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1. Does PCAF consider scope 1, 2, and 3 emissions when calculating emissions from the investment?
   

PCAF Response: Yes, PCAF considers all three scopes when calculating emissions. This can be found per asset class in our Standard.

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2. I understand that the attribution factor is based on Book Equity and Book Debt. How is negative book equity handled?
   

PCAF Response: You can find this answer in Footnote 57 of the PCAF Standard. "In cases where the total company equity value according to the client’s balance sheet is negative, 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."

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3. The emissions are only for Banks?
   

PCAF Response: PCAF is not limited to banks; our signatory base spans across commercial banks, credit unions, CDFIs, development banks, asset owners, asset managers, insurance companies, and other types of financial institutions.

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4. What is typical market practice for measuring emissions of asset classes that are not currently covered by the PCAF standard?
   

Persefoni Response: They are typically excluded. You can monitor PCAF public consultations to prepare for upcoming guidance on additional asset classes.

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5. What happens once an FI measures its financed emissions? How do you measure real impact versus just ending up with portfolio optimization?
   

PCAF Response: PCAF is an accounting standard and does not offer guidance on activities or strategy related to the use of financed emissions that FIs should adhere to internally. However, our signatories often discuss such activities in our signatory-led regional Working Groups and breakout sessions at PCAF events, which are available to signatories.

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6. How do companies mitigate risk associated with disclosing emissions when data quality may not be the highest?
   

PCAF Response: PCAF offers a standardized data quality scorecard, which allows banks to disclose at what level of data quality their calculations are conducted at. Data quality scores help institutions rate the reliability of their information, with scores ranging from one (highest reliability) to five (lowest reliability). This improves transparency and accountability, requiring institutions to disclose their score, along with any assumptions, data gaps, and improvement plans. Standardization and transparency help to reduce risk when disclosing.

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7. In developed countries like India there are various small size loan given like for INR 10k to women. How to do accounting as FIs because the volume of corpus would be great
   

Persefoni Response: Persefoni provides a streamlined data-ingestion process and supports high-volume financed-emissions calculations with automatic quality scoring.

PCAF Response: PCAF’s methodologies are applied on a loan-by-loan basis, with the attributes of the transaction (i.e., outstanding amount) attributing the emissions associated with the transaction. 

PCAF currently does not provide methodology for consumer loans that are for purposes other than mortgages and motor vehicles. Therefore, loans to an individual are currently out of scope. 

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8. Does a bad data quality under- or overestimate financed emissions?
   

PCAF Response: Bad data quality could both under- or overestimate financed emissions. For example, if industry average emission factors are lower than the actual, higher emissions of a specific client or transaction’s operations or locations, the emissions would be underestimated. If the client / transactions’ emissions are lower than the industry average, the emissions would be overestimated. It is highly dependent on the portfolio of assets and the data quality score / emission factors used within the calculations. 

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9. Could that checklist be included or distributed after this call?
   

PCAF Response: You can find the Disclosure Checklist here.

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10. Would you say that using cost basis (instead of FMV) as the outstanding capital of the investment is in accordance with PCAF? We believe using any unrealized gain would be wrong since the EVIC side of the attribution calc is picking up book debt/equity with no market upsize. It is like for like, but I have read that it should be full FMV which doesn't seem right.
    

PCAF Response: PCAF uses a combination of fair market value and book value across asset classes. Two examples are below. 

a. Listed equity: the market price is multiplied by the shares outstanding in the numerator, while the denominator is the EVIC. 

b. For corporate bonds to private companies, the book value of debt is used for the outstanding amount, while the denominator is debt plus equity from the balance sheet.

The Standard covers which are used and why it is implemented as it is, should you wish to obtain further details.

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11. Is there like a materiality pre-assessment in order to identify the most critical asset classes for a financial institution?
    

Persefoni Response: We see a lot of customers start with a high level portfolio assessment at DQ4/5 to determine the highest emitting sectors and focus their efforts accordingly.

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12. Do you know when is this update of PCAF standard expected?
    

PCAF Response: The updates to the Standard will be launched before the end-of-year.

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13. Could the upcoming changes to the standard be provided in writing here in the chat as bullet points, please?
    

PCAF Response: The update includes new methods and clearer guidance, making it easier to track emissions across more financial product types. More specifically, the updated Standard includes: 

a. Four new Part A (Financed Emissions) methodologies for use of proceeds structures, securitizations and structured products, sub-sovereign debt, and an optional reporting on undrawn loan commitment according to IFRS S1 & S2.  

b. New Part A reporting recommendations developed in response to feedback on the Inventory Fluctuation discussion paper (2024).  

c. A document providing guidance and guardrails when separately reporting financed avoided emissions and forward-looking emission metrics to capture future impact.  

d. Two new Part C (Insurance Associated Emissions) methodologies for treaty reinsurance and project insurance.  

e. PCAFs existing methodologies have not been changed, while some textual changes are implemented across the standards to improve readability and ensure the standard is up to date. 

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14. Although PCAF is for financial institutions, can it be applied to a large corporation's investment securities?
    

Persefoni Response: Yes, we have a lot of large corporate customers using PCAF to measure their investment emissions.

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15. Can you cover the current treatment of capital markets transactions (underwriting / bookbuilding)?
    

PCAF Response: In December 2023, PCAF launched Part B of the Standard, which provides a standardized methodology for financial institutions to measure and disclose facilitated emissions associated with capital markets activities.

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16. Are Assets Under Management (AuM) considered under PCAF Standard B for facilitated emissions, rather than Standard A for financed emissions? Additionally, is it acceptable to calculate AuM-related emissions using the methodology outlined in Standard A?
    

PCAF Response: It is acceptable to use Part A methodology to calculate AuM-related emissions, as this is the primary guidance for asset managers, and the standard requires asset managers to disclose AuM-related financed emissions. Part B focuses on emissions from primary capital market issuance and other capital markets transactions that are generally off-balance, not on the emissions associated with managing assets.

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17. Would the updated version of PCAF standards take into consideration Avoided Emissions?
    

PCAF Response: The update includes a document providing guidance and guardrails when separately reporting financed avoided emissions and forward-looking emission metrics to capture future impact.