There is growing scrutiny over the environmental impact of investments made by financial institutions. Governments across the globe are ramping up their efforts to combat climate change. Sustainability is becoming a key concern for investors. Maintaining compliance with regulations and aligning with investor expectations are major issues for the financial sector. Measuring and disclosing greenhouse gas (GHG) emissions linked to loans and investments allows financial institutions to set meaningful decarbonization targets and track progress toward net-zero commitments.

The Partnership for Carbon Accounting Financials (PCAF) is a non-profit coalition of financial institutions from across the globe. The PCAF has created a standardized approach to measuring and reporting financed emissions. The Global GHG Accounting and Reporting Standard for the Financial Industry (known as the PCAF Standard) has been designed to assist banks, asset managers, and insurers in meeting their obligations under international environmental frameworks such as the Paris Agreement.

By complying with the PCAF standard, financial institutions can set credible decarbonization targets, mitigate transition risks, and gain a competitive edge.

Founded and operated by reputable ESG (Environmental, Social, and Governance) specialists, Atlas Metrics assists companies in monitoring and managing financed emissions. To provide you with a more comprehensive understanding of your obligations, we’ve put together this short guide to PCAF.

Why the PCAF Is Important

Financial institutions play a critical role in driving global economic activity. They not only influence the flow of capital but also shape the direction of investments. By understanding and addressing the environmental impact of their activities, financial institutions can better align with sustainable and climate-conscious goals.

The PCAF estimates that banks have invested over US$4.6 trillion into fossil fuels during the last decade. According to data from the Carbon Disclosure Project (CDP), financed emissions are over 700 times the size of operational emissions. As the world strives to reach a net-zero carbon economy, there is a clear need for a standardized approach to assessing and reporting financed emissions.

Adopting the PCAF methodology ensures that companies and financial institutions can accurately assess the environmental risks and impacts of their operations and investments and adhere to green financing principles. The PCAF Standard helps organizations comply with environmental regulations and conform to investor and stakeholder expectations.

The Development of the PCAF

The PCAF was founded in the Netherlands in 2015 as a response to increased demands for banks to measure and disclose GHG emissions associated with their investments. From its initial group of 14 Dutch financial institutions, the PCAF gradually began to acquire members across the globe. In 2018, 12 North American banks adopted the PCAF methodology. In 2019, 28 banks from the Global Alliance for Banking on Values (GABV) announced they were also adopting PCAF’s approach to monitoring and disclosing financed emissions. As pressure from governments and investors grew, the PCAF expanded its methodology and standards to include the insurance sector and activities associated with capital markets. More than 550 financial institutions currently use PCAF methodology to track emissions.   

Understanding the PCAF Standard

The PCAF Standard provides financial institutions with a unified approach to measure and disclose the GHG emissions associated with their loans, investments, and financial activities. The Standard was developed by the PCAF Global Core Team, which is made up of 14 PCAF signatories across several regions.

Before the development of the PCAF Standard, companies and financial institutions lacked a uniform methodology to measure and disclose GHG emissions associated with their loans and investments. The PCAF Standard provides harmonized methodologies to assess risks according to the Task Force on Climate-related Financial Disclosures (TCFD). Companies can also use PCAF methodology to set science-based targets (SBTs).

There are three key parts to the PCAF Standard: A, B, and C. Each part provides methodological guidance to measure and report/disclose emissions:

• Part A: Financed Emissions – GHG accounting methodologies applicable to seven asset classes, including loans, investments, and other financial assets and services.

• Part B: Facilitated Emissions – Transparency mechanisms for GHG emissions associated with financial services connected to capital markets.

• Part C: Insurance-Associated Emissions – Guidance on measuring and disclosing GHG emissions associated with re/insurance underwriting.

At present, the PCAF Standard is implemented in Africa, Asia-Pacific, Europe, Latin America, and North America. The PCAF will evolve as ESG regulations expand. It is expected that additional asset classes and case studies will be included in the Standard.

The PCAF Asset Classes for Financed Emissions

PCAF methodology follows the key accounting principles of the GHG Protocol’s Scope 3 Standard. It does, however, go further by providing more detailed guidance for specific types of financial assets. PCAF attribution rules enable financial institutions to evaluate their proportionality relating to financed emissions. There is also a dedicated framework for assessing data quality.

What PCAF methodology is used depends on the asset class of the loan or investment, the amount of financial data available, and the level of emissions directly associated with each client.

Three scopes are used in PCAF methodology to categorize GHG emissions. These scopes are based on the definition provided by the GHG Protocol:

• Scope 1: Direct emissions from sources that a company owns directly or has control over. For example, emissions from corporate vehicles.

  
  

• Scope 2: Emissions indirectly resulting from a company’s actions. For example, the purchase of electricity or energy for heating company buildings.

  
  

• Scope 3: Indirect emissions that occur in the value chain and are not linked to activities by the company or by assets owned by the company. For example, emissions produced by suppliers. There are 15 sub-categories for Scope 3 emissions.

Understanding how emissions are categorized into different scopes is critical to correctly measuring the impact of different asset classes using PCAF methodologies. Financed emissions are listed within sub-category 15 of Scope 3, which relates to GHG emissions resulting from financing and lending operations.

At the time of writing, there are seven PCAF asset classes relating to financed emissions:

• Listed Equity and Corporate Bonds

• Business Loans and Unlisted Equity

• Project Finance

• Commercial Real Estate

• Mortgages (Residential Real Estate)

• Motor Vehicle Loans

• Sovereign Bonds

The PCAF Data Quality Score

The PCAF data quality score is used to accurately measure the reliability and accuracy of financed emissions data. Using the PCAF data quality score allows financial institutions to gauge how trustworthy their emission data is.

Data is scored using a scale from one to five, with five being the lowest rank and one being the best. A high score shows that a company has reliable, high-quality data that is per the GHG Protocol. A low score indicates that the data is incomplete, inaccurate, or lacking the necessary details.

A high PCAF data quality score demonstrates that a company is committed to transparency and accurately reporting GHG emissions. A high score proves that a financial institution is acting in an environmentally responsible manner. This improves their reputation, enables better risk management in financial portfolios, and helps them to achieve regulatory compliance.

Low scores can hamper decision-making relating to sustainability and climate goals, prevent compliance with climate-related regulations, and damage a company’s overall reputation with regulators, clients, and investors.

Calculating a PCAF data quality score is based on three main factors:

• Coverage: How complete the data coverage is.

• Accuracy: How accurate the data is.

• Granularity: How detailed the data is.

Best Practices to Implement PCAF Methodology

Implementing the PCAF methodologies requires a structured approach.

The first step to aligning with the PCAF Standard requires a formal commitment by the company. This can be achieved by allocating resources to implement the PCAF framework with the full support of key stakeholders throughout the organization. Joining the PCAF initiative demonstrates a company’s commitment to transparency. To join the PCAF, a company must send a formal letter that states its commitment to adhering to the principles and practices of the PCAF Standard. 

The company must then focus on gathering accurate and comprehensive GHG data related to its loans and investments. It is advisable to conduct a baseline assessment to identify data sources, evaluate data quality, and identify any gaps.

Selecting the applicable and relevant PCAF asset classes is the next step. This will ensure that the correct methodologies are used throughout the implementation process. The resulting data should be gathered with a focus on coverage, accuracy, and granularity to improve the reliability of emissions reporting.

Calculations can then be made using applicable PCAF methodologies for each asset class. All calculations should be reviewed and verified by reputable third parties before any public disclosures are made. GHG emissions disclosures are often part of publicly accessible sustainability or financial reports.

PCAF methodology should be integrated into a company’s continued sustainability and risk management strategies. Methodologies should be continuously evaluated and updated as more reliable data becomes available. Proactive and responsive actions are the key to ongoing PCAF improvements. Using a dedicated PCAF tool can assist your company in following the PCAF Standard.

You can accurately track and assess GHG emissions using specialized PCAF software from Atlas Metrics. You can calculate financed emissions and Scope 3.15 across a range of applicable asset classes and get expert advice from an experienced PCAF consultant.

How Atlas Metrics Supports PCAF Reporting

Complying with the PCAF Standard can be complex, especially when dealing with large portfolios and evolving regulatory requirements. Atlas Metrics simplifies this process with a dedicated PCAF module designed to make financed emissions reporting fast, reliable, and audit-proof.

Key benefits of using Atlas Metrics for PCAF reporting include:

• Simplified PCAF Calculations:
  Atlas Metrics guides users step-by-step through each asset class, pre-loaded with all necessary emission factors. You don’t need to dive into technical manuals — the platform ensures full compliance while making the process intuitive.

• Guided Data Collection:
  Built-in templates with explanatory text, dropdown menus, and validation checks help collect the right data accurately. The system also provides detailed breakdowns for each data quality score, making improvements transparent and actionable.

• Rapid Calculation at Scale:
  Even for institutions managing thousands of loans and investments, Atlas Metrics processes portfolios in seconds, offering immediate results without compromising quality.

• Smart Error Handling:
  The platform flags exactly which data points have issues, explains why, and guides users to quick fixes — eliminating guesswork and preventing delays in reporting.

• Audit-Ready Documentation:
  Every emission factor, calculation, and assumption is transparently documented and easily shareable. This ensures institutions are always prepared for audits, stakeholder reviews, and regulatory inspections.

• Expert Support:
  Atlas Metrics also offers personalized support and consulting to help financial institutions not only comply with PCAF but also optimize their sustainability strategies for competitive advantage.

With Atlas Metrics, financial institutions can set credible decarbonization targets, mitigate transition risks, meet regulatory requirements, and gain a competitive edge — all while saving significant time and effort.

FAQs

What Does PCAF Stand For?

The acronym PCAF stands for the Partnership for Carbon Accounting Financials.

What Is the PCAF?

The PCAF is a non-profit coalition of financial institutions from across the globe dedicated to creating a unified method to measure and report GHG emissions linked to loans and investments.

What Is the PCAF Standard?

The PCAF Standard is a unified set of guidelines designed to help financial institutions streamline the process of measuring and disclosing GHG emissions. Using standardized PCAF methodology, banks and investors can manage climate-related risks, set targets for emissions reduction, and demonstrate their commitment to sustainability.

Is there a Difference Between the GHG Protocol and the PCAF?

Although they are related, there is a difference between the GHG Protocol and PCAF. The GHG Protocol is a framework for measuring and reporting Scope 1, 2, and 3 GHG emissions across all sectors.

The PCAF is a worldwide initiative that builds on the GHG Protocol. The PCAF adapts the GHG Protocol's framework to assist financial institutions in assessing the climate impact of their portfolios.