Financed emissions (PCAF)

Financed emissions are the greenhouse gas emissions associated with a financial institution's loans and investments. In other words, they are the emissions of the companies and projects to which a bank, an insurer or a fund allocates its capital.

Within the GHG Protocol, they fall under Scope 3, specifically category 15, investments. In most financial institutions these emissions are far larger than those of their own operations, so they are the real centre of gravity of their carbon footprint.

What PCAF is

PCAF, which stands for Partnership for Carbon Accounting Financials, is the initiative that has developed the global standard to measure financed emissions. Its aim is for institutions to calculate and report these emissions in a harmonised and comparable way.

The third edition of its Financed Emissions Standard, Part A, was issued on 2 December 2025. This version now covers ten asset classes and adds four new methodologies:

• Use of proceeds structures.
• Securitisations and structured products.
• Sub-sovereign debt.
• Optional IFRS reporting of undrawn loan commitments.

It also includes supplemental guidance on financed avoided emissions and forward-looking metrics.

How they are calculated

The PCAF method rests on two key pieces:

• Attribution factor: allocates to the financial institution a share of the borrower's or investee's emissions, in proportion to its financing.
• Data quality score: a scale from 1 to 5 that flags the level of uncertainty of the estimate, where lower values reflect more reliable data.

This way, an institution can add up the proportional share of emissions of each loan or investment and build the inventory of its portfolio.

What they are for

Measuring financed emissions is the starting point for the financial sector to set credible climate targets. They underpin science-based targets for financial institutions and net zero emissions strategies. They also feed socially responsible investment decisions and climate risk reporting.

What it means for your institution

• Identify the relevant asset classes in your portfolio and apply the corresponding PCAF methodology.
• Document the data quality score to be transparent about uncertainty.
• Connect the calculation with your decarbonisation targets and your sustainability reporting.

How Manglai helps you

Calculating financed emissions requires gathering data from many counterparties and applying attribution factors rigorously. Manglai helps you measure and structure your carbon footprint, including Scope 3, so your information is reliable and traceable. Talk to our team and take the first step.