheet information on the
subsidiary. If the subsidiary’s balance sheet is unavailable, the financial institution should calculate the attribution factor based on
the total balance sheet of the entity to whom the financial institution has recourse for repayment of the loan.
52
• Option 1: reported emissions, where verified57 or unverified58 emissions are collected from
the borrower or investee company directly (e.g., company sustainability report) or indirectly
via verified third-party data providers (e.g., CDP) and then allocated to the reporting
financial institutions using the attribution factor.
• Option 2: physical activity-based emissions, where emissions are estimated by the
reporting financial institution based on primary physical activity data collected from the
borrower or investee company (e.g., megawatt-hours of natural gas consumed or tons
of steel produced) and then allocated to the reporting financial institution using the
attribution factor. The emissions data should be estimated using an appropriate calculation
methodology or tool with verified emission factors expressed per physical activity (e.g.,
tCO2e/MWh or tCO2e/t of steel) issued or approved by a credible independent body.
• Option 3: economic activity-based emissions, where emissions are estimated by the
reporting financial institution based on economic activity data collected from the borrower
or investee company (e.g., euro of revenue or euro of asset) and then allocated to the
reporting financial institution using the attribution factor. The emissions data should
be estimated using official statistical data or acknowledged environmentally extended
input-output (EEIO) tables providing region- or sector-specific average emission factors
expressed per economic activity (e.g., tCO2e/€ of revenue or tCO2e/€ of asset).59
Data required
PCAF distinguishes three options to calculate the financed emissions from listed equity and
corporate bonds depending on the emissions data used:
• Option 1: reported emissions

• Option 2: physical activity-based emissions
• Option 3: economic activity-based emissions
While Options 1 and 2 are based on company-specific reported emissions or primary physical
activity data provided by the borrower or investee or third-party data providers, Option 3 is based
on region- or sector-specific average emissions or financial data using public data sources such
as statistics or data from other third-party providers.60
Options 1 and 2 are preferred over Option 3 from a data quality perspective—they provide more
accurate emissions results to a financial institution. Due to data limitations, financial institutions
might use Options 1 or 2 for certain companies and Option 3 for others. The data quality mix shall
be reflected in the average data quality score, as Chapter 6 illustrates.
57 This refers to reported emissions being calculated in line with the GHG Protocol and verified by a third-party auditor.
58 This refers to reported emissions being calculated in line with the GHG Protocol without verification by a third-party auditor.
Unverified reported emissions can be calculated by either an external party or by the borrower or investee company itself.
59 Sampling tests based on actual data on the company level extrapolated to the portfolio level can help to test the accuracy of
calculations based on this data from statistics or EEIO tables. This may also be used to refine the data for specific sectors or
regions if the reporting financial institution has a strong presence in and specific knowledge of the respective sector or region.
National agencies and regional data providers or statistical offices in individual regions may assist reporting financial institutions
and investee companies in various regions in finding regional and more relevant financial or emissions data information.
60 Option 1 and Option 2 were called “Approach 1: company specific approach” and Option 3 was called “Approach 2: Sector/region
average approximation” in the report produced by the PCAF Dutch team: (PCAF, 2019).
53
Table 5-3 provides data quality scores for each of the described options and sub-options (if
applicable) that can be used to calculate the financed emissions for listed equity and corporate
bonds.
Table 5-3. General description of the data quality score table

for listed equity and corporate bonds61
(score 1 = highest data quality; score 5 = lowest data quality)
Data Quality Options to estimate the When to use each option
financed emissions
Outstanding amount in the company and EVIC
Score 1 1a are known. Verified emissions of the company
Option 1: are available.
Reported emissions Outstanding amount in the company and EVIC
1b are known. Unverified emissions calculated by
the company are available.
Outstanding amount in the company and
Score 2 EVIC are known. Reported company emissions
are not known. Emissions are calculated
2a62 using primary physical activity data of the
company’s energy consumption and emission
Option 2: factors63 specific to that primary data. Relevant
Physical activity- process emissions are added.
based emissions Outstanding amount in the company and
EVIC are known. Reported company emissions
are not known. Emissions are calculated
Score 3 2b using primary physical activity data of the
company’s production and emission factors
specific to that primary data.
Outstanding amount in the company, EVIC, and
the company’s revenue64 are known. Emission
Score 4 3a factors for the sector per unit of revenue are
known (e.g., tCO2e per euro of revenue earned
in a sector).
Outstanding amount in the company is known.
Option 3: Emission factors for the sector per unit of
Economic activity- 3b asset (e.g., tCO2e per euro of asset in a sector)
based emissions are known.
Score 5 Outstanding amount in the company is known.
Emission factors for the sector per unit of
3c revenue (e.g., tCO2e per euro of revenue earned
in a sector) and asset turnover ratios for the
sector are known.
A detailed summary of the data quality score table, including data needs and equations to
calculate financed emissions, is provided in Annex 10.1 (Table 10-1). Data for all three options in
Table 5-3 can be derived from different data sources.
61 For bonds to private companies, EVIC is defined as the total equity and debt of the respective company.
62 The quality scoring for the Option 2a is only possible for/applicable to scope 1 and scope 2 emissions as scope 3 emissions cannot
be estimated by this option. Other options can be used to estimate the scope 3 emissions, however.
63 Supplier-specific emission factors (e.g., from electricity provider) for the respective primary activity data are always preferred over
non-supplier-specific emission factors.
64 If revenue is not deemed a suitable financial indicator for estimating the emissions of a company in a certain sector, one can apply
other suitable financial indicators as a proxy. If an alternative indicator is used, the reasoning for the selection of this alternative
indicator should be made transparent. The data quality score will not be affected.
54
Official company filings

Where available, PCAF recommends using emissions data reported by companies, given the
data fully covers a company’s emissions-generating activities disclosed in official filings and
environmental reports. The most recent available data should be used with mention to the data
source, reporting period, or publication date. Using this data is in line with Option 1.
Data providers (Option 1)

For Option 1 (reported emissions), PCAF recommends either collecting emissions from the
borrower or investee company directly (e.g., company sustainability report) or third-party
data providers, such as CDP, Bloomberg, MSCI, Sustainalytics, S&P/Trucost, and ISS ESG. Data
providers typically make scope 1 and 2 emissions data available. PCAF encourages using the most
recent available data and to mention the data source, reporting period, or publication date.
Data providers collect emissions data as reported by the companies themselves, either through
a standardized framework such as CDP or through a company’s own disclosures in official filings
and environmental reports. They often have their own methodologies to estimate/calculate
companies’ emissions, especially if this data is not reported. In this case, the calculation would
be in line with Options 2 or 3, assuming the methodology used is in line with the GHG Protocol.
Financial institutions should ask data providers to be transparent, disclose the calculation method
they use, and confirm alignment with the GHG Protocol. This will enable financial institutions
to apply the proper score to the data. PCAF also encourages data providers to apply the PCAF
scoring method to their own data, which would allow them to share the data quality scores
directly with their clients.
PCAF does not recommend a preferred data vendor. PCAF recommends using data providers that
use the standardized CDP framework and suggests data providers disclose the data quality score
according to the scoring hierarchy in Table 5-3.65 When using data providers, PCAF recommends
using the same provider for all equity and bonds due to variability of scope 1 and 2 emissions
observed by providers.
Estimation models (Option 2 and 3)

Not all companies disclose their emissions data in official filings or through data providers.
Reporting in emerging markets lags developed markets. To maximize the coverage of emissions
data, the remaining gaps are often filled with estimates.
If no data is available, estimation models consistent with the emissions from the primary business
activity may be used. Emission factors from production-based models (i.e., emission intensity per
physical activity) are preferred over emission factors from revenue-based models (i.e., emission
intensity per revenue) because the former are less sensitive to exchange rate or commodity price
fluctuations. Emission factors from production-based models in line with Option 2 are especially
useful for carbon-intensive industries like utilities, materials, energy, and industrials. Emission factors
from revenue-based models in line with Option 3 (e.g., intensity-based or environmental input-
output models) have the advantage of requiring less detailed data from the financial institution.
65 More information about CDP can be found at: https://www.cdp.net/en
55
For Option 2 (physical activity-based emissions), PCAF recommends using actual energy
consumption (e.g., megawatt-hours of natural gas consumed) or production (e.g., tons of steel
produced) data reported by companies, given the data fully covers the company’s emissions-
generating activities. The emission factors expressed per physical activity used should be based
on appropriate and verified calculation methodologies or tools issued or approved by a credible
independent institution. Example data sources for retrieving emission factors are ecoinvent,66
Defra,67 Intergovernmental Panel on Climate Change (IPCC),68 GEMIS (Global Emissions Model
for integrated Systems),69 and Food and Agriculture Organization of the United Nations (FAO).70
The most recent available data should be used, including a mention of the data source, reporting
period, or publication date.
For Option 3 (economic activity-based emissions), PCAF recommends using official statistical
data or acknowledged EEIO tables providing region- or sector-specific average emission
factors expressed per economic activity (e.g., tCO2e/€ of revenue or tCO2e/€ of asset). Financial
institutions should use emission factors as consistently as possible with the primary business
activity. For example, for a business loan to a paddy rice farmer, the financial institution should
seek to find and use a sector-specific average emission factor for the paddy rice sector and not
an emission factor for the agricultural sector in general. Example EEIO databases that can be
used to obtain such emission factors are EXIOBASE,71 Global Trade Analysis Project (GTAP),72 or
World Input-Output Database (WIOD).73
PCAF’s web-based emission factor database provides a large set of emission factors for Options
2 and 3. The database can help financial institutions get started with estimating the financed
emissions of their investments.
PCAF expects that the financed emissions for most listed equity and corporate bonds can
be derived through either reported emissions (Option 1), physical activity data (Option 2),
or economic activity data (Option 3). However, PCAF allows the use of alternative options to
calculate emissions if none of the specified options can be used or in the case that new options
are developed. The reporting financial institution shall always explain the reasons for using an
alternative option if it deviates from the three options defined above.
66 More information can be found at: https://www.ecoinvent.org/

67 More information can be found at:
https://www.gov.uk/government/publications/greenhouse-gas-reporting-conedition-factors-2019
68 More information can be found at: https://www.ipcc-nggip.iges.or.jp/EFDB/find_ef.php
69 More information can be found at: http://iinas.org/gemis-download.html
70 More information can be found at: http://www.fao.org/partnerships/leap/database/ghg-crops/en
71 More information can be found at: https://www.exiobase.eu
72 More information can be found at: https://www.gtap.agecon.purdue.edu
73 More information can be found at: http://www.wiod.org
56
Limitations
Market price fluctuations
When using EVIC as the denominator, assets under management change as a result of fluctuating
market prices. Under the influence of this fluctuation, an objective to reduce relative financed
emissions (also referred to as emission intensities) by a certain percentage becomes a moving
target. Using normalized assets under management may help overcome this, as prices are held
constant over the target period. For example, the EU TEG and EU regulation on benchmarks
require the application of an inflation correction to changes in EVIC over time.
Applying corrections for market price fluctuations can highly influence the results and heavily
reduce the comparability of results between different financial institutions when applied
inconsistently. In addition, corrections could theoretically be applied to many other variables (like
exchange rates, inflation, emerging versus emerging markets, etc.), further reducing comparability.
For that reason, PCAF requires all financial institutions to report its uncorrected absolute
emissions as a minimum. Corrected results may optionally be reported separately. If the financial
institution decides to apply such adjustments, they should be made transparent. In the future,
PCAF will also investigate the challenges linked to steering on financed emissions and describe
the metrics in use by investors as emerging practices.
Organization identifiers
For larger listed equity and corporate bond portfolios, organization identifiers should be in place
to combine information from various sources. Examples of such identifiers include the Stock
Exchange Daily Official List, International Securities Identification Number, Committee on Uniform
Security Identification Procedures numbers, and Bloomberg tickers. For large portfolios, matching
external data sources can be a challenge when two companies merge; the organization identifiers
will be adjusted immediately while carbon data providers might only update such information on
an annual basis.
Side effects
There is a potentially undesired side effect related to attributing the issuer’s absolute emissions
to its total equity and debt position. While lower emissions would typically be achieved by
encouraging issuers to reduce their absolute emissions (numerator), the recommended
calculation methods imply that a similar effect could be achieved by increasing the denominator
(either the issuer’s equity or debt position).
57
5.2 Business loans
and unlisted equity
5.2 Business loans
and unlisted equity
Review and apply

Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
business
accounting
accounting
and Report
accounting Report
goals
rules
each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
TE
TE
TE
TE
TE
5E
TE
TE
TE
TE
TE
TE
PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH

This PCAF asset class comprises:
• Business loans
• Equity investments in private companies, also referred to as unlisted equity
Business loans
Business loans include all loans and lines of credit for general corporate purposes (i.e., with
unknown use of proceeds as defined by the GHG Protocol) to businesses, nonprofits, and any
other structure of organization74 that are not traded on a market and are on the balance sheet
of the financial institution.75 Revolving credit facilities, overdraft facilities, and business loans
secured by real estate such as CRE-secured lines of credit are also included. Any off-balance
sheet loans and lines of credit are excluded.
For financing products such as revolving credit facilities, bridge loans, and letters of credit, which
are commonly provided by financial institutions, only those loans outstanding on the year-end
balance sheet of the financial institution are covered by this asset class.76
Methods for financed emissions from business loans for specific corporate purposes (i.e., with
known use of proceeds) are not included in this asset class but are instead covered by the project
finance asset class, even if they may not be structured as project finance per se (see subchapter
5.3). Business loans to finance commercial real estate or motor vehicles are also considered
separate asset classes—i.e., CRE (see subchapter 5.4) and motor vehicle loans (see subchapter
5.6), respectively.77
Unlisted equity
Unlisted equity includes all equity investments for general corporate purposes (i.e., with unknown
use of proceeds as defined by the GHG Protocol) to businesses, nonprofits, and any other
structure of organization that are not traded on a market and are on the balance sheet of the
financial institution. Unlisted equity is also referred to as equity investments in private companies
(i.e., the financial institute obtains shares of the company) throughout the Standard.
Private equity that refers to investment funds is not included in this asset class; guidance on such
private equity will follow in later editions of the Standard.
74 This also includes governmental-owned enterprises (e.g., state-owned companies such as municipal energy or public transport
providers), while loans to governments themselves are excluded. Loans to governments (i.e., governmental lending) will be
covered in a later edition of the Standard.
75 The term “company” is used throughout this subchapter but can refer to any type of organization, including nonprofits.
76 More detailed guidance on such financing is under development and will be published in later editions of the Standard; this
guidance will elaborate further on how to account for the significant interannual fluctuations of such financial products that may
not be captured appropriately when only considering the year-end balance sheet of a financial institution. For now, financial
institutions should be transparent on any major last minute increases or decreases at fiscal year-end because this can increase or
decrease the financed emissions from business loans significantly.
77 Financial institutions can still report their financed emissions from such business loans for specific corporate purposes (i.e.,
with known use of proceeds) under an asset class called “business loans” if that is the name commonly used or preferred by the
financial institution (e.g., when reporting internally or externally).
59

Financial institutions shall report borrowers’ and investees’ absolute scope 1 and scope 2
emissions across all sectors.
For reporting borrowers’ and investees’ scope 3 emissions, PCAF follows a phased-in approach,
which requires scope 3 reporting for lending to and making investments in companies depending
on the sector in which they are active (i.e., where they earn revenues). For sectors where scope
3 emissions reporting is required, the financial institutions shall separately disclose these
absolute scope 3 emissions, including the specific sectors covered. Separate reporting allows for
full transparency while acknowledging potential double counting issues when adding these to the
borrowers’ and investees’ scope 1 and 2 emissions.
PCAF acknowledges that, to date, the comparability, coverage, transparency, and reliability of
scope 3 data still varies greatly per sector and data source. By requiring scope 3 reporting for
selected sectors over time, PCAF seeks to make scope 3 emissions reporting more common by
improving data availability and quality over time.
Financial institutions shall explain if they are not able to report the required scope 3 emissions
because of data availability or uncertainty. For all sectors where PCAF does not yet require scope
3 emissions reporting, financial institutions should follow the GHG Protocol Corporate Value Chain
(Scope 3) Accounting and Reporting Standard and only account for scope 3 emissions where
relevant.
PCAF provides a sector list detailing where scope 3 emissions of borrowers and investees are required
to be reported (see Table 5-4). The sector list of PCAF aligns with the phased-in approach for scope 3
emissions as defined by the EU TEG, which was included in Article 5 of the Supplementing Regulation
(EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU
Climate Transition Benchmarks and EU Paris-aligned Benchmarks.
In practice, this means that financial institutions shall start including scope 3 emissions for the
oil, gas, and mining sectors from 2021 onward and additional sectors will be added from 2024.
In the years toward 2024, PCAF will monitor the data availability and impact for these additional
sectors and will provide additional guidance on the reporting requirements.
Table 5-4. List of sectors with required scope 3 emissions inclusion

as defined by the EU TEG78
Phase in period NACE L2 sectors considered
From 2021 At least energy (oil & gas) and mining
(i.e., NACE L2: 05-09, 19, 20)
From 2024 At least transportation, construction, buildings, materials, and industrial activities
(i.e., NACE L2: 10-18, 21-33, 41-43, 49-53, 81)
From 2026 Every sector
78 NACE is the abbreviation for the Statistical Classification of Economic Activities in the European Community. The NACE sector
codes provided in the table are identical to the codes of the ISIC of the UN (see ISIC REV. 4). Non-European financial institutions
are referred to the ISIC classification if this classification better serves their needs.
60
As a basic attribution principle, the financial institution accounts for a portion of the borrower’s
and investee’s annual emissions, as determined by the ratio between the outstanding amount
(numerator) and the value of the financed company (denominator). This ratio is called the
attribution factor.79
1. Outstanding amount (numerator): This is the actual outstanding loan amount.

a For business loans, this is defined as the value of the debt that the borrower owes to
the lender (i.e., disbursed debt minus any repayments). It will be adjusted annually to
reflect the correct exposure, resulting in the attribution to decline to 0 at the end of
the lifetime of the loan (i.e., when it is fully repaid).
b For unlisted equity (i.e., equity investments in private companies), the outstanding
amount is the outstanding value of equity that the financial institution holds in the
private company. It is calculated by multiplying the relative share of the financial
institution in the respective investee80 by the total equity of the respective investee
according to its balance sheet. Financial institutions should either use the calendar or
financial year-end outstanding amount, provided the approach is communicated and
used consistently.
2. Company value (denominator):
a. For business loans and equity investments to/in private companies, this is the sum of
total company equity81 and debt,82 which can be found on the client’s balance sheet.
b. For business loans to listed companies, this is the company enterprise value including
cash (EVIC) of the respective client.83
79 The attribution factor calculation is, in principle, only possible for business loans and unlisted equity where client-specific financial
data is available. For business loans and unlisted equity where such data is unavailable, the attribution factor cannot be calculated
but rough estimations on attribution can still be made based on region- and sector-specific average financial data and the actual
outstanding amount. This is explained in more detail in the Equations to calculate financed emissions and Data required sections
below (see Option 3b and Option 3c).
80 The relative share of the financial institution in the respective investee is calculated by dividing the number of shares that the
financial institution holds in the respective investee by the total number of shares of the investee.
81 In cases where the total company equity value according to the client’s balance sheet is negative (this can happen when the
the client—e.g., this often holds for startups that have high negative profits during their first years of operation), the financial
institution shall set total equity to 0; this means that all emissions are attributed to debt only, while no emissions are attributed to
equity investments. For those companies that are doing well (i.e., they have high retained earnings), financial institutions attribute
more emissions to equity providers; for those companies doing poorly (i.e., they have high retained losses), financial institutions
attribute more emissions to debt providers. This is in line with the attribution factor rationale for listed companies, where the
equity part of EVIC (i.e., market capitalization) also implicitly reflects retained earnings and losses (e.g., if retained earnings
increase, the share price and thus the market capitalization generally also increase).
83 If total debt or total equity cannot be obtained from a client’s balance sheet for whatever reason (e.g., for some it might be difficult
to obtain these values), financial institutions are allowed to fall back to the total balance sheet value (i.e., the sum of total equity
and liabilities, which is equal to the client’s total assets). 61
For business loans and equity investments to/in private companies:
𝐹𝐹𝐹𝐹𝐹𝐹 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒, 𝑡𝑡ℎ𝑒𝑒 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑎𝑎𝑎𝑎 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓:
# 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑜𝑜𝑜𝑜 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖!

𝑥𝑥 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒!
# 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎!
For business loans to listed companies:
EVIC is defined as: The sum of the market capitalization of ordinary shares at fiscal year-end,
the market capitalization of preferred shares at fiscal year-end, and the book values of total
debt84 and minorities’ interests. No deductions of cash or cash equivalents are made to avoid the
possibility of negative enterprise values.85
PCAF chose to align the definition of EVIC with the definition provided by the :
1. EU TEG in its Handbook of Climate Transition Benchmarks, Paris-Aligned Benchmark and

Benchmarks’ ESG Disclosure86
2. The Supplementing Regulation (EU) 2016/1011 of the European Parliament and of the
Council as regards minimum standards for EU Climate Transition Benchmarks and EU
Paris-aligned Benchmarks, which says EVIC should be used to determine the GHG
intensities for the benchmarks.
Further clarification on the rationale for using EVIC for the attribution of listed companies is
provided in the asset class on listed equity and corporate bonds.
84 In its EVIC definition, the EU TEG refers to “the book values of total debt,” including all debt as listed on the company balance
sheet. This is different from some accounting definitions of book value of debt, which exclude some elements like non-interest-
bearing debt (also see next footnote on precautionary principle).
85 This is the standard definition of EVIC as provided by the EU TEG. For consistency reasons, PCAF decided to align with this
definition to ensure maximum alignment on metrics in the market, which also enables data providers to collect data in a
consistent way. In reality, specific elements of EVIC might not be readily available because data providers are still working on
aligning their data with this definition. For cases where data is missing, the EU TEG (pg. 16 in its handbook of climate-related
benchmarks) recommends conducting corporate GHG data estimations based on the UN’s (1992) precautionary principle: “If in
doubt, err on the side of the planet not the side of the company.” Following this precautionary approach for EVIC calculations,
financial institutions can decide to exclude elements of the EVIC (e.g., minority interests or certain elements of the book value of
debt) as this would lead to a slightly lower EVIC and higher attribution of financed emissions to their own outstanding amount.
These slight deviations from the standard EVIC definition are allowed as long as they are: (1) in line with this precautionary
principle, and (2) the basis of the EVIC definition still includes the market value of equity (market capitalization) plus the total
book value of debt of any given company.
86 (EU Technical Expert Group on Sustainable Finance, 2019)
62

The financed emissions from business loans and unlisted equity are calculated by multiplying the
attribution factor by the emissions of the borrower or investee company and then summing these
emissions up:87
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓! × 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒!

!
The attribution factor represents the proportional share of a given company—that is, the ratio
of the outstanding amount to total equity and debt for private companies and EVIC for listed
companies:
!
For business loans to listed companies:
!
The financed emissions from business loans and unlisted equity can be calculated in different
ways depending on the availability of borrower- and investee-specific financial and emissions
data. Overall, PCAF distinguishes three different options to calculate the financed emissions from
business loans and unlisted equity depending on the emissions data used.
• Option 1: Reported emissions, where verified88 or unverified89 emissions are collected

from the borrower or investee company directly (e.g., company sustainability report) or
indirectly via verified third-party data providers (e.g., CDP) and then allocated to the
reporting financial institution using the attribution factor.
• Option 2: Physical activity-based emissions, where emissions are estimated by the
reporting financial institution based on primary physical activity data collected from
the borrower or investee (e.g., megawatt-hours of natural gas consumed or tons of steel
produced) and then allocated to the reporting financial institution using the attribution
87 Wherein a financial institution is lending to or investing in a subsidiary of a larger entity, the attribution should be accounted at
the subsidiary level according to the “follow the money” principle, if the financial institution has balance sheet information on the
subsidiary. If the subsidiary balance sheet is unavailable, the financial institution should calculate the attribution factor based on
the total balance sheet of the entity to whom the financial institution has recourse for repayment of the loan.
89 This refers to reported emissions being calculated in line with the GHG Protocol without verification by a third party-auditor.
Unverified reported emissions can be calculated by either an external party or by the borrower or investee company itself.
63
factor. The emissions data should be estimated using an appropriate calculation

methodology or tool with verified emission factors expressed per physical activity (e.g.,
tCO2e/MWh or tCO2e/t of steel) issued or approved by a credible independent body.
• Option 3: Economic activity-based emissions, where emissions are estimated by the
reporting financial institution based on economic activity data collected from the borrower
or investee company (e.g., euro of revenue or euro of asset) and then allocated to the
reporting financial institution using the attribution factor. The emissions data should be
estimated using official statistical data or acknowledged EEIO tables providing region- or
sector-specific average emission factors expressed per economic activity (e.g., tCO2e/€ of
revenue or tCO2e/€ of asset).90
Data required
As described, PCAF distinguishes three options to calculate the financed emissions from business
loans and unlisted equity depending on the emissions data used:
• Option 1: reported emissions

• Option 2: physical activity-based emissions
• Option 3: economic activity-based emissions
While Options 1 and 2 are based on company-specific reported emissions or primary physical
activity data provided by the borrower or investee company or third-party data providers, Option
3 is based on region- or sector-specific average emissions or financial data using public data
sources such as statistics or data from other third-party providers.91
Options 1 and 2 are preferred over Option 3 from a data quality perspective—provide more
accurate emissions results to a financial institution. Due to data limitations, financial institutions
might use Options 1 or 2 for certain companies and Option 3 for others. The data quality mix shall
be reflected in the average data quality score, as Chapter 6 illustrates.
and investee companies in various regions in finding regional and more relevant financial or emissions data information.
91 Option 1 and Option 2 were called “Approach 1: company specific approach” and Option 3 was called “Approach 2: Sector/region
average approximation” in the report produced by the PCAF Dutch team: (PCAF, 2019).
64
Table 5-5 provides data quality scores for each of the described options and sub-options (if
applicable) that can be used to calculate the financed emissions for business loans and unlisted
equity.
Table 5-5. General description of the data quality score table
for business loans and unlisted equity92
financed emissions
Outstanding amount in the company and total
Score 1 1a company equity plus debt are known. Verified
emissions of the company are available.
Option 1:
Reported emissions Outstanding amount in the company and
total company equity plus debt are known.
1b Unverified emissions calculated by the
company are available.
Outstanding amount in the company and total
Score 2 company equity plus debt are known. Reported
company emissions are not known. Emissions
2a93 are calculated using primary physical activity
data for the company’s energy consumption
Option 2: and emission factors94 specific to that primary
Physical activity- data. Relevant process emissions are added.
based emissions Outstanding amount in the company and total
company equity plus debt are known. Reported
company emissions are not known. Emissions
Score 3 2b are calculated using primary physical activity
data for the company’s production and
emission factors specific to that primary data.
Outstanding amount in the company, total
company equity plus debt, and the company’s
Score 4 3a revenue95 are known. Emission factors for the
sector per unit of revenue are known (e.g.,
tCO2e per euro of revenue earned in a sector).
Outstanding amount in the company is known.
Option 3: Emission factors for the sector per unit of
Economic activity- 3b asset (e.g., tCO2e per euro of asset in a sector)
based emissions are known.
Score 5 Outstanding amount in the company is known.
sector are known.
calculate financed emissions, is provided in Annex 10.1 (Table 10-2). Data for all three options in
Table 5-5 can be derived from different data sources.
92 For business loans to listed companies, total company equity and debt is defined as the EVIC of the respective company.
93 The quality scoring for Option 2a is only possible for/applicable to scope 1 and scope 2 emissions as scope 3 emissions cannot be
estimated by this option. Other options can be used to estimate the scope 3 emissions, however.
94 Supplier-specific emission factors (e.g., from an electricity provider) for the respective primary activity data are always preferred
over non-supplier-specific emission factors.
95 If revenue is not deemed a suitable financial indicator for estimating the emissions of a company in a certain sector, one can apply
other suitable financial indicators as a proxy. If an alternative indicator is used, the reasoning for the selection of this alternative
indicator should be made transparent. The data quality score will not be affected.
65
Data providers (Option 1)

For Option 1 (reported emissions), PCAF recommends either collecting emissions from the
borrower or investee company directly (e.g., company sustainability report) or third-party
data providers, such as CDP, Bloomberg, MSCI, Sustainalytics, S&P/Trucost, and ISS ESG. Data
providers typically make scope 1 and 2 emissions data available. PCAF encourages using the most
recent available data and to mention the data source, reporting period, or date of publication.
Data providers collect emissions data as reported by the companies themselves, either through
a standardized framework such as CDP or through a company’s own disclosures in official filings
and environmental reports. They often have their own methodologies to estimate/calculate
companies’ emissions, especially if emissions are not reported. In this case, the calculation would
be in line with Options 2 or 3, assuming the methodology used is in line with the GHG Protocol.
Financial institutions should ask data providers to be transparent, disclose the calculation method
they use, and confirm alignment with the GHG Protocol. This will enable financial institutions
to apply the proper score to the data. PCAF also encourages data providers to apply the PCAF
scoring method to their own data, which would allow them to share the data quality scores
directly with their clients.
PCAF does not recommend a preferred data vendor. PCAF recommends using data providers that
use the standardized CDP framework and suggests data providers disclose the data quality score
according to the scoring hierarchy in Table 5-5.96 When using data providers, PCAF recommends
using the same provider due to variability of scope 1 and 2 emissions observed by providers.
Estimation models (Option 2 and 3)

Not all companies disclose their emissions data in official filings or through data providers.
Reporting in emerging markets lags developed markets. To maximize the coverage of emissions
data, the remaining gaps are often filled with estimates.
For Option 2 (physical activity-based emissions), PCAF recommends using actual energy
consumption (e.g., megawatt-hours of natural gas consumed) or production (e.g., tons of steel
produced) data reported by companies, given the data fully covers the company’s emissions-
generating activities. The emission factors expressed per physical activity used should be based
on appropriate and verified calculation methodologies or tools issued or approved by a credible
independent institution. Example data sources for retrieving emission factors are ecoinvent,97
Defra,98 IPCC,99 GEMIS,100 and FAO.101 The most recent available data should be used, including a
mention of the data source, reporting period, or publication date.
For Option 3 (economic activity-based emissions), PCAF recommends using official statistical
data or acknowledged EEIO tables providing region- or sector-specific average emission
96 More information about CDP can found at: https://www.cdp.net/en

97 More information can be found at: https://www.ecoinvent.org/
98 More information can be found at: https://www.gov.uk/government/publications/greenhouse-gas-reporting-conedition-
factors-2019
99 More information can be found at: https://www.ipcc-nggip.iges.or.jp/EFDB/find_ef.php
100 More information can be found at: http://iinas.org/gemis-download.html
101 More information can be found at: http://www.fao.org/partnerships/leap/database/ghg-crops/en
66
factors expressed per economic activity (e.g., tCO2e/€ of revenue or tCO2e/€ of asset). Financial
institutions should use emission factors as consistently as possible with the primary business
activity.102 For example, for a business loan to a paddy rice farmer, the financial institution should
seek to find and use a sector-specific average emission factor for the paddy rice sector and not
an emission factor for the agricultural sector in general. Example EEIO databases that can be
used to obtain such emission factors are EXIOBASE,103 GTAP,104 or WIOD.105
PCAF’s web-based emission factor database provides a large set of emission factors for Option 2
and Option 3 above. The database can help financial institutions get started with estimating the
financed emissions of their investments.
PCAF expects that the financed emissions for most business loans and unlisted equity can
be derived through either reported emissions (Option 1), physical activity data (Option 2),
or economic activity data (Option 3). However, PCAF allows the use of alternative options to
calculate emissions if none of the specified options can be used or in the case that new options
are developed. The reporting financial institution shall always explain the reasons for using an
alternative option if it deviates from the three options defined above.
Limitations
Generalized nature of Option 3
One limitation of Option 3 is the generalized nature and necessary assumptions made in applying
region- or sector-specific average values (both for emissions and financial data). This makes
calculations less robust and more uncertain than those based on borrower- or investee-specific
data, as the data for this option largely depends on assumptions and approximations derived from
region and sector averages. In addition, statistical data or acknowledged EEIO tables for a given
region need to be critically mapped to the sector classification used by the reporting financial
institution, as the sectors may not map one-to-one and may cause financed emissions to be over
or understated in the end.
Measurement inconsistencies
Inconsistencies can arise from measuring part of the portfolio with borrower- or investee-specific
emissions data (which may encompass scopes 1, 2, and 3 emissions) and from measuring the
other part with region- or sector-specific average emissions data (which often encompasses
only scope 1 and 2 emissions). One mitigating factor is that using borrower- or investee-specific
emission data could improve the accuracy of the region- or sector-specific average data if the
reporting financial institution had enough borrower- or investee-specific data points relative to
the size of the portfolio in a given sector. For example, if a majority of the borrowers in a lender’s
textile manufacturing loan portfolio provide specific emissions data, these averages could be
applied (instead of industrywide sector averages) to the remainder of the borrowers in the sector
that did not provide specific emissions data.
102 For conglomerates, financed emissions from a mix of activities can be estimated if data (e.g., revenue split) is available. If not, the
primary revenue-generating activity should be chosen.
103 More information can be found at: https://www.exiobase.eu
104 More information can be found at: https://www.gtap.agecon.purdue.edu
105 More information can be found at: http://www.wiod.org
67
Timing of emissions
Another limitation for the described options stems from the use of year-end outstanding
balances. For a portfolio that includes loans and equity investments to businesses in industries
with high seasonal variability or temporal volatility, using year-end outstanding balances may
not capture the activity occurring during seasons that do not overlap with the end of the year.
Similarly, reporting financial institutions using different fiscal calendars may be less comparable
with each other. A solution could be that financial institutions opt to conduct GHG accounting
using an average monthly balance for the year instead of a year-end balance. However, this would
put more burden on the reporting financial institutions. If financial institutions decide to apply
such average monthly balances, they should report these results separately and make the method
and assumptions transparent.
Market price fluctuations

When using EVIC as the denominator for business loans to listed companies, assets under
management change as a result of fluctuating market prices. Under the influence of this
fluctuation, an objective to reduce relative financed emissions (also referred to as emission
intensities) by a certain percentage becomes a moving target. Using normalized assets under
management may help overcome this, as prices are held constant over the target period. For
example, the EU TEG and EU regulation on benchmarks require the application of an inflation
correction to changes in EVIC over time.
Applying corrections for market price fluctuations can highly influence the results and heavily
reduce the comparability of results between different financial institutions when applied
inconsistently. In addition, corrections could theoretically be applied to many other variables (like
exchange rates, inflation, emerging versus emerging markets, etc.), further reducing comparability.
For that reason, PCAF requires all financial institutions to report its uncorrected absolute
emissions as a minimum. Corrected results may optionally be reported separately. If the financial
institution decides to apply such adjustments, they should be made transparent. In the future,
PCAF will also investigate the challenges linked to steering on financed emissions and describe
the metrics in use by investors as emerging practices.
68
5.3 Project finance
5.3 Project finance
Review and apply

Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
business
accounting
accounting
and Report
accounting Report
goals
rules
each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
TE
TE
TE
TE
TE
5E
TE
TE
TE
TE
TE
TE
PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH

This asset class includes all loans or equities to projects for specific purposes (i.e., with known
use of proceeds as defined by the GHG Protocol) that are on the balance sheet of the financial
institution. The financing is designated for a defined activity or set of activities, such as the
construction and operation of a gas-fired power plant, a wind or solar project, or energy efficiency
projects. To calculate emissions, only the financed (ring-fenced) activities are included. Emissions
and financials related to existing activities outside the financed project but within the financed
organization are not considered.

Financial institutions shall report the absolute scope 1 and 2 emissions of the project. Scope 3
emissions should be covered if relevant.106 Avoided and removed emissions may be reported if
relevant but must be reported separately from absolute emissions.
As a basic attribution principle, the financial institution accounts for a portion of the annual
emissions of the financed project determined by the ratio between the institution’s outstanding
amount (numerator) and the total equity and debt of the financed project (denominator). This
ratio is called the attribution factor.107
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎"
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓" =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 + 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑"
𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒, 𝑡𝑡ℎ𝑒𝑒 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑎𝑎𝑎𝑎 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓:
# 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑜𝑜𝑜𝑜 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖"

𝑥𝑥 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒"
# 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎"
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑝𝑝 = 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝)
The outstanding amount in the numerator is the amount of debt or equity provided by the
individual financier. In the case of debt, the outstanding amount is defined as the value of the
debt the borrower owes to the lender (i.e., disbursed debt minus any repayments). In the case of
equity, the outstanding amount is the outstanding value of equity the financial institution holds
in the project. It is calculated by multiplying the relative share of the financial institution in the
respective project108 by the total equity of the respective project according to its balance sheet.
Guarantees have no attribution until they are called and turned into a loan. Financial institutions
should either use the calendar or financial year-end outstanding amount, provided the approach
is communicated and used consistently.
106 Examples of projects where scope 3 emissions are relevant include but are not limited to nuclear power plants, hydroelectric
power plants, infrastructure projects (airports, highways), and oil and gas exploration.
107 The attribution factor calculation is, in principle, only possible for project finance where project-specific financial data is
available. For project finance where such data is unavailable, the attribution factor cannot be calculated but rough estimations
on attribution can still be made based on region- and sector-specific average financial data and the outstanding amount. This is
explained in more detail in the “Equations to calculate financed emissions” and “Data required” sections below (see Option 3b and
Option 3c).
108 The relative share of the financial institution in the respective project is calculated by dividing the number of shares the financial
institution holds in the respective project by the total number of shares of the investee.
70
At the start of the project, the total equity109 and debt110 in the denominator is the total financing
available for the project (total debt plus equity to realize the project).111 In subsequent years, it is
expected that projects will report annually on their financials, including balance sheet information
(i.e., the total equity and debt within the project). The value of total equity and debt in the
denominator can then be used to calculate the attribution factor.
Figure 5-2 illustrates the attribution rule, where initially most of the emissions or avoided
emissions from the project are attributed to debt, but as debt is repaid more and more of the
emissions become attributable to the equity providers.
Figure 5-2. Illustration of changes in equity/debt attribution over time
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
01 23 45 67 89 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
attribution to debt attribution to equity

The financed emissions from a single project are calculated by multiplying the attribution factor
by the emissions of the respective project. The total financed emissions from multiple projects are
calculated using the following equation:
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓" × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒"

"
In this asset class, the sum represents all projects in a financial institution’s portfolio, and the
attribution factor represents the proportional share of a given project—that is, the ratio of the
outstanding amount to total equity and debt:
109 In cases where the total project equity value according to the project’s balance sheet is negative (this can happen when the
the project), the financial institution shall set total equity to 0; this means that all emissions are attributed to debt only, while
no emissions are attributed to equity investments. For those projects that are doing well (i.e., they have high retained earnings),
financial institutions attribute more emissions to equity providers; for those projects doing poorly (i.e., they have high retained
losses), financial institutions attribute more emissions to debt providers. This is in line with the attribution factor rationale for
listed companies, where the equity part of EVIC (i.e., market capitalization) also implicitly reflects retained earnings and losses
(e.g., if retained earnings increase, the share price and market capitalization generally also increase).
111 If total debt or total equity cannot be obtained from a project’s balance sheet for whatever reason (e.g., for some it might be
difficult to obtain these values), financial institutions are allowed to fall back to the total balance sheet value (i.e., the sum of total
equity and liabilities, which is equal to the project’s total assets).
71
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎"
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒"
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 + 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑"
"
Overall, PCAF distinguishes three different options to calculate project emissions depending on
the availability of project-specific data:
• Option 1: reported emissions, where verified112 or unverified113 emissions are collected

from the project directly or indirectly through independent third parties.
• Option 2: physical activity-based emissions, where emissions are estimated based
on primary physical activity data collected from the project (e.g., fuel consumed or
megawatt-hours of electricity produced). The emissions data should be estimated using
an appropriate calculation methodology or tool with verified emission factors expressed
per physical activity (e.g., tCO2e/MWh) issued or approved by a credible independent body
such as the International Energy Agency (IEA).
• Option 3: economic activity-based emissions, where emissions are estimated based on
economic activity data collected from the project (e.g., revenue or assets). The emissions
data should be estimated using official statistical data or acknowledged EEIO tables
providing region- or sector-specific average emission factors expressed per economic
activity (e.g., tCO2e/€ of revenue or tCO2e/€ of asset).114
Data required
Within the due diligence and monitoring of a project finance transaction, the availability and
quality of project-specific data is generally good. Project-specific reported emissions (Option 1)
ranks highest in quality and consistency but will not always be available. Physical activity-based
data (Option 2) such as megawatt-hours produced is generally available from a previous year or
as an estimate (e.g., P50 estimations for renewable energy projects).115 The lowest data quality
applies when there is no project-specific physical data, only financial data (Option 3).
The data quality scorecard in Table 5-6 is recommended for project finance. Financial institutions
can refine or further specify this generic data quality table per project type, as long as these
refined data quality tables are disclosed transparently.
113 This refers to reported emissions being calculated in line with the GHG Protocol without verification by a third-party auditor.
Unverified reported emissions can be calculated by either an external party or by the borrower or investee itself.
and borrower or investee companies in various regions in finding regional and more relevant financial or emissions data
information.
115 For renewable energy projects it is customary to have experts calculate percentile production predictions based on an analysis
of historic data resource data (wind, irradiation, hydraulic flow, etc.). The P50 value is the predicted annual production for which
there is a 50% probability it will be exceeded in a given year. The P90 value is the predicted value that has a 90% probability of
being exceeded in a given year (the 1-year P90) or of being exceeded in an average year over a 10-year period (the 10-year P90).
PCAF proposes using the P50 predicted production.
72
Table 5-6. General description of the data quality score table for project finance

financed emissions
Outstanding amount in the project and total
Score 1 1a project equity plus debt are known. Verified
Option 1: emissions of the project are available.
Reported emissions Outstanding amount in the project and total
1b project equity plus debt are known. Unverified
emissions reported by the project are available.
Outstanding amount in the project and total
Score 2 project equity plus debt are known. Project
emissions are not known but calculated using
2a116 primary physical activity data for the project’s
energy consumption and emission factors117
Option 2: specific to that primary data. Relevant process
Physical activity- emissions are added.
based emissions Outstanding amount in the project and total
project equity plus debt are known. Project
emissions are not known. Emissions are
Score 3 2b calculated using primary physical activity data
for the project’s production and emission factors
specific to that primary data.
Outstanding amount in the project, total project
equity plus debt, and the project’s revenue118 are
Score 4 3a known. Emission factors for the sector per unit
of revenue or from similar projects is known (e.g.,
tCO2e per euro of revenue earned in a sector).
Outstanding amount in the project is known.
Option 3: Emission factors for the sector per unit of asset
Economic activity- 3b or economic activity-based emission factors
based emissions from similar projects (e.g., tCO2e per euro of
asset in a sector) are known.
Score 5
Outstanding amount in the project is known.
sector or from similar projects are known.
calculate financed emissions, is provided in Annex 10.1 (Table 10-3).
PCAF expects that the financed emissions for most projects can be derived through either
reported emissions (Option 1), physical activity data (Option 2), or economic activity data
(Option 3).
116 The quality scoring for Option 2a is only possible for/applicable to scope 1 and scope 2 emissions as scope 3 emissions cannot be
estimated by this option. Other options can be used to estimate the scope 3 emissions, however.
117 Supplier-specific emission factors (e.g., from an electricity provider) for the respective primary activity data are always preferred
over non-supplier-specific emission factors.
118 If revenue is not deemed a suitable financial indicator for estimating the emissions of a project, one can apply other suitable
financial indicators as a proxy. If an alternative indicator is used, the reasoning for the selection of this alternative indicator should
be made transparent. The data quality score will not be affected.
73
Avoided emissions
Avoided emissions related to renewable power projects are the reduction in emissions of the
financed project compared to what would have been emitted in the absence of the project (the
baseline emissions). They are calculated based on the GHG Protocol for Project Finance and are a
separate category compared to the calculation of absolute emissions based on the GHG Protocol
for Corporate Accounting.
Calculating the annual avoided emissions from a financial institution’s renewable power project
portfolio at a fixed point in time and in line with the financial reporting cycle is a complex process.
The (estimated) annual power production of these projects over the reporting period must be
compared with the power mix per country over the same period. In this comparison, it is assumed
that the production of renewable power (over the reporting period) might have avoided the need
to run certain fossil fuel power plants.
The power mix and associated grid emission factors can be derived using various approaches and
assumptions, as illustrated in Table 5-7.
Table 5-7. Emission factors per type of power mix

Preferred Type of mix Description of emission factors
options
1 Operating margin119 Emission factors based on the existing fossil fuel power
plants in a country/region whose operation will be most
affected (reduced) by the project (i.e., the generation from the
power plants with the highest variable operating costs in the
economic merit order dispatch of the electricity system).
2 Fossil fuel mix traded Emission factors based on the emissions of all fossil fuel
power (including or excluding nuclear) traded (i.e., produced
and imported minus exported) in a country or region.
3 Fossil fuel mix produced Emission factors based on the emissions of all fossil fuel
power (including or excluding nuclear) produced in a country
or region.
4 Average electricity mix Emission factors based on the emissions of all power (fossil
and non-fossil) produced in a country or region.
Various publicly available data sources on national and international levels are available and
provide the data to calculate these emission factors (e.g., International Energy Agency (IEA), US
Environmental Protection Agency (EPA), European Environment Agency (EEA)).
PCAF prefers to use the operating margin emission factor for the accounting of the avoided
emissions of renewable power project portfolios over the reporting period. The International
Finance Institution (IFI)-harmonized GHG accounting standards and approaches calculated these
operating margin emission factors for various countries using the methodology published by the
IFI Technical Working Group on Greenhouse Gas Accounting.120
119 The operating margin is a term defined under the UNFCCC Clean Development Mechanism for grid-connected electricity
generation from renewable sources and represents the cohort of existing power plants whose operation will be most affected
(reduced) by the project.
120 (IFI, 2020)
74
If the operating margin is not available, financial institutions can use the fossil fuel mix traded,
the fossil fuel mix produced, or (as a last resort) the average electricity mix. In principle, PCAF
recommends excluding nuclear energy in line with the IFI methodology but also allows the
inclusion of nuclear as most data sources include nuclear power under the fossil fuel mix.
Emissions removals
Emissions removals can be relevant for project finance. Sequestered emissions (which is one form
of emissions removals) account for carbon sinks where carbon is absorbed from the atmosphere.
PCAF participants are developing more detailed guidance on accounting for sequestered
emissions and emissions removals, which will be provided in later editions of the Standard.
Lifetime emissions
Portfolio accounting of emissions occurring in the reporting year does not consider lifetime
emissions insofar as these emissions happen before or after the reporting year. For example,
emissions related to future disposal of a wind park are not reported in the current reporting year.
Nevertheless, this principle is problematic for construction projects. For example, in the case of a
gas-fired power plant, construction emissions would be accounted during the construction phase
and operational emissions during the operational phase. However, if the loan is repaid shortly
after operation starts, the portfolio emissions for that investment would only reflect a small
portion of the total emissions impact during the gas-fired power plant’s lifetime.
As the power plant is often constructed by a third party (i.e., a construction company) contracted
by the project developer, the emissions of the construction and purchased goods and services are
normally reported under scope 3 of the project developer. These Scope 3 emissions are usually
not significant enough to report or they might be unavailable, in which case no emissions will be
reported. When these Scope 3 emissions are relevant, they should be reported.
To address the above a financial institution should, if they are an initial sponsor or lender, assess
the total projected lifetime scope 1 and 2 emissions for projects that were financed during the
reporting year. Those emissions should be reported separately in the year of contracting. If a
financial institution would be an initial lender for the above example of a gas-fired power plant, it
should report in the year of contracting the total projected lifetime scope 1 and 2 emissions based
on the expected load factor, the expected lifetime of the plant, and the expected carbon content
of the gas used.
75
Portfolio vs. (annualized) lifetime emissions

Various (multilateral) development banks have been working on harmonizing GHG accounting
of new projects under the IFI Framework for a Harmonized Approach to Greenhouse Gas
Accounting.121 These financial institutions developed a methodology to calculate the expected
emissions of newly signed contracts for specific projects in the reporting year.122 In the IFI
methodology, avoided emissions are assessed using emission factors (called combined margin)
that incorporate future greening of the electricity grid. These avoided emissions are annualized
and reported in the year of loan/equity origination.
Unlike the IFI methodology, PCAF’s portfolio GHG accounting involves calculating the annual
emissions linked to the financial institution’s balance sheet and using emission factors (operating
margin) that are based on the existing fossil fuel power plants in a country or region whose
operation will be most affected (reduced) by the project.
PCAF considers portfolio and (annualized) lifetime GHG accounting to be complementary.

Portfolio GHG accounting better lends itself to target setting compared to a global carbon
budget, whereas (annualized) lifetime GHG accounting can be used to reflect the generated
emissions or avoided emissions over the operational lifetime. Portfolio GHG accounting is more
suited to guide strategic developments on a portfolio level, while lifetime GHG accounting can be
used to make investment-level decisions (e.g., to avoid investments with carbon lock-in).
121 (UNFCCC, 2015). Additional information can be found at: https://unfccc.int/climate-action/sectoral-engagement/ifis-

harmonization-of-standards-for-ghg-accounting
122 The emission factors can be found at: https://unfccc.int/climate-action/sectoral-engagement/ifis-harmonization-of-standards-for-
ghg-accounting/ifi-twg-list-of-methodologies
76
5.4 Commercial
real estate
5.4 Commercial
real estate
Review and apply

Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
business
accounting
accounting
and Report
accounting Report
goals
rules
each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
TE
TE
TE
TE
TE
5E
TE
TE
TE
TE
TE
TE
PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH

This asset class includes on-balance sheet loans for specific corporate purposes, namely the
purchase and refinance of commercial real estate (CRE), and on-balance sheet investments in
CRE. This definition implies that the property is used for commercial purposes, such as retail,
hotels, office space, industrial, or large multifamily rentals. In all cases, the building owner or
investor leases the property to tenants to conduct income-generating activities.
CRE investments by asset owners are also included in this method. These investments consist
of deals where the asset owner fully owns the building or partially owns it in a joint venture, joint
operation, or in joint ownership.
CRE investments listed in the stock market are classified as listed equity. In this case, financial
institutions shall use the method for listed equity (subchapter 5.1).
Loans secured by CRE for other purposes than CRE and loans to CRE companies that are
unsecured are classified as business loans if the loans are for general corporate purposes
(i.e., with unknown use of proceeds as defined by the GHG Protocol). In these cases, financial
institutions shall use the method for business loans (subchapter 5.2).
Loans for construction and renovation of CRE are optional. As the building is often constructed
by a third party (i.e., a construction company) contracted by the project developer, the emissions
of the construction are normally reported under scope 3 of the project developer during the
building’s construction phase. As such, it can be impractical for the lender to measure financed
emissions of a construction or renovation loan unless the project developer reports construction
emissions (see further explanation below under Emission scopes covered).

For property already built, financial institutions shall cover the absolute scope 1 and 2 emissions
related to the energy use of financed buildings during their operation (energy use includes the
energy consumed by the building’s occupant and shared facilities).
Reporting financed emissions from construction or renovation of buildings is optional. When

measuring these emissions, financial institutions should refer to the GHG Protocol’s guidance
to account for construction emissions.123 If the property developer is a company that measures
and reports construction emissions, financial institutions should account for the related financed
emissions during the building’s construction phase. If the property developer does not measure
and report construction emissions, financial institutions should engage with the property
developer to encourage the practice of measuring and reporting these emissions.
While reporting financed construction emissions is not yet required, PCAF acknowledges that
construction emissions, notably building’s embodied GHG emissions, are important and should
123 (ENCORD, 2012)
78
not be neglected. PCAF will continue to monitor guidance developments124 on the subject and
when robust approaches and data to measure buildings’ embodied emissions are available, PCAF
could expand its coverage to include these emissions.
When calculating the financed emissions, a building’s annual emissions are attributed based on
the ratio between the outstanding amount and the property value at origination. This ratio is
called the attribution factor:
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎#
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓# =
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑎𝑎𝑎𝑎 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜#
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑏𝑏 = 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏)
For loan providers, the numerator is the outstanding loan amount,125 whereas for investors, it is
the outstanding investment amount. In both cases, the outstanding amount is the value of the
loan or investment on the financial institution’s balance sheet.
When the property value at origination is not feasible to obtain, financial institutions shall use the
latest property value available and fix this value for the following years of GHG accounting (i.e.,
the denominator remains constant from the first year of GHG accounting onward).126 The property
value should include the value of the land, the building, and any building improvements. When a
CRE loan is modified (e.g., loan amount is increased, renewed, refinanced, or extended) and a new
property value is obtained as part of the transaction, the property value at origination shall be
updated to the property value at the time of the modification.
When asset owners invest in CRE they either fully finance the property or partially finance it
through joint ventures, joint operation, or in joint ownership with other asset owners. When CRE
is fully financed by an asset owner, 100% of the building’s emissions are attributed to the asset
owner. When CRE is jointly financed by a group of asset owners, the attribution is based on the
share invested by each asset owner.
124 For example, the World Business Council for Sustainable Development (WBCSD) is working on creating an approach for the
embedded carbon of constructions. At this point, they are defining a theoretical approach with a working group consisting of real
estate developers, building material producers, construction companies, and technical consultants. The key in this approach is
to use a life cycle assessment to obtain average values of embedded carbon per square meter of building, which will differ per
climate zone and building typology.
125 For loan providers, the outstanding amount in the numerator is defined as the value of the debt that the borrower owes to the
lender (i.e., disbursed debt minus any repayments). It will be adjusted annually to reflect the correct exposure, resulting in the
attribution to decline to 0 at the end of the lifetime of the loan (i.e., when it is fully repaid).
126 Availability of property value at origination varies by country. In some countries, financial institutions can easily retrieve the
property value at origination from their books and do not typically update it to the current property value. In other countries,
regulators require financial institutions to update the property value year over year.
79

Financed emissions of a CRE loan or investment are calculated by multiplying the attribution
factor by the building’s emissions. Thus, financed emissions are calculated as follows:
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓# × 𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝑛𝑛𝑔𝑔 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒#

#
The emissions of buildings are calculated as the product of a building’s energy consumption
and specific emission factors for each source of energy consumed. The total energy use of the
building includes the energy consumed by the building’s occupants.
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = - × 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐#,% × 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑓𝑓𝑓𝑓𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐%
#,%
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑏𝑏 = 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑎𝑎𝑎𝑎𝑎𝑎 𝑒𝑒 = 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠)
Data required
Actual building energy consumption is preferred but may not be widely available. In the absence
of metered data, energy use can be estimated based on building characteristics and publicly
available data.
Various sources and commercial databases are available and divide energy consumption by
characteristics like energy label, type of property, and floor area of property. When applying these
data on a large sample of financed properties, it is possible to get a reasonable approximation of
the emissions. Similarly, supplier-specific emission factors127 for specific energy sources should
be used if they are available. If they are not, average emission factors128 may be used. PCAF’s
web-based emission factor database provides emission factors by building type, floor area, and
number of buildings for a large set of geographies.
To improve building energy use estimation, financial institutions should collect data on building
characteristics (e.g., size, building use, climate zone, and year constructed). Based on the data
available, the following data hierarchy is proposed in order of preference:
127 In the case of electricity, supplier-specific emission factors are the same as market-based emission factors.
128 In the case of electricity, average emission factors, which are non-supplier-specific emission factors, are the same as location-
based emission factors.
80
Table 5-9. General description of the data quality score table for CRE
financed emissions
Primary data on actual building energy
consumption (i.e., metered data) is available.
Emissions are calculated using actual building
Score 1 1a energy consumption and supplier-specific
Option 1: emission factors129 specific to the respective
Actual building energy source.
emissions Primary data on actual building energy
Score 2 1b Emissions are calculated using actual building
energy consumption and average emission
factors specific to the respective energy source.
Estimated building energy consumption per
floor area based on official building energy
labels AND the floor area are available.
Score 3 2a Emissions are calculated using estimated
building energy consumption and average
Option 2: emission factors specific to the respective
Estimated building energy source.
emissions based on Estimated building energy consumption
floor area per floor area based on building type and
location-specific statistical data AND the floor
Score 4 2b area are available. Emissions are calculated
using estimated building energy consumption
and average emission factors specific to the
respective energy source.
building based on building type and location-
Option 3: specific statistical data AND the number of
Estimated building
Score 5 3 buildings are available. Emissions are calculated
emissions based on using estimated building energy consumption
number of buildings and average emission factors specific to the
Other considerations
Grid emission factors
Consumed energy can be converted to CO2e using emission factors. When converting building
energy use to emissions, care should be taken to use emission factors that are appropriate to the
energy type used in the building (e.g., electricity, natural gas, fuel oil, steam). These factors should
be specified according to the type of energy consumed.
129 Supplier-specific emission factor is an emission rate provided by the energy supplier (e.g., utility) to its customers reflecting
the emissions associated with the energy it provides (e.g., electricity, gas, etc.). Average emission factors represent the average
emissions of the respective energy sources occurring in a defined boundary (e.g., national or subnational).
81
Building characteristics
Various building characteristics can be taken into consideration to provide additional resolution
to average energy consumption and emissions when actual data is unavailable. Many countries
conduct surveys to publicly provide building type and location-specific statistical data on average
energy consumption by characteristics such as floor space, principle building activity, region,
number of floors, and year constructed. Other national surveys might provide tables on emissions
and energy source or end use by industry and region.
Where possible, the most common regional electricity grid mix data for the building’s location
should be used. If unavailable, country-level electricity grid mix emissions data should be used.
Limitations
Country-specific assumptions
Many countries lack widespread use of building energy labels, and it may be challenging for
financial institutions to access a borrower’s measured energy consumption data. As such, limited
actual data will require financial institutions to estimate building energy use. Institutions may find
that the data they have available in the existing portfolio requires using average values. Collecting
additional building data at loan or investment origination may improve future estimations of
energy use. Some municipal governments are collecting building energy data, and this could
prove useful for some financial institutions.
Some country-specific adjustments will need to be made to make the calculation applicable
depending on the data availability and standards in each country. The variations across countries
in their systems of categorizing the energy efficiency of buildings require a tailored approach for
optimal accuracy in calculations.
Property value
This Standard requires financial institutions to use the property values determined at origination
as a CRE loan or investment is made in relation to the original value of the property. Thus, using
the outstanding amount to the original value provides a consistent estimate of the proportion
of the project attributable to the loan and investment. Nevertheless, PCAF recognizes that
availability of property value at origination varies globally. In some countries, financial institutions
can easily retrieve the property value at origination from their books and do not typically update it
on an annual basis. In other countries, regulators require financial institutions to update property
values annually.
Considering these differences and to ensure as much consistency as possible in the calculations,
when financial institutions do not have the property value at origination, they shall use the latest
property value available and they shall fix this value for the following years of GHG accounting
(i.e., the denominator remains constant from the first year of GHG accounting onward).
The property value includes the value of the land, the building, and any building improvements.
82
5.5 Mortgages
5.5 Mortgages
Review and apply

Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
business
accounting
accounting
and Report
accounting Report
goals
rules
each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
TE
TE
TE
TE
TE
5E
TE
TE
TE
TE
TE
TE
PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH

This asset class includes on-balance sheet loans for specific consumer purposes—namely
the purchase and refinance of residential property, including individual homes and multifamily
housing with a small number of units. This definition implies that the property is used only for
residential purposes and not to conduct income-generating activities.
If the loan is used to refinance a mortgage and this loan is provided by the original mortgage
provider, the new loan supersedes the original mortgage. If the refinancing is done by an
institution other than the original loan provider, the new loan and associated building’s emissions
are attributed to the institution providing the loan for refinancing.
Home equity loans (HELs) and home equity lines of credit (HELOCs) are not required under
this methodology given that these products are generally consumer loans for general consumer
purposes (with unknown use of proceeds as defined by the GHG Protocol).130
Mortgages used to construct or renovate a house are not required at this point given that the
homeowner does not directly account for construction emissions. As a home is often constructed
or renovated by a third party (i.e., a home builder) contracted by the homeowner, the emissions
of the construction would normally be accounted by the third party during the building’s
construction phase.131
Nevertheless, PCAF acknowledges that construction emissions, notably building’s embodied GHG
emissions, are important and should not be neglected. PCAF recommends financial institutions
find opportunities in the due diligence process to influence the homeowner into making low
carbon choices. PCAF will continue to monitor guidance developments132 on the subject and when
robust approaches and data to measure buildings’ embodied emissions are available, PCAF could
expand its coverage to include these emissions.

Financial institutions shall cover the absolute scope 1 and 2 emissions related to the energy use
of the property financed through the mortgage (energy use includes the energy consumed by
the building occupant). For example, if the mortgage is used to purchase a multifamily home
with shared facilities, scope 1 and 2 emissions of the whole property should be covered. If the
mortgage is used to buy a single apartment or house, emissions related to the apartment or
house should be covered.
130 If the consumer loan is to purchase motor vehicles, financial institutions shall use the motor vehicle loans asset class method
(subchapter 5.6).
131 Theoretically, these emissions would be categorized under scope 3 of the homeowner, but in practice homeowners do not report
emissions; thus, it is impractical for financial institutions to measure financed emissions of a construction or renovation mortgage.
132 For example, the WBCSD is working on creating an approach for the embedded carbon of constructions. At this point, they
are defining a theoretical approach with a working group consisting of real estate developers, building material producers,
construction companies, and technical consultants. The key in this approach is to use a life cycle assessment to obtain average
values of embedded carbon per square meter of building, which will differ per climate zone and building typology.
84
When calculating financed emissions, a building’s annual emissions are attributed to the mortgage
provider using a loan-to-value approach. Thus, the attribution is equal to the ratio of the
outstanding amount at the time of GHG accounting to the property value at loan origination.
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓# =
When the property value at origination is not feasible to obtain, financial institutions shall use the
latest property value available and fix this value for the following years of GHG accounting (i.e.,
the denominator remains constant).133
The attribution approach assumes the residential property owner also takes ownership of the
building’s emissions.

Financed emissions of mortgages are calculated by multiplying the attribution factor by the
building’s emissions. Thus, financed emissions are calculated as follows:
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓# × 𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒#

#
The emissions of buildings are calculated as the product of a building’s energy consumption
and specific emission factors for each source of energy consumed. The total energy use of the
building includes the energy consumed by the building’s occupant. The equation below is the
result.
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = - × 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐#,% × 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓%
#,%
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑏𝑏 = 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑎𝑎𝑎𝑎𝑎𝑎 𝑒𝑒 = 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑔𝑔𝑔𝑔 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 )
133 Availability of property value at origination varies by country. In some countries, financial institutions can easily retrieve the
property value at origination from their books and do not typically update it to the current property value. In other countries,
regulators require financial institutions to update the property value year over year.
85
Data required
The availability of data on the energy consumption of properties is still limited in many countries;
in others, it has improved considerably due to policy regulations within the built environment (like
the introduction of energy performance certificates and energy labels). In such countries, the
available data is usually anonymized by averaging data over several households in the same peer
group. Often, buildings’ energy data is available by energy label, type of household or sector, and
type of property. When applying these data on many financed properties, it is possible to get a
reasonable approximation of the emissions.
As more data sources become available institutions are expected to move up the data hierarchy,
but easily accessible data for many countries is currently between score 4 and 5 of the data
quality score table provided below.
Some financial institutions may not collect information on property size, in which case they can
use the average energy consumption by building and geographic region. Financial institutions
should use the highest quality dataset available and evaluate new data sources on a regular basis.
Supplier-specific emission factors134 for specific energy sources should be used if they are
available. If they are not, average emission factors135 may be used. PCAF’s web-based emission
factor database provides emission factors by building type (e.g., single-family house and
multifamily house), floor area, and number of buildings for a large set of geographies.
134 In the case of electricity, supplier-specific emission factors are the same as market-based emission factors.
135 In the case of electricity, average emission factors, which are non-supplier-specific emission factors, are the same as location-
based emission factors.
86
The following data hierarchy is proposed in order of preference:
Table 5-10. General description of the data quality score table for mortgages
financed emissions
Primary data on actual building energy
Emissions are calculated using actual building
Score 1 1a energy consumption and supplier-specific
Option 1: emission factors136 specific to the respective
Actual building energy source.
emissions Primary data on actual building energy
Score 2 1b Emissions are calculated using actual building
energy consumption and average emission
factors specific to the respective energy source.
floor area based on official building energy
labels AND the floor area are available.
Score 3 2a Emissions are calculated using estimated
building energy consumption and average
Option 2: emission factors specific to the respective
Estimated building energy source.
emissions based on Estimated building energy consumption
floor area per floor area based on building type and
location-specific statistical data AND the floor
Score 4 2b area are available. Emissions are calculated
using estimated building energy consumption
and average emission factors specific to the
building based on building type and location-
Option 3: specific statistical data AND the number of
Estimated building
Score 5 3 buildings are available. Emissions are calculated
emissions based on using estimated building energy consumption
number of buildings and average emission factors specific to the
Financial institutions should work with actual data on the energy consumption of properties, if
available. The consumed energy at the household level (e.g., gas, electricity, heating oil, wood)
can be converted to CO2e-emissions using supplier-specific emission factors or average emission
factors if no emissions data is provided in the chosen data sources (some data sources report
only energy use whereas others report CO2e emissions). As an intermediate step, financial
institutions could start collecting building size data (in addition to geographic location and
building type) and energy labels, where available, to more accurately capture the associated
emissions of their mortgages.
136 Supplier-specific emission factor is an emission rate provided by the energy supplier (e.g., utility) to its customers reflecting
the emissions associated with the energy it provides (e.g., electricity, gas, etc.). Average emission factors represent the average
emissions of the respective energy sources occurring in a defined boundary (e.g., national or subnational).
87
Other considerations
Obtaining data on energy consumption
Actual energy consumption data (but also specific to a certain mortgage portfolio) is preferred as
this will be more accurate than working with average energy consumption. In some markets with
clear government partnerships on climate action, financial institutions might attempt to work at
the policy level to obtain actual data directly from grid operators.
Almost all grids are becoming lower emission over time, providing gradually reduced emissions
for mortgage portfolios. Where possible, the most common regional electricity grid mix data for
the building’s location should be used; if unavailable, country-level electricity grid mix emissions
data should be used. If actual consumption data is unavailable, financial institutions should start
collecting building size, geographic location, and building type data to more accurately capture
the associated emissions of their mortgages.
If actual energy consumption data is used, it may be unclear if all the energy consumption is
applicable solely for the house or, for instance, also for an electric vehicle (EV). If possible, the
actual energy consumption data can be further disaggregated to differentiate the electricity used
in the home from the electricity used for charging the vehicle.
Off-balance mortgages and subsidiaries

The scope of this methodology is on-balance mortgages; off-balance are not included. If relevant
and substantial, off-balance sheet mortgages can be reported separately.
Distinguishing between private and corporate mortgages

No distinction is made between private or corporate mortgages.
Improving a home’s energy performance

The attribution approach assumes the residential property owner also takes ownership of the building’s
emissions. During the mortgage period, financial institutions may have the opportunity to work with the
property owner to lower the building emissions by offering additional financial services; these services
are used to improve the building’s energy performance (green mortgages, low carbon mortgages, or
energy efficient mortgages are some of the existing products in various markets around the globe).
Limitations
Results depend on data quality
Many assumptions must be made to calculate the emissions of mortgages as data is often difficult
to retrieve for privacy reasons. Even though the calculation method does not differ greatly, the
data sources used can yield different results—for instance, when average consumption data is
replaced by actual consumption data from grid operators.
Country-specific assumptions
Some country-specific adjustments will need to be made to make the calculation applicable
depending on the data availability and standards in each country. The variations across countries
in their systems of categorizing the energy efficiency of houses require a tailored approach for
optimal accuracy in calculations.
88
5.6 Motor vehicle
loans
5.6 Motor vehicle loans
Review and apply

Introduction
Understand
Introduction
what GHG
Understand
Identify
what GHG
business
business
accounting
accounting
and Report
accounting Report
goals
rules
each asset class
4
6
5
5
3
3
2
2
1
R
R
R
R
R
R
TE
TE
TE
TE
TE
5E
TE
TE
TE
TE
TE
TE
PT
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
RA
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
CH
TE
AP
CH

This asset class refers to on-balance sheet loans and lines of credit for specific (corporate
or consumer) purposes (i.e., with known use of proceeds as defined by the GHG Protocol) to
businesses and consumers that are used to finance one or several137 motor vehicles.
Financial institutions will finance different vehicle types and will also use different internal
definitions and categories for the motor vehicle types being financed by their investments. For
example, one financial institution may have a portfolio mainly of passenger cars and motorcycles,
while another financial institution may have a strong share of buses and heavy duty trucks.
This methodology does not prescribe a specific list of vehicle types falling within this asset class;
instead, it leaves it open for financial institutions to decide and define what vehicle types to
include in their inventory of financed emissions. It is the responsibility of each financial institution
to define the vehicle types included in their inventory of financed emissions and, in the case
of leaving a specific vehicle type out of the GHG accounting exercise, provide a transparent
explanation of why a vehicle type is excluded.
The following list exemplifies the vehicle types that may fall under the asset class of motor
vehicle loans—it is not exhaustive:
• Passenger car
• Motorcycle
• Light commercial truck (e.g., vans)
• Medium/heavy commercial truck
• Recreational vehicles
• Bus
• Snowmobiles/all-terrain vehicles
• Boats, including outboard motors138
• Yellow equipment (i.e., earth-moving vehicles for mining and construction)
This is not an exhaustive list as other vehicle types can also be included.
Financial institutions typically finance motor vehicle loans through consumer lending or business
lending. Consumer lending for motor vehicles includes financing the purchase of a motor vehicle
for a private person, whereas business loans for motor vehicles typically includes financing a fleet
of motor vehicles for a business.139
137 A single loan might cover the purchase of several vehicles or fleets. In any case, the methodology presented in this chapter should
be used.
138 Depending on the portfolio of some financial institutions, it may be appropriate to differentiate between the vehicle and the
propulsion system of that vehicle. In this case, it is possible to apply the methodology for the vehicle as a whole but also to the
propulsion system on its own. An example of this are financial institutions that have boats on their portfolio. In this case, it is
common to have loans for boats and also loans for outboard motors alone.
139 Note that the term “fleet” does not necessarily refer to multiple vehicles only—it can also refer to a single business vehicle.
90

Financial institutions shall calculate and report the annual scope 1 and scope 2 emissions of the
vehicles being financed:
• Scope 1: Direct emissions from fuel combustion in vehicles

• Scope 2: Indirect emissions from electricity generation consumed in EVs
(hybrid and fully EVs)
Scope 3 emissions related to the production of vehicles, delivery of vehicles to buyers, or

decommissioning of vehicles after use do not need to be covered; these emissions are difficult
to obtain and they can be considered rather marginal. However, if a financial institution seeks
to account for the production emissions of new vehicles (i.e., embodied emissions) for whatever
reason, they should report the emissions as follows:
• In the initial financing year, the financial institution shall report the production emissions
of the respective vehicle as a lump sum under scope 3 emissions, while the operation
emissions in the respective year shall be reported under scope 1 or 2 emissions.
• In the following financing years, the financial institution shall not report any production
emissions of the respective vehicle; they shall only report the operation emissions under
scope 1 or 2 emissions.
This approach on scope 3 emissions only holds for new vehicles, not used vehicles.
As a basic attribution principle, the financial institution accounts for a portion of the borrower’s
annual motor vehicle emissions as determined by the ratio between the outstanding amount
(numerator) and the value of the motor vehicle at origination (denominator). This ratio is called
the attribution factor:
1. Outstanding amount (numerator): This is the actual outstanding motor vehicle loan
amount, defined as the value of the debt that the debtor owes to the creditor. It will be
adjusted annually to reflect the correct exposure, resulting in the attribution to decline to
0 at the end of the lifetime of the loan (i.e., when it is fully repaid). Financial institutions
should either use the calendar or financial year-end outstanding loan, provided the
approach is communicated and used consistently.
2. Total value at origination (denominator): This is the total value of the motor vehicle at
origination, which corresponds to the price of the vehicle at the moment the transaction
was done (i.e., equity plus debt at origination).
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎$
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓$ =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑎𝑎𝑎𝑎 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜$
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑣𝑣 = 𝑣𝑣𝑣𝑣ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 𝑣𝑣𝑣𝑣ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓)
91
If the total value of the motor vehicle at origination (i.e., the denominator) is unknown, financial
institutions should take a conservative approach and assume 100% attribution. As soon as the
motor vehicle loan is repaid, the financed emissions associated to that loan are equal to 0.

The financed emissions from a motor vehicle loan are calculated by multiplying the attribution
factor by the emissions of the motor vehicle. The total financed emissions from multiple motor
vehicle loans are calculated as follows:
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓$ × 𝑉𝑉𝑉𝑉ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒$

$
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑣𝑣 = 𝑣𝑣𝑣𝑣ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 𝑣𝑣𝑣𝑣ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓)
The emissions can, in principle, be calculated by multiplying the vehicle distance traveled (e.g.,
km) by the vehicle’s fuel efficiency (e.g., l diesel/km, kWh electricity/km) and the vehicle’s fuel
type-specific emission factor (e.g., kg CO2e/l diesel, kg CO2e/kWh electricity). The total financed
emissions from multiple motor vehicle loans are calculated as follows:
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎&
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ J K × 𝑉𝑉𝑉𝑉ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒&
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑎𝑎𝑎𝑎 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜&
&
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎&
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 = @ J K × 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡& 𝑥𝑥 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸&,' × 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓'
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑎𝑎𝑎𝑎 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜&
&,'
(𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑣𝑣 = 𝑣𝑣𝑣𝑣ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 𝑣𝑣𝑣𝑣ℎ𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓, 𝑓𝑓 = 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡)
The financed emissions from motor vehicle loans can be calculated in several ways depending
on the availability of data to derive the financed vehicle’s emissions. Overall, PCAF distinguishes
three options to calculate the financed emissions from motor vehicle loans depending on the data
used:140
• Option 1: actual vehicle-specific emissions,141 where emissions are calculated based on

actual vehicle fuel consumption or actual vehicle distance traveled for a known vehicle
make and model with data directly collected from the borrower.
- Option 1a: Vehicle emissions are calculated based on primary data on actual
vehicle fuel consumption.
- Option 1b: Vehicle emissions are calculated based on vehicle efficiency and fuel
type (fossil or electricity) from known vehicle make and model142 and primary
data for actual vehicle distance traveled.
140 For all options the attribution factor is calculated in the same way; the only thing changing is the way vehicle emissions are
calculated.
141 For motor vehicle loans to consumers, this approach seems rather unrealistic as consumers are unlikely to report their actual
fuel consumption or distance traveled to a financial institution. However, for motor vehicle loans to businesses (in particular for
financing of company-owned staff cars), companies often collect information on actual fuel consumption or distance traveled and
could share such information with financial institutions.
142 Vehicle make and model refers to the name of the company that manufactures the vehicle and the product name of the vehicle.
For example, Toyota Prius.
92
• Option 2: estimated vehicle-specific emissions, where emissions are calculated based

on estimated vehicle distance traveled for a known vehicle make and model with data
collected from official statistics.
- Option 2a: Vehicle emissions are calculated based on vehicle efficiency and fuel
type (fossil or electricity) from known vehicle make and model and estimated
vehicle distance traveled derived from local statistical data.143
type (fossil or electricity) from known vehicle make and model and estimated
vehicle distance traveled derived from regional statistical data.144
• Option 3: estimated vehicle-unspecific emissions, where emissions are calculated based
on estimated vehicle distance traveled for an unspecified vehicle with data collected from
official statistics.
- Option 3a: Vehicle emissions are calculated based on vehicle efficiency and fuel
type (fossil or electricity) from known vehicle type145 (vehicle make and model
are unknown) and estimated vehicle distance traveled derived from local or
regional statistical data.
type (fossil or electricity) from an average vehicle (vehicle make and model and
vehicle type are unknown)146 and estimated vehicle distance traveled derived
from local or regional statistical data.
Data required
PCAF distinguishes three options with six suboptions to calculate the financed emissions from
motor vehicle loans depending on the data used. Although Option 1b, Option 2a, and Option 2b
are all based on known vehicle characteristics on vehicle efficiency and fuel type, the data used
for vehicle distance travel is of higher quality for Option 1b than it is for Option 2a, and it is of
higher quality for Option 2a than it is for Option 2b. In this sense, while there are several options
to calculate financed emissions, the quality of the results is not the same for all these options.
For this reason, PCAF gives a higher score to results obtained with higher data quality and a
lower score to results obtained with lower data quality (score 1 = highest data quality; score 5 =
lowest data quality). If a financial institution uses a mix of options to calculate the emissions of a
borrower (e.g., actual distance traveled and vehicle type is known, while vehicle make and model
is unknown, which means that Option 1b and Option 3a are mixed), the data score for the lower-
rated option should be assumed for this borrower (i.e., score 4 from Option 3a).
Table 5-10 provides data quality scores for each of the described options that can be used to
calculate the financed emissions for motor vehicle loans.
143 Local statistical data refers to statistical data at the province/state or small country level.
144 Regional statistical data refers to statistical data at the large country or a subcontinental level.
145 Vehicle type refers to an overall vehicle class such as passenger car, bus, or light commercial truck.
146 If it is not possible to know the vehicle type, then an average vehicle can be assumed.
93
Table 5-10. General description of the data quality score table for motor vehicle loans
(score 1 = highest data quality; score 5 = lowest data quality)147, 148
Data Quality Options to estimate When to use each option
the financed emissions
Outstanding amount and total value at origination of
vehicle or vehicle fleet are known. Primary data on actual
1a vehicle fuel consumption is available. Emissions are
calculated using actual fuel consumption and fuel type-
Option 1: specific emission factors.
Actual vehicle- Outstanding amount and total value at origination of
Score 1 specific vehicle or vehicle fleet are known. Vehicle efficiency and
emissions fuel type (fossil and/or electricity) are available from
1b known vehicle make and model.149 Primary data on
actual vehicle distance traveled is available. Emissions
are calculated using estimated fuel consumption and fuel
type-specific emission factors.
vehicle or vehicle fleet are known. Vehicle efficiency and
fuel type (fossil and/or electricity) are available from
Score 2 2a known vehicle make and model. Distance traveled is
estimated based on local statistical data.150 Emissions
Option 2: are calculated using estimated fuel consumption and fuel
Estimated type-specific emission factors.
vehicle-specific Outstanding amount and total value at origination of
emissions vehicle or vehicle fleet are known. Vehicle efficiency and
fuel type (fossil and/or electricity) are available from
Score 3 2b known vehicle make and model. Distance traveled is
estimated based on regional statistical data.151 Emissions
are calculated using estimated fuel consumption and fuel
type-specific emission factors.
vehicle or vehicle fleet are known. Vehicle efficiency
and fuel type (fossil and/or electricity) are estimated
from known vehicle type (vehicle make and model are
Score 4 3a unknown).152 Distance traveled is estimated based on
local or regional statistical data. Emissions are calculated
Option 3: using estimated fuel consumption and fuel type-specific
Estimated emission factors.
vehicle-
unspecific Outstanding amount and total value at origination of
emissions vehicle or vehicle fleet are known. Vehicle efficiency and
fuel type (fossil and/or electricity) are estimated for an
average vehicle (vehicle make and model and vehicle type
Score 5 3b are unknown).153 Distance traveled is estimated based on
local or regional statistical data. Emissions are calculated
using estimated fuel consumption and fuel type-specific
emission factors.
147 Fuel type in the case of electric or hybrid vehicles can also refer to electricity.
148 For all options shown in the table, supplier-specific emission factors (e.g., from electricity provider) for the respective primary
activity data are always preferred over non-supplier-specific emission factors (i.e., also sometimes referred to as average emission
factors).
149 Vehicle make and model refers to the name of the company that manufactures the vehicle and the product name of the vehicle.
For example, Toyota Prius.
150 Local statistical data refers to data at the province/state or small country level.
151 Regional statistical data refers to data at the large country or a subcontinental level.
152 Vehicle type refers to a passenger car, bus, or light commercial truck.
153 If it is not possible to know the vehicle type, an average vehicle can be assumed.
94
Data for all three options can be derived from different data sources. Data on vehicle efficiency
and fuel type per vehicle make and model can be derived from official statistical data sources
such as the US EPA’s Federal Test Procedure154 and the EEA’s Worldwide Harmonized Light
Vehicles Test Procedure (WLTP).155 Both data sources provide detailed vehicle efficiency and
fuel type information by make and model. Option 1b, Option 2a, and Option 2b require such
information. If make and model are unknown to the reporting financial institution (Option 3),
vehicle efficiency and fuel type can be estimated on the vehicle type level (e.g., passenger car)
using the International Council on Clean Transportation’s (ICCT’s) Transportation Roadmap156
or the International Transport Forum at the Organisation for Economic Co-operation and
Development (ITF OECD).157
If no actual distance traveled is known to the reporting financial institution, data on vehicle
distance traveled can be estimated based on data sources such as the ICCT Transportation
Roadmap or the ITF OECD. Several local statistical data sources provide geography-specific
vehicle distances traveled. For the US and Canada, state- or province-level distance per year can
be retrieved from carinsurance.com158 and the Canadian Office of Energy Efficiency.159
PCAF’s web-based emission factor database provides emission factors per vehicle type (e.g.,
passenger car) and per vehicle make and model (e.g., VW Polo) for a large set of geographies.
These motor vehicle emission factors are widely based on the sources mentioned above.
PCAF expects that the financed emissions for motor vehicle loans can be derived through either
actual vehicle-specific emissions (Option 1), estimated vehicle-specific emissions (Option 2), or
estimated vehicle-unspecific emissions (Option 3). However, PCAF allows the use of alternative
approaches to calculate emissions if none of the specified options can be used or in the case
that new approaches are developed. The reporting financial institution shall always explain the
reasons for using an alternative approach if it deviates from the options defined above.
154 The US EPA’s Federal Test Procedure is a series of drive cycle tests to measure the tailpipe emissions and fuel efficiency of
passenger cars. Because these tests are used to verify that cars sold in the US meet EPA regulatory standards, their results reflect
the road performance of passenger cars in the US. The results for more than 4,000 makes and models are publicly available on
fueleconomy.gov, downloadable in .csv format.
155 The WLTP is a global, harmonized standard of drive cycle tests to determine the tailpipe emissions and fuel efficiency of
passenger cars. It was developed by the United Nations Economic Commission for Europe to replace the old New European
Driving Cycle (NEDC) as the European vehicle homologation procedure. The NEDC was shown to be flawed, enabling
manufacturers to meet EU environmental standards during lab tests but not on the road (Dieselgate). The WLTP was conceived
to rectify this. The WLTP final version was published in 2015. Hence, even though it will become a truly international standard
in time, it is only used in the EU for now, and its results only reflect the performance of cars sold within the EU. These results
are published by the EEA in .csv format and can be downloaded at https://www.eea.europa.eu/data-and-maps/data/co2-cars-
emission-16.
156 The ICCT’s Transportation Roadmap has been a global reference for environmental performance data on all major transportation
modes, fuel types, and vehicle technologies since 2012. Over the past decade, the ICCT has extended its roadmap model to
cover 11 of the largest vehicle markets (Australia, EU, Brazil, Canada, China, India, Japan, Mexico, South Korea, Russia and the
US) and five aggregate regions (Africa, Other Asia-Pacific, Other Europe, Other Latin America, and the Middle-East). The most
recent results of the model (2017) are downloadable in .xlsx format on the ICCT website: https://theicct.org/transportation-
roadmap#about.
157 The OECD iLibrary maintains a database of transport statistics collected by the ITF on the transport of freight (maritime, air, and
surface) and passengers (car, rail, and air) in its member states
https://www.oecd-ilibrary.org/transport/data/itf-transport-statistics_trsprt-data-en.
158 More information can be found at: https://www.carinsurance.com/Articles/average-miles-driven-per-year-by-state.aspx
159 More information can be found at: http://oee.nrcan.gc.ca/publications/statistics/cvs08/appendix-1.cfm?graph=6&attr=0
95
Limitations
Data availability
Information regarding actual vehicle distance traveled may not be easily available. If actual data is
unavailable, PCAF proposes using local or regional averages on vehicle distance traveled by state,
province, country, or region.
PCAF proposes that financial institutions collect the actual vehicle make and model to determine
the exact vehicle efficiency and fuel type. If the financial institution does not track the vehicle
make and model, PCAF proposes that the financial institution falls back to a generic vehicle type
(e.g., passenger car, motorcycle, light commercial truck, medium/heavy commercial truck, bus) or
to an average vehicle as a last resort (where the vehicle efficiency is determined by the weighted
average vehicle efficiency in the respective geography).
Dual fuel vehicles

For dual fuel vehicles, the percentage of usage per fuel (e.g., gasoline vs. electricity) may be
unknown. If the vehicle make and model is known, PCAF recommends assuming an average usage
split for the respective hybrid vehicle based on information from national agencies or the vehicle
manufacturer. If such information is not available, PCAF proposes either applying an average
geography-specific usage split or (if that is also not available) the conservative assumption that
the combustion engine (e.g., gasoline) is used by 100%.
Electricity grid estimates

Exact electricity source data will not be known for each vehicle in a financial institution’s portfolio
(e.g., where does the borrower source electricity? Does the borrower source gray or green
electricity?). Where possible, the most common local or regional electricity grid mix emission
factor for the borrower’s location should be used. If unavailable, the most common local or
regional electricity grid mix emission factor for the financial institution’s branch should be used
(i.e., location of the financial institution where the loan was issued). If also unavailable, country-
level electricity grid mix emissions data should be used.
96
6. Reporting
recommendations
and requirements
6. Reporting
recommendations
and requirements
Review Review and apply

Introduction
Understand Identify
Report
what GHG business
accounting is goals
reporting principles
and rules
methodologies for
each asset class emissions
emissions
4
6
5
3
2
1
R
R
R
R
R
TE
TE
TE
TE
TE
TE
6
AP
AP
AP
AP
AP
AP
R
CH
CH
CH
CH
CH
CH
TE
AP
CH
To manage financial and reputational risk and steer in line with the Paris Agreement, it is crucial
that the financial sector reports GHG emissions of loans and investments for transparency and
accountability. The following reporting recommendations and requirements guide financial
institutions to disclose the GHG emissions associated with their loans and investments.
Rather than creating a new framework, PCAF developed these reporting requirements and
recommendations to complement existing frameworks such as TCFD, GRI, Sustainability
Accounting Standards Board (SASB), generally accepted accounting principles (GAAP), and
International Financial Reporting Standards (IFRS). It adheres to and builds upon the reporting
requirements set out by the GHG Protocol Corporate Value Chain (Scope 3) Accounting and
Reporting Standard.
All financial institutions that commit to using this Standard shall fulfil certain requirements when
disclosing their financed emissions publicly. However, they do have the flexibility to decide where
they want to start with measuring and disclosing their financed emissions—for instance, at a
specific asset class level or for a specific sector within a certain asset class. Flexibility in reporting
is allowed largely as a consequence of limitations in data availability and quality. PCAF recognizes
that data for many asset classes may not be available to financial institutions and that a financial
institution may not be able to disclose 100% of its portfolio. However, financial institutions shall be
transparent in their coverage and justify any exclusions.
The requirements for disclosure of financed emissions describe a minimum disclosure level with
room for financial institutions to report beyond this level. Any requirements not fulfilled must be
accompanied by an explanation. Minimum reporting requirements are described in this chapter
using the word “shall.” Where certain aspects of reporting are not required but encouraged as
best practice, the word “should” is used.
Report using the operational or financial control consolidation approach 160

The asset class methods in this Standard are used to calculate the scope 3 category 15 emissions
from financial investments. According to the GHG Protocol Corporate Value Chain (Scope 3)
Accounting and Reporting Standard,161 three consolidation approaches can be applied by financial
institutions to account for their scope 1, 2, and 3 emissions—namely equity, operational control,
and financial control. For PCAF reporting, financial institutions shall use the operational control
approach or the financial control approach; as a result, all financed emissions shall be accounted
for in their scope 3 category 15 reporting.
160 Additional information on consolidation approaches can be found in Chapter 4.

98
Overall Reporting Requirements and Recommendations

• Principles: GHG accounting and reporting of financial institutions shall be based on the
following principles: relevance, completeness, consistency, transparency, and accuracy.
• Purpose: A financial institution’s reporting should align with its specific business goals;
for instance, for identifying and managing climate-related transition risks or for steering
toward a specific emissions reduction target.
• Frequency: Financial institutions shall disclose at least annually and at a fixed point in
time in line with the financial accounting cycle. Financial institutions shall ensure that the
chosen point in time provides a representative view on the emissions for that reporting
year and shall transparently disclose if large changes close to (before/after) the reporting
date affected the results.
• Recalculation and significance threshold: Financial institutions shall, in line with the
GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard
requirement (pg. 104162), establish a baseline recalculation policy to define under which
circumstances a recalculating of (base year) financed emissions is necessary to ensure the
consistency, comparability, and relevance of the reported GHG emissions data over time.
As part of this base year emissions recalculation policy, financial institutions shall establish
and disclose the significance threshold163 that triggers base year emissions recalculations.
• Form of reporting: Financial institutions shall disclose in publicly available reports such
as (semi) annual reports, website articles, or other publicly available sources as deemed
appropriate by the financial institution. Annex 10.2 provides an example template for how
financial institutions can disclose their financed emissions.
• Past performance: Where appropriate and relevant for their business goals, financial
institutions should disclose their financed emissions for multiple comparable time periods
(e.g., years).
Coverage
• Financial institutions shall disclose all absolute emissions for all of the relevant asset
classes or sectors164 covered in Chapter 5 and justify any exclusions. Potential justification
criteria for exclusion are:
- Data availability: Required data is not available to the financial institutions.
- Size: The activities are insignificant to the institution’s total anticipated financed
emissions.
- Methodology: There is no global methodology to quantify the financed emissions
of specific activities (i.e., asset classes not covered in this Standard).
• Financial institutions shall disclose the percentage of their total loans and investments
covered in their financed emissions inventories for the six asset classes covered in Chapter
5 (e.g., a financial institution’s total outstanding loans and investments by asset class
noting any limitations and exclusions).

163 Definition according to the GHG Protocol: “A significance threshold is a qualitative and/or quantitative criterion used to define any
significant change to the data, inventory boundaries, methods, or any other relevant factors.”
164 Financial institutions can choose to report by sector rather than asset class.
99
Gases and units

• Financial institutions shall account for the seven gases under the Kyoto Protocol that are
also mandated under the UNFCCC to be included in national inventories if they are emitted
in the value chain. These are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and
nitrogen trifluoride (NF3).
• These seven gases shall be converted to carbon dioxide equivalents (CO2e) using the
100-year time horizon global warming potentials published by the IPCC—either the AR5
values published by the GHG Protocol165 or the IPCC’s most recently published assessment
report.166
• Financial institutions shall express their financed emissions in metric tonnes of carbon
dioxide equivalents (tCO2e) or another appropriate metric conversion—e.g., kilotonnes
(ktCO2e), megatonnes (MtCO2e). When emissions from a specific GHG (e.g., methane
emissions) are material and relevant, financial institutions should consider a separate
disclosure of these emissions.
• Biogenic CO2 emissions that occur in the value chain shall not be included in the scopes
but shall be included and separately reported in the public report.
Absolute emissions
• Institutions shall disclose the absolute emissions (scope 1 and 2 combined) of their loans
and investments. If it serves the financial institutions’ business goals, absolute scope 1
and scope 2 emissions of loans and investments should be reported separately from each
other.
• Beyond the reporting of scope 3 category 15 emissions covered by this Standard, financial
institutions shall also measure and report their scope 1 and 2 emissions and any other
relevant scope 3 emissions categories in line with the GHG Protocol Corporate Value Chain
(Scope 3) Accounting and Reporting Standard (see Annex 10.2 for an example).
• Where required by the relevant methodology in Chapter 5, financial institutions shall
separately disclose the absolute scope 3 emissions of their loans and investments,
including the specific sectors covered. Financial institutions shall explain if they are not
able to provide any required scope 3 information because of data availability or uncertainty.
• Financial institutions shall disaggregate and disclose absolute emissions data at the asset
class or at the sector level, particularly for the most carbon-intensive sectors (e.g., energy,
power, cement, steel, automotive).
• When a financial institution is an initial sponsor or lender of a specific project, the
institution should also assess and report the absolute lifetime scope 1 and 2 emissions of
the project that was financed during the reporting year.
165 (GHG Protocol, 2014)

166 The IPCC reports can be found at: https://www.ipcc.ch
100
Box 6. Double counting in reporting absolute emissions
Double counting—which occurs when GHG emissions are counted more than once in the
financed emissions calculation of one or more institutions—should be avoided as much
possible. Double counting occurs between the different scopes of emissions from loans and
investments when a financial institution invests in stakeholders that are in the same value
chain.167 This form of double counting cannot be avoided but can be made more transparent
by separately reporting the scope 1, 2, and 3 emissions of loans and investments. Apart from
this, double counting can take place at five levels:
• Between financial institutions

• In cofinancing the same entity or activity
• Between transactions within the same financial institutions
• Across different asset classes
• Within the same asset class
PCAF recognizes that double counting of GHG emissions cannot be avoided completely;
however, it should be minimized. Double counting between cofinancing institutions and
between transactions within the same asset class of a financial institution are avoided by
using the appropriate attribution rules defined by PCAF consistently.
By using the correct attribution method, double counting of emissions between institutions
can be minimized. Financial institutions using the methodologies in the Standard will be
subject to the same exposure to double counting so that one financial institution will not be
more significantly burdened than another.
Avoided emissions and emissions removals168

• In addition to absolute emissions, financial institutions:
- Should report carbon removals where relevant to their loans and investments
when appropriate methodologies become available.
- May report avoided emissions of their renewable power projects.
• If financial institutions choose to disclose carbon removals or avoided emissions, they
shall disclose absolute carbon removals or avoided emissions separately from the financial
institution’s scope 1, scope 2, and scope 3 inventories (see Annex 10-2 for an example).
167 The scope 1 emissions of one company can be the upstream scope 2 or 3 emissions of its customer. For example, scope 1
emissions from a utility providing energy to a company would end up in the scope 2 inventory of that company. If both companies
are receiving funding from the same financial institution these emissions would be double counted within its inventory.
168 As defined in Chapter 3, removed emissions are those related to projects or technologies that can result in CO2 being sequestered
by trees or removed from the atmosphere and stored in solid or liquid form.
101
Emissions intensity
• Financial institutions should report economic emission intensities if these values are
relevant to their business goals.
• Economic emission intensities shall be expressed on a portfolio, asset class, or sector level
in metric tonnes of carbon dioxide equivalents per million euro or dollar invested or loaned:
tCO2e/M€ or tCO2e/M$.
• When relevant to their business goals, financial institutions should consider reporting
physical emission intensities per sector using sector-specific activity (e.g., tCO2e/m2 for real
estate, tCO2e/MWh for power utilities, tCO2e/tonne of steel produced for steel companies).
Box 7. Financed emission metrics and comparability

Measuring financed emissions in absolute terms (i.e., absolute emissions) provides financial
institutions with the necessary baseline for climate action to align with the Paris Agreement.
When banks and investors aim to benchmark or compare companies, sectors, or portfolios to
each other, normalization is required. Absolute financed emissions at a portfolio level is not
a good instrument to compare or benchmark financial institutions on their performance due
the potential differences between financial institutions in terms of size, product portfolio,
exposure to sectors and regions, etc. For comparability and benchmarking, the absolute
financed emissions need to be translated into an emissions intensity metric (emissions per a
specific unit). 169
A wide array of intensity metrics is applied in the market and each has its own merits. The
table below includes a list of the most common metrics.
Metric Purpose Description

Absolute emissions To understand the climate impact The total GHG emissions of an
of loans and investments, and set asset class or portfolio
a baseline for climate action
Economic emissions To understand how the emissions Absolute emissions divided
intensity intensity of different portfolios by the loan and investment
(or parts of portfolios) compare to volume, expressed as e.g.
each other per monetary unit tCO2e/€M invested
Physical emissions To understand the efficiency of a Absolute emissions divided
intensity portfolio (or parts of a portfolio) by an output value, expressed
in terms of total carbon emissions as e.g. tCO2e/MWh, tCO2e/ton
per unit of a common output product produced
Weighted Average Carbon To understand exposure to Portfolio’s exposure to carbon-
Intensity (WACI) carbon-intensive companies intensive companies, expressed
as tCO2e/€M company revenue
169 Actual performance benchmarking or target setting for financial institutions is not covered by this Standard. For this type of
assessment, other initiatives (e.g., the SBTi or Center for Climate-Aligned Finance) exist that build on the accounting requirements
set forth in this Standard but that further rely on their own methodologies and approaches.
102
Data and data quality

• Financial institutions shall use the most recent or otherwise appropriate data available
to them. PCAF recognizes there is often a lag between financial reporting and required
emissions data, such as emission factors or borrower or investee emissions data. In these
instances, it is acceptable that the data represents different years.
• Financial institutions should provide a description of the types and sources of data—
including activity data, assumptions, emission factors, and all relevant publication dates—
used to calculate emissions. Descriptions should be written to create transparency.
• Financial institutions should publish a weighted score by outstanding amount of the data
quality of reported emissions data or should explain why they are unable to do so. An
example is provided in Box 8.
• Where financial institutions are reporting scope 3 emissions, the weighted data quality
score shall be reported separately from scopes 1 and 2.
• The data hierarchy tables provided in each asset class method in Chapter 5 should be
used as a guide for disclosing data quality. Financial institutions should explain how data
quality is assessed, acknowledging that it will improve over time.
• Over time and where possible, data should be verified to at least a level of limited
assurance. Financial institutions should disclose whether data is verified and to what level.
103
Box 8. An illustrative example for calculating weighted data quality scores

It is likely that data quality will differ across asset classes, sectors, companies, and emission
scopes. To disclose the best representation of data quality, the Standard requires that
financial institutions normalize the data quality scores for each asset class and sector to the
total outstanding loan or investment amount.
The equation for calculating weighed averages for an asset class or sector is:
∑&%'( 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎% × 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠%

=
∑&%'( 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎%
𝑤𝑤𝑤𝑤𝑤𝑤ℎ 𝑖𝑖 = 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑜𝑜𝑜𝑜 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑒𝑒
An illustrative example of a financial institution’s lending is provided below:
Asset class Sector Company Outstanding Attributed Data

loan scope 1 and quality
2 absolute score
emissions (1=high,
(kton CO2e) 5=low)
Business loans Oil & Gas Company A 522,425 15 3
Business loans Oil & Gas Company B 187,449 7 5
Business loans Cattle farming Company C 82,778 8 1
Business loans Cattle farming Company D 108,997 11 1
Business loans Cattle farming Company E 67,556 7 2
Business loans Cattle farming Company F 54,762 5 5
Weighted data score for business loans scope 1 and 2 emissions:
((522,425 ×3)+(187,449×5)+(82,778×1)+(108,997×1)+(67,556×2)+(54,762×5))
((522,425+187,449+82,778+108,977+67,556+54,762))
=3.03
Weighted data score for oil & gas sector scope 1 and 2 emissions:
=((522,425 ×3)+(187,449×5))
((522,425+187,449))
=3.53
104
7. Glossary
7. Glossary
Absolute emissions Emissions attributed to a financial institution’s lending and investing

activity. Expressed in tonnes CO2e.
Asset class A group of financial instruments that have similar financial
characteristics.
Attribution factor The share of total greenhouse gas (GHG) emissions of the borrower
or investee that are allocated to the loan or investments.
Avoided emissions Emission reductions that the financed project produces versus what
would have been emitted in the absence of the project (the baseline
emissions). In the context of the Standard, avoided emissions are only
from renewable energy and energy efficiency projects.
Biogenic carbon dioxide (CO2) Emissions from a stationary source directly resulting from the
emissions combustion or decomposition of biologically based materials other
than fossil fuels.
Borrower A person or company that borrows money from a bank.
Business loan Loans and lines of credit for general corporate purposes (i.e., with
unknown use of proceeds as defined by the GHG Protocol) to
businesses, nonprofits, and any other structure of organization that
are not traded on a market and are on the balance sheet of the
financial institution. For detail information on this asset class see
subchapter 5.2.
Climate impact In the context of this Standard, climate impact refers to the emissions
financed by loans and investments.
Climate risk The potential for adverse effects on lives, livelihoods, health
status, economic, social and cultural assets, services (including
environmental), and infrastructure due to climate change.
CO2-equivalent (CO2e) The amount of CO2 that would cause the same integrated radiative
forcing (a measure for the strength of climate change drivers)
over a given time horizon as an emitted amount of another GHG or
mixture of GHGs. Conversion factors vary based on the underlying
assumptions and as the science advances. As a baseline, PCAF
recommends using 100-year Global Warming Potentials without
climate-carbon feedback from the most recent IPCC Assessment
report.
Commercial real estate (CRE) This asset class includes on-balance sheet loans for specific
corporate purposes, namely the purchase and refinance of CRE, and
on-balance sheet investments in CRE. This definition implies that
the property is used for commercial purposes, such as retail, hotels,
office space, industrial, or large multifamily rentals. In all cases, the
building owner or investor leases the property to tenants to conduct
income-generating activities. For detailed information on this asset
class see subchapter 5.4.
Consolidation approach Refers to how an organization sets boundaries for GHG accounting.
Types include equity approach, financial control, and operational
control.
Consumer finance Finance provided to individual and household consumers, such as
mortgages and motor vehicle loans.
Corporate debt Money that is owed by companies rather than by governments or
individual people.
Debt A financing instrument that requires repayment by the borrower.
Direct emissions Emissions from sources that are owned or controlled by the reporting
entity or the borrower or investee.
Double counting Occurs when GHG emissions (generated, avoided, or removed) are
counted more than once in a GHG inventory or toward attaining
mitigation pledges or financial pledges for the purpose of mitigating
climate change.
Embodied emissions in The GHG emissions associated with the non-operational phase of the
buildings project. This includes emissions cause by extraction, manufacture,
transportation, assembly, maintenance, replacement, deconstruction,
disposal and end of life aspects of the materials and systems that
make up a building.
106
Emission intensity metric Emissions per a specific unit, for example:

tCO2e/€M invested, tCO2e/MWh, tCO2e/ton product produced,
tCO2e/MWh, tCO2e/ton product produced,
tCO2e/€M company revenue.
Emission removal The action of removing GHG emissions from the atmosphere and
store it through various means, such as in soils, trees, underground
reservoirs, rocks, the ocean, and even products like concrete and
carbon fiber.
Emission scopes The GHG Protocol Corporate Accounting and Reporting Standard
classifies an organization’s GHG emissions into three scopes. Scope
1 emissions are direct emissions from owned or controlled sources.
Scope 2 emissions are indirect emissions from the generation of
purchased energy. Scope 3 emissions are all indirect emissions (not
included in scope 2) that occur in the value chain of the reporting
organization, including both upstream and downstream emissions.
Enterprise Value Including The sum of the market capitalization of ordinary shares at fiscal
Cash (EVIC) year end, the market capitalization of preferred shares at fiscal
year-end, and the book values of total debt and minorities’ interests.
No deductions of cash or cash equivalents are made to avoid the
possibility of negative enterprise values.
Environmentally extended EEIO data refers to EEIO emission factors that can be used to
input-output (EEIO) data estimate scope 1, 2, and upstream scope 3 GHG emissions for a given
industry or product category. EEIO data is particularly useful in
screening emissions sources when prioritizing data collection efforts.
Equity Bank’s or investor’s ownership in a company or project. There are
various types of equity, but equity typically refers to shareholder
equity, which represents the amount of money that would be returned
to a company’s shareholders if all of the assets were liquidated and
all of the company’s debt were paid off.
EXIOBASE A global, detailed multi-regional environmentally extended supply-
use table and input-output table. It was developed by harmonizing
and detailing supply use tables for a large number of countries,
estimating emissions, and resource extractions by industry.
Federal Test Procedure The US Environmental Protection Agency’s Federal Test Procedures
are a series of drive cycle tests to measure the tailpipe emissions and
fuel efficiency of passenger cars.
Financed emissions Absolute emissions that banks and investors finance through their
loans and investments.
Financial institutions A company engaged in the business of dealing with financial and
monetary transactions such as deposits, loans, investments, and
currency exchange. Financial institutions encompass a broad range
of business operations within the financial services sector including:
commercial banks, investment banks, development banks, asset
owners/managers (mutual funds, pension funds, close-end funds,
investment trusts), and insurance companies.
Greenhouse gas (GHG) The seven gases mandated under the Kyoto Protocol and to be
emissions included in national inventories under the United Nations Framework
Convention on Climate Change (UNFCCC)—carbon dioxide (CO2),
methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), sulphur hexafluoride (SF�), and nitrogen
trifluoride (NF3).
GHG accounting A means of measuring the direct and indirect emissions to the Earth’s
biosphere of CO2 and its equivalent gases from industrial activities.
GHG accounting of financial The annual accounting and disclosure of GHG emissions associated
portfolios with loans and investments at a fixed point in time in line with
financial accounting periods. This is also called portfolio GHG
accounting.
GHG Protocol Comprehensive global standardized frameworks to measure and
manage GHG emissions from private and public sector operations,
value chains, and mitigation actions. The GHG Protocol supplies the
world’s most widely used GHG accounting standards. The Corporate
Accounting and Reporting Standard provides the accounting platform
for virtually every corporate GHG reporting program in the world.
107
Global Trade Analysis Project GTAP is a global network of researchers and policy makers
(GTAP) database conducting quantitative analysis of international policy issues. GTAP
is coordinated by the Center for Global Trade Analysis in Purdue
University’s Department of Agricultural Economics. The centerpiece
of the GTAP is a global database describing bilateral trade patterns,
production, consumption, and intermediate use of commodities and
services
Home equity line of credit A revolving line of credit usually with an adjustable interest rate,
(HELOC) which allows homeowners to borrow up to a certain amount over
a period of time. HELOCs work in a manner similar to credit cards,
where the homeowner can continuously borrow up to an approved
limit while paying off the balance.
Home equity loan (HEL) Sometimes referred to as a second mortgage, usually allows
homeowners to borrow a lump sum against their current home equity
for a fixed rate over a fixed period of time. Usually, home equity loans
are used to finance large expenditures, such as home repairs or
college tuition.
Indirect emissions Emissions that are a consequence of the activities of the reporting
entity but occur at sources owned or controlled by another entity.
Investment The term investment (unless explicitly stated otherwise) is used
in the broad sense: “Putting money into activities or organizations’
with the expectation of making a profit.” Most forms of investment
involve some form of risk taking, such as investment in equities,
debt, property, projects, and even fixed interest securities which are
subject to inflation risk, among other risks.
Investee company or investee A company or project in which an investor makes a direct investment.
project
Known use of proceeds Known use of proceeds relates to investments and loans for specific
(corporate or consumer) purposes (i.e., the financial institution knows
for what activity the money is used).
Listed equity and corporate This asset class includes all listed corporate bonds and all listed
bonds equity for general corporate purposes (i.e., unknown use of proceeds
as defined by the GHG Protocol) that are traded on a market and
are on the balance sheet of the financial institution. For detailed
information on this asset class see subchapter 5.1.
Mortgage This asset class includes on-balance sheet loans for specific
consumer purposes—namely the purchase and refinance of
residential property, including individual homes and multi-family
housing with a small number of units. This definition implies that the
property is used only for residential purposes and not to conduct
income-generating activities. For detailed information on this asset
class see subchapter 5.5.
Motor vehicle loan This asset class refers to loans and lines of credit for specific
(corporate or consumer) purposes (i.e., with known use of proceeds
as defined by the GHG Protocol) to businesses and consumers that
are used to finance one or several motor vehicles on the balance
sheet of the financial institution. For detailed information on this
asset class see subchapter 5.6.
Paris Agreement The Paris Agreement, adopted within the UNFCCC in December 2015,
commits participating countries to limit global temperature rise to
well-below 2°C above preindustrial levels and pursue efforts to limit
warming to 1.5°C, adapt to changes already occurring, and regularly
increase efforts over time.
Project finance This asset class includes all loans or equities to projects for specific
purposes (i.e., with known use of proceeds as defined by the GHG
Protocol) that are on the balance sheet of the financial institution.
The financing is designated for a defined activity or set of activities,
such as the construction and operation of a gas-fired power plant,
a wind or solar project, or energy efficiency projects. For detailed
information on this asset class see subchapter 5.3.
Scenario analysis A process of analyzing future events by considering alternative
possible outcomes.
108
Science-based reduction Targets adopted by companies to reduce GHG emissions are

targets (SBTs) considered science-based if they are in line with what the latest
climate science says is necessary to meet the goals of the Paris
Agreement—to limit global warming to well-below 2°C above
preindustrial levels and pursue efforts to limit warming to 1.5°C.
Scope 1 emissions Direct GHG emissions that occur from sources owned or controlled
by the reporting company—i.e., emissions from combustion in owned
or controlled boilers, furnaces, vehicles, etc.
Scope 2 emissions Indirect GHG emissions from the generation of purchased or acquired
electricity, steam, heating, or cooling consumed by the reporting
company. Scope 2 emissions physically occur at the facility where the
electricity, steam, heating, or cooling is generated.
Scope 3 emissions All other indirect GHG emissions (not included in Scope 2) that occur
in the value chain of the reporting company. Scope 3 can be broken
down into upstream emissions that occur in the supply chain (for
example, from production or extraction of purchased materials) and
downstream emissions that occur as a consequence of using the
organization’s products or services.
Scope 3 category 15 This category includes scope 3 emissions associated with the
(investments) emissions reporting company’s loans and investments in the reporting year, not
already included in scope 1 or scope 2.
Sequestered emissions Refers to atmospheric CO2 emissions that are captured and stored in
solid or liquid form, thereby removing their harmful global warming
effect.
Total balance sheet value A balance sheet is a financial statement that reports a company’s
assets, liabilities, and shareholders’ equity. The balance sheet value
refers to the sum of total equity and liabilities, which is equal to the
company’s total assets.
Unknown use of proceeds Unknown use of proceeds refers to investments and loans for general
(corporate or consumer) purposes (i.e., the financial institution does
not know exactly for what activity the money is used, which holds for
general purposes loans).
Unlisted equity All equity investments for general corporate purposes (i.e., with
unknown use of proceeds as defined by the GHG Protocol Corporate
Value Chain (Scope 3) Accounting and Reporting Standard) to
businesses, nonprofits, and any other structure of organization
that are not traded on a market and are on the balance sheet of
the financial institution. Unlisted equity is also referred to as equity
investments in private companies (i.e., the financial institute obtains
shares of the company).
Vehicle make The name of the company that manufactures the vehicle.
Vehicle model The product name of the vehicle.
World Input-Output Database World Input-Output tables and underlying data, covering 43
(WIOD) countries, and a model for the rest of the world for 2000-2014. Data
for 56 sectors are classified according to the International Standard
Industrial Classification revision 4 (ISIC REV. 4).
World Harmonized Light- The WLTP is a global, harmonized standard of drive cycle tests to
duty Vehicles Test Procedure determine the tailpipe emissions and fuel efficiency of passenger
(WLTP) cars.
109
8. Acronyms
8. Acronyms
CDP Carbon Disclosure Project

CH4 Methane
CO2 Carbon dioxide
CO2e Carbon dioxide equivalent
CRE Commercial real estate
EEIO Environmentally extended input-output
EU European Union
EU TEG European Commission Technical Expert Group on Sustainable Finance
EV Electric vehicle
EVIC Enterprise value including cash
FAO Food and Agriculture Organization of the United Nations
FSB Financial Stability Board
GAAP Generally accepted accounting principles
GEMIS Global Emissions Model for integrated Systems
GHG Greenhouse gas
GTAP Global Trade Analysis Project
HFC Hydrofluorocarbon
HEL Home equity loan
HELOC Home equity line of credit
ICCT International Council on Clean Transportation
IEA International Energy Agency
IFI Internal Financial Institution
IFRS International Financial Reporting Standards
IPCC Intergovernmental Panel on Climate Change
IPO Initial public offering
ISIC Industrial Classification of All Economic Activities
ITF OECD International Transport Forum at the Organisation for
Economic Co-operation and Development
ktCO2e kilotonnes of carbon dioxide equivalent
L2 Level 2 (NACE)
MtCO2e megatonnes of carbon dioxide equivalent
MWh Megawatt-hour
N2O Nitrous oxide
NACE Statistical Classification of Economic Activities in the European Community
NDC Nationally determined contribution
NEDC New European Driving Cycle
NF3 Nitrogen trifluoride
NGO Nongovernmental organization
PCAF Partnership for Carbon Accounting Financials
PFC Perfluorocarbon
SASB Sustainability Accounting Standards Board
SBT Science-based targets
SBTi-FI Science -Based Targets initiative for Financial Institutions
SDA Sectoral Decarbonization Approach
SF6 Sulphur hexafluoride
111
TCFD Task Force on Climate-related Financial Disclosures

tCO2e Metric tonnes of carbon dioxide equivalent
UNEP FI United Nations Environment Programme Finance Initiative
UNFCCC United Nations Framework Convention on Climate Change
US United States
WACI Weighted Average Carbon Intensity
WBCSD World Business Council for Sustainable Development
WIOD World Input-Output Database
WLTP Worldwide Harmonized Light Vehicles Test Procedure

112
9. References
9. References
• CDP. (2020). CDP Climate Change 2020 Questionnaire.

Retrieved from CDP: https://bit.ly/39d9zoE
• CRO Forum. (2020). Carbon Footprinting Methodology for Underwriting Portfolios.
Retrieved from The CRO
Forum: https://www.thecroforum.org/wp-content/uploads/2020/05/CRO-Carbon-Foot-
Printing-Methodology.pdf
• ENCORD. (2012). Construction CO2e Measurement Protocol: A Guide to reporting against
the Green House Gas Protocol for construction companies. Retrieved from Greenhouse
Gas Protocol: https://ghgprotocol.org/sites/default/files/ENCORD-Construction-CO2-
Measurement-Protocol-Lo-Res_FINAL_0.pdf
• EU Technical Expert Group on Sustainable Finance. (2019). Financing a Sustainable
European Economy: Report on Benchmarks: Handbook of Climate Transition Benchmarks,
Paris Aligned Benchmark, and Benchmarks’ ESG Disclosure. Retrieved from European
Commission: https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_
and_finance/documents/192020-sustainable-finance-teg-benchmarks-handbook_en_0.pdf
• GHG Protocol. (2014). Global Warming Potential Values. Retrieved from The Greenhouse
Gas Protocol: https://www.ghgprotocol.org/sites/default/files/ghgp/Global-Warming-
Potential-Values%20%28Feb%2016%202016%29_1.pdf
• IFI. (2020). Methodological Approach for the Common Default Grid Emission Factor
Dataset. Retrieved from United Nations Framework Convention on Climate Change: https://
unfccc.int/sites/default/files/resource/IFITWG_Methodological_approach_to_common_
dataset.pdf
• New Climate Institute and Climate Analytics. (2020). Climate Action Tracker. Retrieved
from https://climateactiontracker.org/global/cat-thermometer/
• PCAF. (2019, December). Accounting for and Steering Carbon: Harmonised Approach for
the Financial Sector. Retrieved from Partnership for Carbon Accounting Financials: https://
carbonaccountingfinancials.com/files/downloads/1911-pcaf-report-nl.pdf?6253ce57ac
• PCAF. (2019, November). Harmonizing and Implementing a Carbon Accounting Approach
for the Financial Sector in North America. Retrieved from Partnership for Carbon
Accounting Financials: https://carbonaccountingfinancials.com/files/2019-10/20191028-
pcaf-report-2019.pdf
• PCAF. (2019). Shaping the climate action journey for financial institutions: navigating
through the cluster of climate initiatives. Retrieved from Partnership for Carbon Accounting
Financials: https://carbonaccountingfinancials.com/files/2020-01/overview-initiatives-
shaping-climate-action-journey-for-fis.pdf?ae36ae7be6
• SBTi. (2020). Financial Sector Science-Based Targets Guidance, Pilot Version. Retrieved
from https://sciencebasedtargets.org/wp-content/uploads/2020/10/Financial-Sector-
Science-Based-Targets-Guidance-Pilot-Version.pdf
• TCFD. (2017). Final Report: Recommendations of the Task Force on Climate-related
Financial Disclosures. Retrieved from https://www.fsb-tcfd.org/publications/final-
recommendations-report/
• TCFD. (2017). Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures. Section D: Supplemental Guidance for the Financial Sector. Retrieved
from Task Force on Climate-related Financial Disclosures: https://www.fsb-tcfd.org/wp-
content/uploads/2017/12/FINAL-TCFD-Annex-Amended-121517.pdf
114
• UNFCCC. (2015). International Financial Institution Framework for a Harmonised Approach

to Greenhouse Gas Accounting. Retrieved from United Nations Framework Convention
on Climate Change: https://unfccc.int/sites/default/files/resource/International%20
Financial%20Institution%20Framework%20for%20a%20Harmonised_rev.pdf
• World Bank Group. (2020). State and Trends of Carbon Pricing. Washington, D.C.
• WRI and WBCSD. (2004). GHG Protocol Corporate Accounting and Reporting Standard,
Revised Edition, Chapter 2. Retrieved from The Greenhouse Gas Protocol: https://
ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf
• WRI and WBCSD. (2011). GHG Protocol, Corporate Value Chain (Scope 3) Accounting and
Reporting Standard, Supplement to the GHG Protocol Corporate Accounting and Reporting
Standard. Retrieved from Greenhouse Gas Protocol:
https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-
Reporing-Standard_041613_2.pdf
• WRI and WBCSD. (2013). Technical Guidance for Calculating Scope 3 Emissions. Retrieved
from Greenhouse Gas Protocol:
https://ghgprotocol.org/sites/default/files/standards/Scope3_Calculation_Guidance_0.pdf
115
10. Annex
10. Annex
10. Annex
10.1. Detailed data quality score tables per asset class

LISTED EQUITY AND CORPORATE BONDS – DETAILED SUMMARY OF DATA NEEDS AND EQUATIONS TO CALCULATE FINANCED EMISSIONS
Table 10.1-1. Detailed description of the data quality score table for listed equity and corporate bonds170
Data
Description
quality
Option
Attribution Emission factor Financed emissions calculation Highest to
Financial data Emission data Equations lowest
"#$%$&'()'* &,-#'$!
! × /34)5)3( 6-,7&'8 3,)%%)-'%!
./01!
!
Verified GHG emissions data from
Option 1a EVIC for the company in accordance with the For bonds to private companies: Score 1
listed GHG Protocol "#$%$&'()'* &,-#'$!
! × /34)5)3( 6-,7&'8 3,)%%)-'%!
Outstanding companies 9-$&: 3;#)$8 + (3=$!
!
amount in and total
the equity plus
company debt for For listed companies:
bonds to "#$%$&'()'* &,-#'$!
! × >'?34)5)3( 6-,7&'8 3,)%%)-'%!
private ./01!
Unverified GHG emissions data !
companies
Option 1b calculated by the company in For bonds to private companies: Score 2
accordance with the GHG Protocol "#$%$&'()'* &,-#'$!
! × >'?34)5)3( 6-,7&'8 3,)%%)-'%!
9-$&: 3;#)$8 + (3=$!
!
170
Where c = borrower or investee company and s = sector.
91
Data
Description
quality
Option
Primary physical
activity data for
the company’s Emission factors For listed companies:
energy specific to that "#$%$&'()'* &,-#'$! 173
! × .'34*8 6-'%#,7$)-'! × .,)%%)-' 5&6$-4
consumption by primary data ./01!
Option !
energy source (e.g., energy
2a171 For bonds to private companies:
(e.g., megawatt- source-specific
hours of emission "#$%$&'()'* &,-#'$! 174
! × .'34*8 6-'%#,7$)-'! × .,)%%)-' 5&6$-4
electricity) plus factors)172 9-$&: 3;#)$8 + (3=$!
!
any process
emissions
Primary physical Emission factors "#$%$&'()'* &,-#'$!
! × @4-(#6$)-'! × .,)%%)-' 5&6$-4
activity data for specific to that !
./01!
the company’s primary data Score 3
Option 2b
production (e.g., (e.g., emission For bonds to private companies:
tons of rice factor per ton of "#$%$&'()'* &,-#'$!
! × @4-(#6$)-'! × .,)%%)-' 5&6$-4
produced) rice) 9-$&: 3;#)$8 + (3=$!
!
EVIC for For listed companies:

listed "#$%$&'()'* &,-#'$! BCB 3,)%%)-'%"
! × A3?3'#3! ×
companies Revenue per ./01! 9#4'-?34"
GHG emissions !
Option 3a and total sector175 Score 4
per sector For bonds to private companies:
equity plus
debt for "#$%$&'()'* &,-#'$! BCB 3,)%%)-'%"
! × A3?3'#3! ×
bonds to 9-$&: 3;#)$8 + (3=$! 9#4'-?34"
!
171
The quality scoring for Option 2a is only possible for/applicable to scope 1 and scope 2 emissions as scope 3 emissions cannot be estimated by this option. Other options can be used to estimate the scope 3
emissions, however.
172
Supplier-specific emission factors (e.g., from an electricity provider) for the respective primary activity data are always preferred over non-supplier-specific emission factors.
173
Where this option is used, process emissions must be added to the calculated energy consumption emissions before multiplying by the attribution factor.
174
175
If revenue is not deemed a suitable financial indicator for estimating the emissions of a company in a certain sector, one can apply other suitable financial indicators as a proxy. If an alternative indicator is
used, the reasoning for the selection of this alternative indicator should be made transparent. The data quality score will not be affected.
92
Data
Description
quality
Option
private
companies
Revenue of
the
company
For listed companies and bonds to private companies:
GHG emissions Assets per BCB 3,)%%)-'%"

Option 3b N/A ! "#$%$&'()'* &,-#'$! ×
per sector sector D%%3$%"
!
Score 5
Asset
For listed companies and bonds to private companies:
turnover GHG emissions Revenue per BCB 3,)%%)-'%"
Option 3c ! "#$%$&'()'* &,-#'$! × D%%3$ $#4'-?34 4&$)-" ×
ratio per per sector sector A3?3'#3"
sector !
93
BUSINESS LOANS AND UNLISTED EQUITY – DETAILED SUMMARY OF DATA NEEDS AND EQUATIONS TO CALCULATE FINANCED EMISSIONS
Table 10.1-2. Detailed description of the data quality score table for business loans and unlisted equity176
Data
Description
quality
Option
"#$%$&'()'* &,-#'$!
! × /34)5)3( 6-,7&'8 3,)%%)-'%!
9-$&: 3;#)$8 + (3=$!
!
Verified GHG emissions data from
Option 1a the company in accordance with the For business loans to listed companies: Score 1
Total equity GHG Protocol
plus debt for "#$%$&'()'* &,-#'$!
! × /34)5)3( 6-,7&'8 3,)%%)-'%!
business ./01!
!
loans and
equity For business loans and equity investments to/in private companies:
Outstanding "#$%$&'()'* &,-#'$!
investments ! × >'?34)5)3( 6-,7&'8 3,)%%)-'%!
amount in 9-$&: 3;#)$8 + (3=$!
to/in private Unverified GHG emissions data !
the
Option 1b companies, calculated by the company in
company For business loans to listed companies:
and EVIC for accordance with the GHG Protocol "#$%$&'()'* &,-#'$!
business ! × >'?34)5)3( 6-,7&'8 3,)%%)-'%!
./01!
loans to !
listed Score 2
companies Primary physical Emission factors For business loans and equity investments to/in private companies:
activity data for specific to that "#$%$&'()'* &,-#'$! 179
! × .'34*8 6-'%#,7$)-'! × .,)%%)-' 5&6$-4
the company’s primary data 9-$&: 3;#)$8 + (3=$!
Option !
energy (e.g., energy
2a177 For business loans to listed companies:
consumption by source-specific
energy source emission "#$%$&'()'* &,-#'$! 180
! × .'34*8 6-'%#,7$)-'! × .,)%%)-' 5&6$-4
(e.g., megawatt- factors)178 ./01!
!
176
177
emissions, however.
178
Supplier-specific emission factors (e.g., from an electricity provider) for the respective primary activity data are always preferred over non-supplier-specific emission factors.
179
180
94
Data
Description
quality
Option
hours of
electricity) plus
any process
emissions
Primary physical Emission factors "#$%$&'()'* &,-#'$!
! × @4-(#6$)-'! × .,)%%)-' 5&6$-4
activity data for specific to that !
9-$&: 3;#)$8 + (3=$!
the company’s primary data
Option 2b
production (e.g., (e.g., emission For business loans to listed companies:
tons of rice factor per ton of "#$%$&'()'* &,-#'$! Score 3
! × @4-(#6$)-'! × .,)%%)-' 5&6$-4
produced) rice) ./01!
!
Total equity
plus debt for
business
loans and
equity For business loans and equity investments to/in private companies:
investments "#$%$&'()'* &,-#'$! BCB 3,)%%)-'%"
! × A3?3'#3! ×
to/in private !
9-$&: 3;#)$8 + (3=$! A3?3'#3"
companies, GHG emissions Revenue per
Option 3a Score 4
and EVIC for per sector sector181 For business loans to listed companies:
business "#$%$&'()'* &,-#'$! BCB 3,)%%)-'%"
! × A3?3'#3! ×
loans to ./01! A3?3'#3"
!
listed
companies
Revenue of
the
company
181
95
Data
Description
quality
Option

Option 3b N/A ! "#$%$&'()'* &,-#'$! ×
!
Score 5
Asset
Option 3c ! "#$%$&'()'* &,-#'$! × D%%3$ $#4'-?34 4&$)-" ×
!
sector
96
PROJECT FINANCE – DETAILED SUMMARY OF DATA NEEDS AND EQUATIONS TO CALCULATE FINANCED EMISSIONS
Table 10.1-3. Detailed description of the data quality score table for project finance182
Data
Description
quality
Option
Verified GHG emissions data of the "#$%$&'()'* &,-#'$#

Option 1a project in accordance with the GHG ! × /34)5)3( 74-E36$ 3,)%%)-'%# Score 1
9-$&: 3;#)$8 + (3=$#
Protocol #
Unverified GHG emissions data "#$%$&'()'* &,-#'$#

Option 1b calculated by the project in ! × >'?34)5)3( 74-E36$ 3,)%%)-'%#
9-$&: 3;#)$8 + (3=$#
Outstanding accordance with the GHG Protocol #
Total project
amount in
equity and
project Primary physical
debt
activity data for
the project’s Emission factors Score 2
energy specific to that
consumption by primary data "#$%$&'()'* &,-#'$#
Option !
185
× .'34*8 6-'%#,7$)-'# × .,)%%)-' 5&6$-4
energy source (e.g., energy 9-$&: 3;#)$8 + (3=$#
2a183
(e.g., megawatt- source-specific #
hours of emission
electricity) plus factors)184
any process
emissions
182
183
emissions, however.
184
Supplier-specific emission factors (e.g., from electricity provider) for the respective primary activity data are always preferred over non-supplier-specific emission factors.
185
97
Data
Description
quality
Option
Primary physical Emission factors

activity data for specific to that
the project’s primary data "#$%$&'()'* &,-#'$#
Option 2b ! × @4-(#6$)-'# × .,)%%)-' 5&6$-4 Score 3
production (e.g., (e.g., emission 9-$&: 3;#)$8 + (3=$#
#
tons of rice factor per ton of
produced) rice)
Total project
equity and
GHG emissions Revenue per "#$%$&'()'* &,-#'$# BCB 3,)%%)-'%"
Option 3a debt ! × A3?3'#3# × Score 4
per sector sector186 9-$&: 3;#)$8 + (3=$# A3?3'#3"
Revenue of #
the project

Option 3b N/A ! "#$%$&'()'* &,-#'$# ×
#
Score 5
Asset
Option 3c ! "#$%$&'()'* &,-#'$# × D%%3$ $#4'-?34 4&$)-" ×
#
sector
186
98
COMMERCIAL REAL ESTATE – DETAILED SUMMARY OF DATA NEEDS AND EQUATIONS TO CALCULATE FINANCED EMISSIONS
Table 10.1-4. Detailed description of the data quality score table for commercial real estate187
Data
Description
quality
Option
Financial data Emissions data Equations lowest
Supplier-
specific
emission Primary data on "#$%$&'()'* &,-#'$$
Option ! × D6$#&: 3'34*8 6-'%#,7$)-'$,&
factors actual building @4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 1
1a $,&
specific to energy consumption × F#77:)34 %736)5)6 3,)%%)-' 5&6$-4&
the energy
source
Primary data on "#$%$&'()'* &,-#'$$

Option !
@4-734$8 ?&:#3 &$ -4)*)'&$)-'$
× D6$#&: 3'34*8 6-'%#,7$)-'$,&
actual building Score 2
1b $,&
Outstanding energy consumption × D?34&*3 3,)%%)-' 5&6$-4&
amount and
property
Estimated building
value at Average
energy consumption "#$%$&'()'* &,-#'$$
origination emission
Option per floor area based ! × .%$),&$3( 3'34*8 6-'%#,7$)-' 54-, 3'34*8 :&=3:%$,&
factors @4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 3
2a on official building $,&
specific to × G:--4 &43&$ × D?34&*3 3,)%%)-' 5&6$-4&
energy labels and
the energy
floor area financed
source
Estimated building
energy consumption
per floor area based "#$%$&'()'* &,-#'$$
Option ! × .%$),&$3( 3'34*8 6-'%#,7$)-' 54-, %$&$)%$)6%$,&
on building type and @4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 4
2b $,&
location-specific × G:--4 &43&$ × D?34&*3 3,)%%)-' 5&6$-4&
statistical data and
floor area financed
187
Where b = building and e = energy source.
99
Data
Description
quality
Option
Estimated building
energy consumption
per building based on "#$%$&'()'* &,-#'$$
Option building type and ! × .%$),&$3( 3'34*8 6-'%#,7$)-' 54-, %$&$)%$)6%$,&
@4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 5
3 location-specific $,&
× H#,=34 -5 =#):()'*%$ × D?34&*3 3,)%%)-' 5&6$-4&
number of buildings
financed
100
MORTGAGES – DETAILED SUMMARY OF DATA NEEDS AND EQUATIONS TO CALCULATE FINANCED EMISSIONS
Table 10.1-5. Detailed description of the data quality score table for mortgages188
Data
Description
quality
Option
Supplier-
specific
emission Primary data on "#$%$&'()'* &,-#'$$
! I D6$#&: 3'34*8 6-'%#,7$)-'$,&
Option 1a factors actual building $,&
@4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 1
specific to energy consumption × F#77:)34 %736)5)6 3,)%%)-' 5&6$-4&
the energy
source
Primary data on "#$%$&'()'* &,-#'$$

! × D6$#&: 3'34*8 6-'%#,7$)-'$,&
Option 1b actual building $,&
@4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 2
energy consumption × D?34&*3 3,)%%)-' 5&6$-4&
Outstanding
amount and
property value Estimated building
Average
at origination energy consumption "#$%$&'()'* &,-#'$$
emission
per floor area based ! × .%$),&$3( 3'34*8 6-'%#,7$)-' 54-, 3'34*8 :&=3:%$,&
Option 2a factors @4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 3
on official building $,&
specific to × G:--4 &43&$ × D?34&*3 3,)%%)-' 5&6$-4&
energy labels and
the energy
floor area financed
source
Estimated building
energy consumption
per floor area based "#$%$&'()'* &,-#'$$
! × .%$),&$3( 3'34*8 6-'%#,7$)-' 54-, %$&$)%$)6%$,&
Option 2b on building type and $,&
@4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 4
location-specific × G:--4 &43&$ × D?34&*3 3,)%%)-' 5&6$-4&
floor area financed
188
Where b=building and e=energy source.
101
Data
Description
quality
Option
Estimated building
energy consumption
per building based on "#$%$&'()'* &,-#'$$
building type and ! × .%$),&$3( 3'34*8 6-'%#,7$)-' 54-, %$&$)%$)6%$,&
Option 3 @4-734$8 ?&:#3 &$ -4)*)'&$)-'$ Score 5
location-specific $,&
× H#,=34 -5 =#):()'*%$ × D?34&*3 3,)%%)-' 5&6$-4&
number of buildings
financed
102
MOTOR VEHICLE LOANS – DETAILED SUMMARY OF DATA NEEDS AND EQUATIONS TO CALCULATE FINANCED EMISSIONS
Table 10.1-6. Detailed description of the data quality score table for motor vehicle loans189
Description Data quality

Option Attribution Emission factor Financed emissions calculation Highest to
Primary data on "#$%$&'()'* &,-#'$'

Option 1a actual vehicle fuel ! × G#3: 6-'%#,7$)-'' × .,)%%)-' 5&6$-4(
9-$&: ?&:#3 &$ -4)*)'&$)-''
consumption ',(
Primary data on
actual vehicle Score 1
distance traveled
Outstanding
Emission plus vehicle’s fuel "#$%$&'()'* &,-#'$'
amount and ! × J)%$&'63 $4&?3:' I .55)6)3'68',( × .,)%%)-' 5&6$-4(
Option 1b factors190 efficiency and fuel 9-$&: ?&:#3 &$ -4)*)'&$)-''
total value of
specific to type from known ',(
vehicle or
the fuel vehicle make and
vehicle fleet at
type model
origination
Local statistical data
for distance traveled
plus vehicle’s fuel
efficiency and fuel "#$%$&'()'* &,-#'$'
Option 2a ! × J)%$&'63 $4&?3:) × .55)6)3'68',( × .,)%%)-' 5&6$-4( Score 2
type from known 9-$&: ?&:#3 &$ -4)*)'&$)-''
',(
vehicle make and
model
189
Where v = vehicle or vehicle fleet with known make and model for that vehicle, t = vehicle or vehicle fleet with known vehicle type, a = assumed average vehicle or vehicle fleet, l = local estimation of distance
traveled, r = regional estimation of distance traveled, s = local or regional estimation of distance traveled, f = fuel type (fuel type in the case of electric or hybrid vehicles can also refer to electricity).
190
Of all options shown in the table, supplier-specific emission factors (e.g., from an electricity provider) for the respective primary activity data are always preferred over non-supplier-specific emission factors.
103
Description Data quality

Option Attribution Emission factor Financed emissions calculation Highest to
Regional statistical
data for distance
traveled plus
vehicle’s fuel "#$%$&'()'* &,-#'$'
Option 2b efficiency and fuel ! × J)%$&'63 $4&?3:* × .55)6)3'68',( × .,)%%)-' 5&6$-4( Score 3
9-$&: ?&:#3 &$ -4)*)'&$)-''
type from known ',(
vehicle make and

model
Local or regional
statistical data for
distance traveled
plus vehicle’s fuel "#$%$&'()'* &,-#'$'
Option 3a ! × J)%$&'63 $4&?3:" × .55)6)3'68+,( × .,)%%)-' 5&6$-4( Score 4
efficiency and fuel 9-$&: ?&:#3 &$ -4)*)'&$)-''
+,(
type from known
vehicle type
Local or regional
statistical data for
distance traveled
plus vehicle fuel’s "#$%$&'()'* &,-#'$'
Option 3b ! × J)%$&'63 $4&?3:" × .55)6)3'68,,( × .,)%%)-' 5&6$-4( Score 5
efficiency and fuel 9-$&: ?&:#3 &$ -4)*)'&$)-''
,,(
type from average
vehicle
104
10.2. Sample table templates displaying reported emissions

for a given fiscal year
Table 10.2-7. Example of a GHG accounting report for scopes 1, 2, and 3
Scopes and categories Baseline year emissions (tCO2e) (if Current reporting year
relevant) emissions (tCO2e)
Scope 1 emissions
Total scope 1
Scope 2 emissions
Total scope 2
Upstream scope 3 emissions
Category 1: Purchased goods
Category 2: Capital goods
Category 3: Fuel- and energy-related activities
Category 4: Upstream transportation and distribution
Category 5: Waste generated in operations
Category 6: Business travel
Category 7: Employee commuting
Category 8: Upstream leased assets
Downstream scope 3 emissions
Category 9: Downstream transportation and distribution
Category 10: Processing of sold products
Category 11: Use of sold products
Category 12: End-of-life treatment of sold products
Category 13: Downstream leased assets
Category 14: Franchises
Category 15: Investments**
Total emissions all scopes
Scope 1 total emissions
105
Scopes and categories Baseline year emissions (tCO2e) (if Current reporting year
relevant) emissions (tCO2e)
Overall total emissions
See Table 10-8 and Table 10-9 for examples how to report scope 3 category 15 (investments) emissions.
Table 10-8. Example reporting of absolute financed emissions—scope 3, category 15 (investments)
Activity Total
Weighted data
outstanding loan Scope 1+ Scope 2 Scope 3 Emission
quality score
and investments emissions emissions intensity
(High Quality = 1
covered (tCO2e) (tCO2e) (tCO2e/€M)
Low Quality = 5)
(x € 1,000)
Absolute emissions per asset class (if reporting by asset class)
Listed Equity & Bonds
Business Loans
-Sector 1, e.g., Cement
-Sector 2, e.g., Cattle
Project Finance
Mortgages
Commercial Real Estate
Motor Vehicle Loans
Total
Absolute emissions per sector (if reporting by sector)
Oil & Gas
Agriculture
Total
106
Table 10.29. Example reporting of financed emission removals and avoided emissions—scope 3, category 15 (investments)
Activity Total outstanding loan and Weighted data quality

Emission intensity
investments covered Emissions (tCO2e) score (High Quality = 1
(tCO2e/€M)
(x € 1,000) Low Quality = 5)
Emission removals
Total
Avoided emissions from renewable power projects
Wind
Solar
Total
107
Website:
carbonaccountingfinancials.com
E-mail:
info@carbonaccountingfinancials.com
The GLOBAL GHG

ACCOUNTING
Photo credits: Unsplash and:

1 David Costa
2 Clint Adair
3 Franck V
4 Sandy Millar
5 Hugues De Buyer Mimeure
5.1 Sigmund
5.2 Marcin Jozwiak
5.3 Gonz Ddl
5.4 Jezael Melgoza Lay
5.5 Mika Baumeister
5.6 Ryan Searle
6 Sam Dan Truong
7 Lysander Yuen
8 Kristian Strand
9 Michael Dziedzic
10 Ryan Searle
117

PCAF Global GHG Standard

Uploaded by

Document Informationclick to expand document information

Copyright:

Available Formats

PCAF Global GHG Standard

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PCAF Global GHG Standard

Uploaded by

Copyright:

Available Formats

The GLOBAL GHG

This standard has been reviewed by the GHG Protocol and

The GLOBAL GHG

Please cite this document as:

November 18, 2020

Understand Identify Review Review and apply

Foreword by the PCAF Steering Committee 6

Foreword by Mark Carney 7

2. The importance of GHG accounting 18

3. Using GHG accounting to set and achieve business goals 24

4. Principles and requirements of GHG accounting for financials 32

4.2 Additional requirements for accounting and reporting financed emissions 35

5. Methodology to measure financed emissions 41

5.1 Listed equity and corporate bonds 47

5.2 Business loans and unlisted equity 58

5.3 Project finance 69

5.4 Commercial real estate 77

5.6 Motor vehicle loans 89

6. Reporting recommendations and requirements 97

10. Annex 116

As an industry-led partnership, PCAF is governed by a Steering Committee of ABN AMRO,

1 The full list of PCAF participants can be found at:

Foreword by the PCAF Steering Committee

The PCAF Steering Committee

Foreword by Mark Carney

Listed equity and Business loans and Project finance

Commercial real estate Mortgages Motor vehicle loans

Harmonizing and implementing a

Corporate Value Chain SF

and Reporting Standard Accounting GHG emissions

harmonised approach for the

Accounting and Reporting Standard PCAF The Netherlands, report 2019

The GLOBAL GHG

Using the Standard is the first step in the journey

Measure Develop Take

1 FAKE FOOTNOTE TO START AT 2

The role of the financial sector

The role of PCAF and GHG emissions accounting in reporting,

2 (New Climate Institute and Climate Analytics, 2020)

• Measuring and disclosing financed emissions

Relationship with other financial sector climate initiatives

Source: (PCAF, 2020)

Figure 1-2. Cluster of climate initiatives

UN Environment Program for Financial Institutions (UNEP FI) Principles

I Investor Agenda: Investor Agenda Climate Plan (IACP)

BI UN Global Compact: Business Ambition for 1.5°C

I U.N.-Convened Net-Zero Asset Owner Alliance

BI Task Force on Climate-related Financial Disclosures (TCFD)

BI Partnership for Carbon Accounting Financials (PCAF)

BI RMI Center for Climate-Aligned Finance

B I 2dii Paris Agreement Capital Transition Assessment (PACTA)

I Climate Action 100+

BI Powering Past Coal Alliance Finance Principles

BI Bankers for Climate

BI 2dii Evidence for Impact

BI CDP Financial Services Questionnaire

Source: (PCAF, 2020)

Standardizing GHG emissions accounting for financial institutions

Listed equity and Business loans and Project finance