What it is
The Partnership for Carbon Accounting Financials (PCAF) is an open-source, global standard for measuring and disclosing greenhouse gas emissions associated with financial portfolios. It covers six asset classes: listed equity, corporate bonds, business loans, project finance, commercial real estate, and mortgages. Over 400 financial institutions representing $95 trillion in assets have joined.
Why we picked this
A bank or asset manager cannot manage what it does not measure. PCAF provides the methodology for calculating 'financed emissions,' the carbon footprint embedded in loans and investments. With regulators increasingly requiring climate risk disclosure, PCAF's standardized approach has become the default framework for financial institutions worldwide.
Key takeaways
- PCAF's methodology is endorsed by the GHG Protocol and recommended by the Task Force on Climate-related Financial Disclosures (TCFD).
- Over 400 financial institutions have committed to measuring and disclosing financed emissions using PCAF's standardized methodology.
- The framework assigns data quality scores (1-5), encouraging institutions to improve emissions measurement over time rather than demanding perfection upfront.