The Partnership for Carbon Accounting Financials (PCAF) announced the launch of its updated Global Greenhouse Gas Accounting and Reporting Standard for the Financial Industry, a new standard aimed at enabling a broad range of financial institutions including banks, asset managers and insurance companies to measure and report GHG emissions related to their financial activities.
PCAF is a global partnership of financial institutions, launched globally in 2019 with a mission to develop and implement a harmonized approach to assess and disclose the greenhouse gas (GHG) emissions associated with loans and investments. In November 2020, the PCAF launched its initial Global GHG Accounting and Reporting Standard for the Financial Industry, designed to provide a standardized, robust and clear way for banks, asset managers, and asset owners to measure and report the GHG emissions impact of their loans and investment portfolios.
The standard has become the single most widely used methodology for measuring and reporting financed emissions globally, included being incorporated and referenced in key sustainability reporting standards including IFRS S2 and the CSRD’s ESRS.
To date, PCAF has grown to 680 participating financial institutions representing over $100 trillion in financial assets.
According to PCAF, the update to its key standard, alongside the release of new supplemental guidance on Financed Avoided Emissions and Forward-Looking Metrics, is aimed at significantly expanding the ability of financial institutions to measure and report emissions, by addressing the complex challenges of calculating GHG emissions across diverse portfolios consisting of many types of financial instruments including loans, investments, insurance products and others.
PCAF said that the update adds several new methods to cover more financial instruments and address the diversity in financial portfolios, keeping the standard’s existing methodologies unchanged, while adding new methods aimed at closing gaps and enabling institutions to account for emissions across relevant exposures. PCAF added that the updates reflect growing demand from financial institutions.
Hetal Patel, Head of Sustainable Investment Research, Phoenix Group and PCAF’s Core Team Chair, said:
“By enhancing the Standard with new methods and guidance, we’re helping financial institutions create a more comprehensive and complete view of the emissions impact of their activities and exposure to associated risks.”
Key updates included in the revised standard include four new 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, new recommendations developed in response to feedback on a 2024 PCAF discussions paper on approaches to address the impact of inventory fluctuations on financed emissions measurement, a new document providing guidance and guardrails when separately reporting financed avoided emissions and forward-looking emission metrics to capture future impact, as well as two new insurance-associated emissions methodologies for treaty reinsurance and project insurance.
Caspar Noach, PCAF’s Technical Director, said:
“Complete, transparent, and consistent accounting methods are the foundation of credible financial GHG emission disclosures. This update to the Standard reflects our commitment to helping financial institutions and their stakeholders improve transparency and make better-informed decisions.”
Click here to access the updated standard and guidance documents.
