The rise of PCAF: “Almost the perfect example of a bottom up process”

Dutch export poised to become the global carbon accounting standard for finance

Piet Sprengers, Manager of Sustainability Strategy at Dutch bank ASN Bank, describes the Partnership for Carbon Accounting Financials (PCAF) as “almost the perfect example of a bottom up process”. 

His comments come as the global coalition of financial institutions, which he chaired until earlier this year, launches a consultation on the first ever global carbon accounting standard – and as three US financial heavyweights join its ranks, each committing to measure and disclose the emissions linked to their financing. 

RI first spoke to Sprengers about PCAF in 2018, when it was still a relatively small initiative focused on the Netherlands, supported by 12 of the country’s financial institutions.

Today, PCAF boasts a global membership of 70, representing over $11trn in assets.

How did this small initiative, which was set up by ASN Bank in 2015, come to develop what its founders now believe could be the global standard on carbon accounting, and be adopted by the likes of Morgan Stanley, Bank of America and CitiGroup? 

“The best way to stimulate and challenge other financial institutions to follow you”, Sprengers told RI in 2018, “is not to start an international discussion group, but come out with the calculations and show how you do it in practice even on a small scale”. 

That faith in a bottom-up approach has played out in the success of PCAF since. But Sprengers says he never imagined the initiative would take off like it has, describing the three US banks joining as a “major deal” and one that “really makes it possible for PCAF to become a global standard”.

‘No one would argue that JP Morgan is at risk of going under any time in the next five years, but they could finance enough fossil fuels to destroy us all in five years’ – Ivan Frishberg, Amalgamated Bank

It was Dutch banking groups Triodos and ABN Amro, and the Global Alliance for Banking on Value, that really helped PCAF – already a success in the Netherlands – take the “next step” and be exported, he observes. 

Ivan Frishberg, Director of Impact at Amalgamated Bank, which became an early adopter and champion of the initiative in the US, tells RI that from 2016 it became “very clear” that financed emissions were a key issue.

“You just can’t change enough LED light bulbs to mitigate the impact”, he says.

In 2018, after connecting with Triodos and ABN Amro, he says, Amalgamated Bank sought to push the uptake of PCAF in the US. 

By the end of Autumn 2019, PCAF had published a methodology for North America and launched a global network.

It was at this time, Frishberg says, that they realised that to really make an impact, PCAF couldn’t be a series of regional standards: it needed “to be tied together by a global standard”.

He tells RI that he is “thrilled” that the three US banks have joined and committed to disclose using PCAF.

When asked if he was surprised that they had agreed to do this work, he replies: “No. I mean, frankly, I'm surprised that it's taken so long, given the threat of climate change”. But, he adds, “big banks move slowly and cautiously”. 

Behind the scenes, however, Frishberg thinks, there “is a sense of inevitability” that financed emissions will have to be measured and disclosed and that, ultimately, “financial institutions are going to have to align their financing with science and the goals of the Paris Agreement”. 

Even on the regulatory side, he adds, US banks are bracing for more interventions. “Most banks have a long enough vision that they can see into the next Administration”, he says, referring to the upcoming US elections.

Frishberg tells RI that, for a lot of banks, the question was whether PCAF could be gamed. He says it was important that it was not like ESG data, “where there's a million standards [and] it's all in the eye of the beholder”.

But many of the big institutions have clearly found it workable, which Frishberg believes is helped by the fact that the framework was created and shaped by banks. 

“The working groups that we have are [made up of] people who really understand how banks work, how data systems work and how accounting systems work”. That, he says, makes a “big difference to the outcome”. 

He acknowledges that this might also make PCAF seem like “something the industry just cooked up”, but argues that “the fact that this started with values-based banks with proven track records of real progress on these issues” and is rooted in the Greenhouse Gas Protocols, gives it the “right balance”.

The new global standard, the consultation on which runs until the end of September, is “pretty much the same” as the one developed by the Dutch financial institutions, with some variations in asset classes between regions. For example, in the US, loans are often made for the purpose of buying cars, unlike in many European countries.

PCAF currently has a regional base in the US and, Sprengers says, more “national coalitions in the EU” are likely to be announced in the future.

Win for shareholder engagement

Morgan Stanley and Bank of America’s adoption of PCAF also represents a tangible success for shareholder engagement. 

Both firms committed to take steps to measure and disclose their emissions in response to proposals filed by US non-profit As You Sow, which called on them to align their lending with the Paris Agreement.

The proposals were withdrawn following fresh commitments from the banks. Similar resolutions at Wells Fargo or Goldman Sachs were withdrawn for the same reason, although neither have yet signed up to PCAF. 

JP Morgan Chase, the world’s largest fossil fuel financier, was the only bank targeted by As You Sow that didn’t make a commitment to measure and disclose emissions. As a result, the proposal went to vote at its AGM, and achieved huge support, getting 49.6% backing from shareholders.

Danielle Fugere, President of As You Sow, tells RI that, through the engagement, it became clear that the US banks – unlike some of their European peers – had “not really begun to figure out how to measure their finance emissions”.

The NGO responded by “taking a step back” from Paris-aligned targets, instead asking banks to commit to start measuring their financed emissions, and consider PCAF as a potential tool to do so. 

Fugere describes the recent move by the three banks as a “huge step forward”, one that sends a “signal” to their peers that PCAF is “a system that works for even the largest banks”.

It also leaves those unwilling to take responsibility for their emissions looking strikingly like laggards, she says.  

She emphasises the value of banks using the same methodology. The “worst outcome”, she says, “would have been if every bank decided they were going to undertake a different system”. The ability to compare banks is “incredibly important”, she tells RI. 

Much work still to be done, Paris aligned targets are the real goal

Measuring financed emissions is just the first step.

“Once you measure and disclose, then you can set targets”, says Fugere. “That will be the next step and the banks understand that. We have been asking for targets all along, and okay, first thing’s first: figure out how to measure and disclose. But then you've got to start demonstrating that you are actually reducing emissions, because that's the purpose.”

Sprengers and Frishberg also stress that measuring emissions is just a step on the way to setting Paris-aligned targets and then, ultimately, aligning – which is the commitment PCAF members make when signing up. 

But target setting, Sprengers says, is still in its infancy and will take a couple of years to develop, requiring methodologies of its own, which groups like the Science Based Targets initiative are working on, he says.

Fugere also stresses the “tremendous amount of work still to be done” in moving money away from fossil fuels. 

She says that she was “surprised” that the banks As You Sow engaged with were found to have increased their financing of fossil fuels last year in the recent Rainforest Action Network report

The commitment to decarbonise has to “permeate across the entire organisation”, Fugere says. “Every loan officer has to understand that carbon emissions are a factor in their decision, and know that they will be rated on this as on how much money they bring into the bank”. 

She adds that the signal sent to companies if the banks come under pressure to reduce their carbon emissions cannot be overstated.  

Frishberg agrees with a recent piece by academic Ben Caldecott, Director of the Oxford Sustainable Finance Programme, in RI, on the need for financial institutions to shift thinking “beyond just immediate transactional financial risk” associated with climate change to aligning their financing with the Paris Agreement. 

He says that “no one would argue that JP Morgan is at risk of going under any time in the next five years, but they could finance enough fossil fuels to destroy us all in five years”.

“It’s quite possible to insulate a bank from a financial position, but to still drive climate change”, he adds. 


Back in 2018, Sprengers pushed back against the criticism that the data quality wasn’t yet there to do this sort of work. “It is a very theoretical rejection to say we can only account for our carbon footprinting if we are completely sure that our carbon data is 100% correct,” he said. “If we do that, we’ll be waiting 50 years for a solution”. He also noted financial accounting did not face such a high bar.  

There is untapped data to be found, too, he says, pointing to the work PCAF has already undertaken on mortgages. Initially the work relied on “rougher calculations”, as it was based on slightly older data around energy labels, which “did not really say a lot about the actual energy use”.

But through these efforts, it was discovered that the Dutch Central Bureau of Statistics held far better data – a lesson that that good quality data is often available but is “not disclosed because it has never been demanded before, and certainly not by the financial sector”. 

The more larger financial players start to demand such data, he adds, the availability of it and its quality “will develop more rapidly”. 

“I am very curious about how the future will look in three, four or five year to see how PCAF can contribute to the transition to a low-carbon economy”.