What are financed emissions?
Financed emissions are the portion of a borrower's or investee's greenhouse gas emissions allocated to the institution providing finance. For the bank, fund or asset owner, they sit in Scope 3 Category 15, investments. The company receiving finance still reports its own emissions in its Scope 1, Scope 2 and Scope 3 totals. Allocation does not transfer ownership of those emissions or prove that the financing caused them.
The PCAF Financed Emissions Standard, third edition, gives separate methods by asset class. The asset class decides which financial denominator you use.
Why do financed emissions matter to you?
A lender or investor may ask for the reporting period, Scope 1, Scope 2 and Scope 3 emissions, verification status, exclusions, total equity, total debt and whether the entity is listed or private. A missing denominator or mismatched year can make the allocation unusable even when the emissions total is correct. Keslio's portfolio management support can connect portfolio data collection, calculation and reporting.
If IFRS S2 applies to an asset manager, commercial bank or insurer, paragraph 29(a)(vi)(2) and paragraphs B58 to B63A require extra information about financed emissions. For a commercial bank, paragraph B62 requires gross financed emissions by Scope 1, Scope 2 and Scope 3, split by industry and asset class. It also requires gross exposure and the calculation method. The December 2025 amendments apply for annual periods beginning on or after 1 January 2027, with earlier application permitted.
How are financed emissions calculated?
First choose the PCAF asset-class method. For a business loan to a private company, divide the year-end outstanding amount by the borrower's total equity plus debt. Multiply that attribution factor by the company's emissions, then sum the results across the portfolio. For a listed company, PCAF uses enterprise value including cash, or EVIC, as the denominator. Keep the financial position and emissions accounting period aligned.
PCAF ranks inputs from data-quality score 1, the highest, to score 5, the lowest. Verified company emissions receive score 1 only when the outstanding amount and the applicable financial denominator are also known. If these are unavailable, you may estimate emissions from primary physical activity or sector and regional averages, but you must disclose the method, source and score. Report attributed Scope 1 and 2 separately from attributed Scope 3.
What mistakes should you avoid?
- Using the original facility amount instead of the amount outstanding at the chosen reporting date.
- Dividing a private-company loan by market capitalization, or using total equity plus debt where the method requires EVIC.
- Combining borrower emissions from different years, boundaries or scopes without explaining the mismatch.
- Treating a lower result caused by loan repayment, market value or better data as proof that the borrower reduced emissions.
What data should you send when an investor asks?
Send the reporting year, organizational boundary, Scope 1, Scope 2 and Scope 3 totals in metric tonnes CO2e, methodology, factor sources, verification statement and exclusions. Add the year-end outstanding amount and total equity plus debt for a private company, or EVIC for a listed company. Label estimates and keep the supporting financial statements and emissions workbook.
Are financed emissions the same as a bank's operational emissions?
No. Fuel used in bank vehicles is Scope 1, and purchased electricity is Scope 2. Emissions allocated from loans and investments are Scope 3 Category 15. Report them separately so a reader can distinguish the bank's operations from its financing portfolio.
Does a falling financed-emissions total prove decarbonization?
No. The result can fall because a loan was repaid, a holding was sold, EVIC increased or an estimate changed. Compare the underlying company emissions, attribution inputs, portfolio composition and data quality before claiming a real-world reduction.