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Created on 09.08.2021

Corporate responsibility: calculating financed emissions consistently

Financed emissions are a major tool used by financial institutions to reduce their carbon footprint. But calculating these emissions is a challenge for banks. Thanks to the PCAF Initiative, a new standard has been established that allows you to determine and report financed emissions on a consistent basis. We speak to Henrik Ohlsen, who is setting up a PCAF learning space for the DACHLi region (see explanation below).

As one of the largest financial institutions in Switzerland, PostFinance takes its social, economic and environmental responsibility seriously by treating its customers, staff and society as a whole fairly. A significant part of this corporate responsibility strategy is comprehensive sustainability management, which is enshrined in the company’s strategy: one of its key aims is to increase transparency about PostFinance’s own carbon footprint, and to reduce it on a systematic basis. One particular challenge that this presents is measuring and disclosing financed emissions (see box).

What are the emission categories?

Companies that record their greenhouse gas emissions in full must, according to the Greenhouse Gas Protocol, take account of three different emission categories (known as “scopes”):

  • scope 1 covers all emissions caused by the burning of fuels in the company’s own facilities/equipment (e.g. caused by company vehicles). 
  • Scope 2 covers emissions caused by energy purchases (e.g. electricity, district heating).
  • Scope 3 covers all emissions caused by any upstream services or services acquired from third parties. Financed emissions also fall into this third category. This includes emissions financed by companies via investments on the global capital market. In the financial sector, financed emissions – especially when compared with scope 1 and scope 2 – play a very significant role.

Determining emissions on a consistent basis

PostFinance joined the PCAF Initiative in April 2021, its objective being to establish a common standard in the DACHLi region   where greenhouse gas emissions and the greenhouse gas intensity of different asset classes can be determined and disclosed on a consistent basis. In an interview, Henrik Ohlsen, Managing Director of the German Association for Environmental Management and Sustainability in Financial Institutions (VfU), explains why a standardized calculation method is so important. Through the VfU, he coordinates work with the Partnership for Carbon Account Financials (PCAF) for Germany, Austria, Switzerland and Liechtenstein.

Mr. Ohlsen, why do banks need standards for measuring and disclosing financed emissions?

Even though there has been a standard for non-financial services for many years in the form of the Greenhouse Gas Protocol, there has been no such standard aimed specifically at financial service providers and their financed emissions. As financial service providers are indirectly involved in the emissions of financed assets by way of their financing and insurance activities, they need a basis on which to determine their share of emissions from the downstream part of their value chain. To ensure this is carried out consistently and in a way that can be compared internationally, a standard is required for calculating and disclosing financed emissions. Calculating the greenhouse gas emissions in the portfolio is often the first step towards further measures, such as scenario analyses, time-sensitive climate targets and stress tests. The global PCAF Initiative has managed to come up with this very standard for the finance sector in the form of the Global GHG Accounting and Reporting Standard.

How exactly does this benefit the banks?

The Global GHG Accounting and Reporting Standard allows financial institutions to measure and disclose emissions linked to loans and investments at a fixed point in time, in line with financial accounting periods, on an annual basis. In this respect, financed emissions from investments are essentially calculated by multiplying the assignment share (the financial institution’s relative share in the investment) by the emissions of the investment in question. This ensures that the direct and indirect emissions of an investment are assigned to the financial institution based on the share of funding in question. The reasons why this is relevant quickly become apparent when you realize that the quantity of absolute scope 3 emissions determined in this way are on average 700 times higher than the classic carbon footprint from scope 1 and 2 (see info box) according to calculations by the non-profit organization The link will open in a new window Carbon Disclosure Project (CDP) ,

What are the biggest challenges to applying the standard?

One of the biggest challenges is recording emission data for investments. For instance, how would you deal with an investment in a SME that does not record any emissions data of its own? Or perhaps it does have data, but its reliability is questionable? The PCAF’s emission factor database has an answer to this problem. Every financial institution that pledges to report data using the PCAF method has access to this database. This database doesn’t show the direct greenhouse gas emissions of an investment or borrower, but it does show emission factors that can help provide an estimate when combined with knowledge of physical quantities, such as energy consumption in kWh or tonnes of steel produced, and using economic sector data. It would, of course, be better if all SMEs reported their actual emissions. To assess data quality on a consistent basis, the PCAF distinguishes between five data quality levels that financial institutions have to specify when disclosing emissions (weighted according the outstanding amount) for their recorded portfolio.

Why is it important for financial institutions that standards for measuring financed emissions are established as quickly as possible?

Analyses show that data on greenhouse gas emissions available from data providers vary substantially. This issue of unreliable data can only be tackled if there are defined standards determining how companies (financial companies in this instance) should calculate their emissions. This is the only way that further measures and decisions can then be taken using this data to reach the 2°C/1.5°C  target set by the Paris Climate Agreement.

PostFinance is one of 142 financial institutions around the world to join the PCAF. How can these institutions benefit from being involved in this initiative?

This brings to mind an old quote from management studies: “What gets measured, gets managed.” Financial institutions themselves can obtain a solid statistical base that is easy to understand, measure and compare that they can draw on to make decisions on additional measures. Emission intensity can, for instance, be a possible (but not the sole) factor when it comes to selecting securities for investment business or lending. Information about financed emissions can also be an important indicator for stakeholders, such as customers, who can use it to identify the financial service providers important to them. Through their involvement, financial service providers also benefit from being able to share best practices, improvements to available data, developments to the methods used and regional-specific analyses. To make progress towards mitigating the effects of climate change, cooperation is key. With this in mind, it’s very encouraging that PostFinance is one of the first financial service providers in the DACHLi region to join the PCAF Initiative.


The German Association for Environmental Management and Sustainability in Financial Institutions (VfU) serves as a platform for sustainable finance professionals to share ideas and to come up with solutions together that address sustainability issues in finance, and it also offers practical implementation aid and solutions. “The discussion over measuring financed emissions is one we have been following with interest for quite some time,” says Managing Director Henrik Ohlsen. “As an association that distributes a free balance sheet tool for greenhouse gases that looks at the corporate carbon footprint, the VfU key figure tool, which is the standard in the financial sector, we can say that measuring greenhouse gas emissions is part of our competency profile.” To Henrik, it made perfect sense to work with the PCAF for the DACHLi region within the framework of Scope 3: Measuring greenhouse gas emissions produced by financial service providers. Under the name “PCAF DACHLi”, Henrik, in collaboration with the PCAF, provides a learning space for all financial service providers from Austria, Germany, Switzerland and Liechtenstein that wish to apply the standard.

Henrik Ohlsen
Henrik Ohlsen
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