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PCAF: Reporting Standard Beginner's Guide

Article Overview
  • PCAF stands for the Partnership for Carbon Accounting Financials; It's a collaboration of financial institutions aiming to measure and disclose the greenhouse gas emissions associated with their investments and loans.
  • Established in 2015, PCAF provides a standardized framework for these institutions to assess their environmental impact and align their strategies with global climate goals, particularly the Paris Agreement.
  • This initiative helps financial organizations understand and disclose their indirect emissions, fostering transparency and accountability in the financial sector's contribution to climate change.

In 2015, ASN Bank led the 14 Dutch financial institutions to create PCAF. The initiative expanded in 2018 to North America, then finally went global in 2019.

PCAF established the Global GHG Accounting and Reporting Standard for the Financial Industry (“the Standard”) to help financial institutions disclose emissions generated by their investments and loans. Before this, financial institutions only had broad guidance from scope 3, category 15 of the GHG Protocol (GHGP).

Measuring and disclosing emissions is the first step in the global effort to cap global warming at 1.5°C in line with the Paris Agreement. Emissions related to investments and loans make up a significant portion of emissions for financial institutions. By following PCAF’s framework, institutions can do their part in helping the globe reach net-zero.

In this guide, we’ll cover what PCAF is, their goals, how they align with other initiatives and organizations and why financial institutions should join PCAF. We’ll also highlight important points from the Standard, but their site is the best resource for in-depth information.

What Is PCAF?

PCAF is a worldwide collaboration of financial institutions that create and administer a streamlined process to review and disclose financed emissions. Financed emissions are emissions indirectly generated as a result of investments and loans. For example, many banks indirectly create financed emissions by financing fossil fuel companies.

PCAF’s mission is to promote the financial industry’s alignment with the Paris Agreement. To do this, they’ve set goals to create a global accounting standard (which they’ve achieved with the Standard) and to have more than 250 financial institutions review and disclose their financed emissions (which they’ve surpassed).

PCAF also created the Strategic Framework for Paris Alignment. This document helps financial institutions understand how they can align with the Paris Agreement and other global climate finance initiatives.

Improving financed emissions disclosure is a necessary step for the financial industry, as these types of emissions are difficult to collect data and measure. Calculating financed emissions requires data from a variety of other businesses and organizations, many of which may not be actively measuring their carbon footprint.

In addition to disclosing financed emissions, PCAF members have also made strides to lower them. For example, Beneficial State Bank created its Vehicle Access Program for low-income residents, which gives residents grants to buy hybrid and electric vehicles.

Measuring Financed Emissions is a Foundational Step for Financial Institutions

What Are the PCAF Asset Classes?

The PCAF asset classes currently encompass six investment categories that have measurement and disclosure guidance from PCAF. The PCAF Global Core team selected these particular asset classes by identifying the most common classes for financial institutions around the world.

These are the current asset classes:

  • Listed equity and corporate bonds, like common stock
  • Business loans and unlisted equity, like lines of credit used for capital expenditures
  • Project finance, like loans used to build a bridge
  • Commercial real estate, like loans used to purchase retail space
  • Mortgages, like loans for a new house
  • Motor vehicle loans, like loans to buy a new company car

PCAF requires institutions to disclose the percentage of their current total investments and loans in their financed emissions inventory covered by these six asset classes. This requirement allows institutions to highlight any data limitations on their end or constraints as a result of a gap in PCAF’s framework.

PCAF may add more asset classes in the future as the Standard evolves. For example, financial products like letters of credit and sovereign bonds are not covered with these asset classes. PCAF will provide guidance on how to treat these types of products in future iterations of the Standard.

How Is the PCAF Standard Implemented?

PCAF’s regional implementation teams in North America, Latin America, Europe, Africa and Asia-Pacific help carry out the Standard for their respective areas. Each team receives free technical assistance for implementation. Teams also pass along feedback and learnings to continue improving the Standard.

Each team has its own form of governance and works locally to hear different experiences and create specific local guidelines. Some regional teams may eventually work in national teams to tailor implementation to the needs of different countries and jurisdictions.

How Does PCAF Partner With Other Organizations and Initiatives?

PCAF works with other organizations and initiatives to make sure they’re aligned with PCAF recommendations. Aligning existing and widely used protocols and recommendations helps streamline the process and create comparable disclosures.

Alignment also makes it easier for institutions to benchmark progress against peers and to ensure high-quality data. It also helps reduce redundancy as many organizations, initiatives and jurisdictions continue looking for ways to improve their carbon management as a whole.

PCAF is the only industry-led initiative that helps financial institutions disclose financed emissions in alignment with the GHGP. It’s also complementary to many other initiatives and recommendations, like the Task Force on Climate-Related Financial Disclosures’ (TCFD) recommendations.

Below are a few of PCAF’s notable partnerships and alignments.

Carbon Disclosure Project (CDP)

The Carbon Disclosure Project (CDP) and PCAF both work to promote the Standard to encourage disclosures from financial institutions. Promotion includes workshops and reports from both organizations.

The CDP also has plans to update its Full GHG Emissions Dataset with a Data Quality Score that aligns with PCAF’s scoring system. In 2020, the CDP added financed emissions questions to their climate change questionnaire for the financial sector. PCAF is also the CDP’s recommended framework in that questionnaire.

Greenhouse Gas Protocol (GHGP)

PCAF’s framework has earned a Built on GHG Protocol mark, meaning that the Standard conforms to and aligns with the GHGP’s requirements. The Standard builds on the GHGP’s five core principles: completeness, consistency, relevance, accuracy and transparency.

Below are the additional requirements the Standard has created and tailored to financial institutions.


This principle requires financial institutions to account for financed emissions. The Standard specifically requires financial institutions to disclose using one of the following approaches for consistent reporting:

  • The financial control approach requires an organization to report all emissions for activities in which they can directly influence financial and operational policies and can benefit economically.
  • The operational control approach requires an organization to report all emissions from operations where it or one of its subsidiaries can introduce and implement operational policies.

Using these approaches ensures financed emissions are accounted for in scope 3, category 15. Institutions are also required to explicitly explain any information that is excluded. Information may be excluded if there’s a lack of data or if activities are small and insignificant to that institution’s total financed emissions.


PCAF requires financial institutions to use PCAF methodologies to measure and disclose emissions for each asset class. Institutions must “follow the money” as far as possible to comprehend its climate impact.

They require the measurement of absolute emissions at a minimum. PCAF defines absolute emissions as the “total GHG emissions of an asset class or portfolio.”

When relevant, institutions can also report on emissions intensity. PCAF defines this as “absolute emissions divided by the loan and investment volume, expressed as tCO2e/€M invested.” Institutions should express emissions intensities on the sector, asset class or portfolio level in metric tonnes of carbon dioxide equivalents per million dollars or euros invested or loaned: tCO2e/M$ or tCO2e/M€.

Institutions must also measure removed and avoided emissions if data and applicable methodologies are available. If they choose to disclose these types of emissions, PCAF requires institutions to report this separately from their scope 1, 2 and 3 inventories.

Their GHG accounting measurements must:

  • Align with their normal financial accounting period
  • Be reported at least annually at the same point in time
  • Provide an accurate representation of the reporting periods emissions
  • Communicate large changes that may have impacted the results
  • Disclose absolute emissions for scope 1 and 2 and relevant scope 3 emissions in line with the GHGP’s guidance for scope 3 emissions
  • Account for emissions data at the asset class or sector level

When calculating emissions, institutions must follow these general guidelines:


The financial institution’s emissions allocation must be proportional to the loan or investment given to the borrower or investee. This is achieved by calculating the attribution factor. Attribution factor is the share of the borrower or investee’s total annual GHG emissions that are allocated to loans or investments.

To calculate this, divide the share of the outstanding amount of loans and investments of the financial institution by the total equity and debt that the financial institution is invested in.

Use the attribution factor to calculate financed emissions. Calculate this by multiplying the asset class’s specific attribution factor by the borrower or investee’s emissions.

How to Approach Financed Emissions Calculations

The Standard applies the same attribution principles for all asset classes. It’s crucial for financial institutions to follow this method so they can have one common denominator for all asset classes, consider equity and debt equally important in calculations, and avoid double counting.

Double Counting

Double counting is especially important to keep an eye on for institutions with both debt and equity in the same project or company. PCAF encourages institutions to minimize double counting as much as possible.

In GHG accounting, double counting happens when reporters count emissions more than once when calculating their financed emissions for one or more institutions.

These are the five levels at which PCAF says double counting can occur:

  • Between financial institutions
  • By simultaneously financing the same entity or activity
  • Between transactions in the same financial institutions
  • Across different asset classes
  • In the same asset class

PCAF says that institutions can minimize double counting by using the correct attribution rules.

Double counting can inevitably happen if an institution makes loans or investments in the same value chain. The Standard recommends separately reporting scope 1, scope 2 and scope 3 emissions from these financed emissions for clear and transparent disclosure.

Data Quality

Financial institutions must also use the highest-quality data available for disclosures and make gradual plans to improve data quality. High-quality data is necessary to accurately reflect an institution’s emissions and ensure information is usable enough for decision-makers.

However, high-quality data is difficult to come by and PCAF recognizes that. A lack of quality data is often encountered when acquiring data from investees or borrowers. When data is incomplete or unavailable, institutions can use proxy data to fill in the gaps.

Reporters may also need to use data collected in different years. For example, institutions may need to use their 2020 financial data and their 2018 emissions data together if this is their latest information. PCAF recommends using the most recent data available and aligning them as much as possible.

PCAF provides guidance for their data quality scores to help institutions rate the reliability of their information. The score itself ranges from one to five, with one being data with the highest reliability and five being the lowest reliability.

Data quality criteria vary with each asset class. Institutions must follow PCAF’s guidance and provide an explanation of how they’ve assessed their data’s quality. The data quality score for scope 1 and 2 emissions must also be separate from their scope 3 emissions.

Institutions also need to establish a baseline recalculation policy in the event they need to recalculate base year financed emissions. Base year financed emissions are used for everything from target setting to scenario analysis. Recalculating this number may be necessary to improve the relevance and comparability of the data. In this policy, institutions also need to identify the events that would lead to a recalculation.

pcaf data quality score


Publicly disclosing findings is critical so institutions can see how their financed emissions compare with peers and how they’re contributing to the Paris Climate Agreement’s goals. It also helps the financial sector as a whole get a clear view of its financial impact.

Following PCAF’s requirements, recommendations and methodology are the keys to keeping disclosures comparable and of the highest quality. Disclosure itself should be accessible both online and through other publicly available sources.

Task Force on Climate-Related Financial Disclosures (TCFD)

PCAF’s framework also aligns with the TCFD’s recommendations for financial institutions. One of the TCFD’s goals is for reporting organizations to measure and disclose policy-related transition risks. An example of a transition risk is the implementation of a carbon tax for high-emission industries. This would result in high operational costs for power plants and other fossil fuel companies.

Measuring financed emissions and their associated value helps bring financial institutions closer to understanding their risk level. It also helps institutions identify their next steps, like prioritizing their carbon “hot spots” and putting together a plan to reduce their emissions.

Paris Agreement Capital Transition Assessment (PACTA)

PCAF focuses on measurement and disclosure, while PACTA can help financial institutions with the steps that come in between: target setting, scenario analysis and strategy development. Institutions can turn to PACTA to see how their portfolio currently aligns with the Paris Climate Agreement.

PACTA for Investors is great for investors implementing PCAF’s methodology for equity and corporate bonds. PACTA for Banks works well for their lending portfolios.

Science-Based Targets initiative (SBTi)

Institutions reporting with the SBTi’s Sectoral Decarbonization Approach (SDA) need to measure their financed emissions to create a baseline for their targets. The Standard is essential for creating these emissions-based targets.

Measuring and disclosing financed emissions also helps institutions identify and prioritize their highest-emitting assets, establish baselines and track progress. The SBTi and PCAF are also aligned since all of the SBTi’s asset classes align with four of PCAF’s asset classes.

UN Principles on Responsible Investing and Banking (PRI and PRB)

One goal of the PRI is to understand the investment implications of environmental, social and governance factors and to support signatories in incorporating them in their decision-making.

PRB’s goals are to ensure that signatories align with the UN’s Sustainable Development Goals and the Paris Climate Agreement.

PCAF’s methodology helps PRI’s and PRB’s respective signatory investors and banks understand their environmental impact.

Why Should Financial Institutions Join PCAF?

Organizations should join PCAF to get technical assistance when measuring their financed emissions, and to get access to events and other guidance that PCAF provides.

Joining PCAF and following the Standard helps financial institutions measure and disclose the climate impact of their financed emissions. Guidance ranges from help with data collection to advice for presenting results. By doing this, they can get the help they need to measure and mitigate emissions. Institutions also have built-in accountability since joining also requires their commitment to lower emissions.

How Can Financial Institutions Join PCAF?

Organizations can join PCAF by learning about them, sending a commitment letter, joining their local regional implementation team, assessing their financed emissions, then disclosing their financed emissions.

PCAF uses this simple five-step process for any financial institution that can commit to disclosing their financed emissions within three years of submitting their letter.

However, it’s up to the financial institution to decide the breadth of their first PCAF disclosure. For example, they can choose to disclose one asset class or a percentage of their portfolio. PCAF allows this flexibility to start since data quality and availability vary greatly between institutions.

There’s no fee for joining PCAF or for using its methodologies. However, accessing PCAF’s emission factor database and its related methodologies are exclusive for PCAF signatories.

After submitting their letter, financial institutions are listed on PCAF’s “financial institutions taking action” page with “committed” status. The status changes to “disclosed” after the institution has disclosed their financed emissions. Those reports are also available to download on this page.

Joining PCAF

What’s Next for PCAF?

Even with PCAF achieving its recent milestone of 250 signatories, there is still much work to do to improve the landscape of financed emissions disclosure. PCAF continues to work with other organizations to refine its methodologies and to improve guidance for specific industries.

For example, PCAF is currently gathering feedback for their Technical Guidance for the Accounting and Reporting of Financed Emissions from Real Estate Operations. PCAF is also working toward publishing other resources, like the European building emission factor database, to meet reporting needs from institutions.

Why Should Financial Institutions Improve Their Financed Emissions Reporting?

Financial institutions should improve their financed emissions reporting since these typically contribute the most to their scope 1, 2 and 3 emissions.

The CDP’s Time to Green Finance Report found that reported financed emissions are more than 700 times larger than reported operational emissions. Reducing these types of emissions can significantly reduce an institution’s individual carbon footprint.

Targeting these types of emissions also requires engagement with the portfolio companies and customers. As a result, financial institutions must also help and encourage them to reduce emissions or find other ways to offset emissions in their portfolio. This can lead to institutions making more “green” investments or divesting completely from high-emitting companies.

Financial institutions should take advantage of PCAF’s framework to accurately measure their financed emissions. Persefoni’s climate management and accounting platform can help streamline reporting even further by simplifying most of this process. This gives reporting organizations more time to focus on their next steps rather than spending hours meticulously collecting their data.

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