SENNA

ESG Round-Up: PCAF Updates Financed Emissions Standard

The Partnership for Carbon Accounting Financials (PCAF) has released an updated global standard for measuring and reporting on financed emissions, a crucial step in the financial industry's efforts to address climate change.

The new PCAF standard provides a comprehensive framework for banks, investors, and other financial institutions to calculate and disclose the greenhouse gas emissions associated with their loans and investments. This allows them to better understand their carbon footprint and set science-based emissions reduction targets.

"The updated PCAF standard is an important milestone in the journey towards net-zero finance," said Dr. Barbara Buchner, Global Managing Director at the Climate Policy Initiative. "By aligning methodologies across the industry, it will enable more transparent and comparable disclosures on financed emissions."

The standard covers a broad range of asset classes, including listed equity, business loans, project finance, commercial real estate, and mortgages. It provides detailed guidance on data collection, calculation approaches, and reporting. Crucially, it also addresses the challenge of data gaps, offering alternative methodologies when primary data is unavailable.

The update comes as regulators worldwide ramp up climate disclosure requirements for the financial sector. In the EU, the recently proposed Corporate Sustainability Reporting Directive (CSRD) would mandate emissions reporting for a wide range of companies, including those in the financial industry.

"Consistent and comparable data on financed emissions is essential for investors to assess climate-related risks and opportunities," said Sander Paul van Tongeren, Managing Director at PCAF. "The updated standard will help drive progress towards a sustainable financial system."

Several major financial institutions have already adopted the PCAF framework, including Barclays, BNP Paribas, and Storebrand Asset Management. Industry groups like the Net-Zero Banking Alliance and the Net-Zero Asset Managers Initiative have also endorsed the standard.

The latest PCAF update underscores the growing momentum behind efforts to align the global financial system with climate goals. As investors and regulators demand greater transparency, financial firms will need to continually enhance their climate risk management and decarbonization strategies.