As financial institutions (FIs) face increasing pressure to quantify and disclose their financed emissions, the Partnership for Carbon Accounting Financials (PCAF) has released updated guidance for public consultation on new methods from December 3, 2024, until February 28, 2025. These updates address critical areas like emissions accounting for Use of Proceeds (UoP) structures, scope-shifting concerns, and enhanced asset-class methodologies, offering greater granularity and precision.
New methods introduced in Part A cover:
Use of Proceeds accounting: focuses on accurately tying emissions to specific projects funded by these financial instruments, helping institutions align their climate claims with real-world impacts
Securitisations and structured products: focus on ensuring emissions are attributed to all tranches and investors without double accounting
Sub-Sovereign Debt: to account for the climate impact of debt issued by city, local or regional governments
Financed avoided emissions and forward-looking emission metrics guidance: to support financial institutions in reporting avoided and expected emissions reductions (EER) across asset classes
Inventory fluctuations discussion: offers an analysis of possible approaches to address the impact of inventory fluctuations on financed emissions measurement
Undrawn loan commitments: aligning PCAF’s methods with the International Financial Reporting Standard (IFRS) S2 by defining a proposed calculation method for financed emissions from undrawn loan commitments
The update has refined methodologies across multiple asset classes, ensuring better attributions across different financial activities for financed emissions and avoiding double accounting risks. The guidance supports a "follow-the-money" principle, ensuring emissions are tracked proportionally to the funding provided.
New methods from PCAF’s New Guidance on Reinsurance and Project Insurance Emissions Accounting (Part C):
New methods for insurance-associated emissions associated with treaty reinsurance portfolios: exploring sector-specific and sector-agnostic economic activity-based emissions in the absence of reported emission data
Emissions associated with project insurance: providing clarity for emissions from construction projects across different life stages of GHG emissions
These methods reflect PCAF’s commitment to building tools that address the financial industry’s evolving needs while ensuring accuracy, consistency, and transparency. The updated methodologies also aim to align with global frameworks such as the IFRS-ISSB (International Sustainability Standards Board), CSRD (Corporate Sustainability Reporting Directive), and the GHG Protocol, making them critical for compliance and credibility.
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