PCAF and CDP team up on financed emissions

The Partnership for Carbon Accounting Financials (PCAF) and environmental reporting non-profit CDP have announced a partnership to promote PCAF’s financed emissions reporting standard. 

According to research published by CDP earlier this year, financed emissions could be 700 times greater than operational emissions. Despite this, only a quarter of financial institutions who disclose their emissions to CDP report portfolio emissions. 

The pair said that they would work together to provide “workshops, reports and case studies” for financial institutions in their networks, aimed at promoting reporting against the PCAF standard. The case studies, they said, will be used to demonstrate how PCAF reporting has improved institutions’ understanding of climate risks. 

CDP said that it would also add data quality scores to its database of reported and modelled emissions from 7,200 companies, bringing it in line with PCAF’s system. 

The partnership comes as a new report from the Sierra Club and the Centre for American Progress finds that the financed emissions of the largest financial institutions in the US are roughly equivalent to the total emissions of Russia.  

The report assesses eight banks and 10 asset managers against the PCAF standard, finding that they share close to 2bn tonnes of carbon emissions a year across their $32.6tn assets under management, with the authors saying that this is “likely a significant underestimate” due to the limitations imposed by the standard. The utilities, energy and materials sectors accounted for 74% of total financed emissions, despite only accounting for 7% of total assets. 

PCAF was launched in 2015, and seeks to develop standards for reporting the GHG emissions from lending books and investments. It currently has 183 members who commit to reporting against and assist in developing its standards, including BlackRock, Mitsubishi UFJ, HSBC and Federated Hermes. 

The group’s standard currently covers a number of the largest asset classes including listed and unlisted equity, real estate, and corporate bonds. It recently launched consultations on how investors should measure the financed emissions of their sovereign and green bond holdings, and how banks should measure emissions associated with their work facility capital market issuances, such as underwriting bonds. Work is also underway with the Net Zero Insurance Alliance to develop standards for measuring insured emissions.