Global Greenhouse Gas Accounting and Reporting Standard for Capital Markets

The Partnership for Carbon Accounting Financials (PCAF) is an industry-led initiative that helps financial institutions assess and disclose their indirect greenhouse gas (GHG) emissions related to their financial activities (Scope 3 emissions classified as category 15). GHG accounting refers to the processes required to consistently measure and report the amount of GHGs generated, avoided, or removed by an entity, allowing it to track and report these emissions over time. It enables financial institutions to disclose these emissions at a fixed point in time and in line with financial accounting periods.

This document is the first version of the Facilitated Emissions Standard. It provides detailed methodological guidance for the measurement and disclosure of GHG emissions associated with capital market transactions. It is anticipated that the Facilitated Emissions Standard will be reviewed again once the revised GHG Protocol Corporate Standards have been published. This will allow experiences of implementing the Standard and expected updates to the GHG Protocol Corporate Standards to be incorporated.

How Guidehouse Can Help

Guidehouse is the Global Secretariat for PCAF, an industry organization that enables financial institutions to measure and disclose the greenhouse gas emissions associated with financial activities. Measuring these emissions facilitates the next steps of target setting, strategy development, taking action, and disclosure. With the technical support of Guidehouse, PCAF has developed the Global GHG Accounting and Reporting Standard for the Financial Industry. The Standard is comprised of three parts:

1. Financed Emissions provides detailed methodological guidance to measure and disclose GHG emissions associated with loans and investments in seven asset classes as well as guidance on emission removals
2. Facilitated Emissions provides detailed methodological guidance for measuring and reporting the GHG emissions associated with capital markets issuances
3. Insurance–Associated Emissions provides methodological guidance for measuring and reporting the GHG emissions associated to re/insurance underwriting

PCAF also provides useful guidance to financial institutions regarding data management, one of the biggest challenges they face as they seek to assess their current level of emissions associated with financial activities. Specifically, PCAF provides in-depth guidance on managing data limitations, including the use of estimated or proxy data where reported data is not available, data quality scoring for increased transparency, and data quality improvements in both the medium- and long-term.

Between investor pressure, public sentiment regarding sustainability, and now, regulatory requirements, financial institutions should start making their portfolios greener, but do not necessarily have all the tools to do so.  Guidehouse has extensive experience assisting financial institutions in their application of PCAF’s industry-led and widely adopted standard, experts who can help financial institutions assess and strengthen their internal reporting controls, and a strong understanding of the climate environment in which financial institutions operate. Drawing on this experience, Guidehouse can help financial institutions pave the way to consistent, comparable, and actionable information that is decision-useful for investors and in compliance with applicable regulatory requirements.

Beyond our PCAF expertise, Guidehouse assists financial institutions in the net zero emissions journey of their financial portfolios. This includes defining science-based targets, developing climate transition plans and strategies, and designing implementation programs to drive decarbonization in the real economy.

This report originally appeared on PCAF launches a new Accounting and Reporting Standard for Capital Markets (carbonaccountingfinancials.com).