What is the Partnership for Carbon Accounting Financials (PCAF)?

As a non-profit entity, PCAF provides financial institutions with guidance on business sustainability initiatives such as:

• Assessing climate-related risks in line with the Task Force on Climate-related Financial Disclosures (TCFD)
• Setting science-based targets (SBTs) using the sectoral decarbonization approach developed by the Science Based Targets Initiative (SBTI)
• Aligning their portfolios with the Paris Climate Agreement

By taking such measures, financial institutions have the potential to pave a path toward sustainable finance. They can also gain a more comprehensive view of their portfolios’ carbon footprints by adopting PCAF’s GHG accounting standard, the Global GHG Accounting and Reporting Standard for the Financial Industry (the Standard).

PCAF was founded in 2015 by 14 Dutch financial institutions under the leadership of ASN Bank. The initiative stemmed from a pledge by the Dutch government that called on banks to lead the shift to a low-carbon economy by measuring and disclosing the GHG emissions associated with their loans and investments. Over time, more financial institutions from the Netherlands joined in an effort to develop open-source methodologies to measure the GHG emissions of various asset classes, ranging from equity to commercial real estate.

In 2018, PCAF expanded to North America. With Amalgamated Bank at the helm, 12 other financial institutions tailored PCAF’s GHG accounting methodologies for the North American market. In 2019, a total of 28 banks from the Global Alliance for Banking on Values (GABV) adopted the PCAF’s approach to disclosing GHG emissions. From there, ABN AMRO, Triodos Bank and ASN Bank joined Amalgamated Bank and the GABV in making PCAF a global initiative.

In addition, at the request of banks and investors, PCAF broadened its work to cover more aspects of the financial industry. Since 2021, the partnership has created GHG emissions measurement and reporting methods for capital markets activities and for the insurance industry.

Today, more than 400 financial institutions have aligned their GHG assessment and disclosure with the PCAF’s accounting standards.¹

According to PCAF: “Banks represent most of the available capital globally. Since the Paris Climate Agreement the largest banks have invested more than USD 4.6 trillion into the fossil fuel sector."²

It’s been proven that burning fossil fuels releases carbon emissions that accelerate climate change, threatening the well-being of the global population. The financial industry can set an example for other industries by prioritizing GHG emissions transparency across its investment activities, prompting GHG emissions accountability to evolve into a common practice across markets.

At the heart of PCAF is its Global Core Team, a diverse collective made up of 14 members representing various regions and PCAF signatories. Together, they developed the Standard with the goal of harmonizing GHG accounting and reporting.

The Standard is comprised of three parts: A, B and C. Each part has been reviewed by the GHG Protocol, an organization that provides a global framework for measuring and managing GHG emissions. The parts all conform with the requirements of the framework's Corporate Value Chain (Scope 3) Accounting and Reporting Standard, for Category 15 investment activities.

Additional asset classes and case studies are expected to be added as PCAF evolves. By following PCAF’s guidance on financed, facilitated and insurance-associated emissions, financial institutions can effectively report to stakeholders like the Carbon Disclosure Project (CDP) while informing climate action and strategies. Such reporting and transparency may also incentivize financial insitutions to develop new financial products to help support the transition to a net-zero emissions economy.

The PCAF Standard is being implemented in five regions: Africa, Asia-Pacific, Europe, Latin America and North America. Each region has its own regional implementation team with a comprehensive governance structure. Each team also receives technical assistance so they can implement GHG accounting and reporting at no cost.

PCAF has indicated that as more metrics and insights come to light, the lessons learned through regional implementation will be used to refine the Standard and further the coalition’s mission: to facilitate the financial industry’s alignment with the Paris Climate Agreement.