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How financial institutions can use technology, AI, and data to pinpoint where emissions concentrate across sectors, products, and counterparties, leading to sharper underwriting, better investment decisions, and greater transparency.
Financed emissions explained: What they are, how they are measured, and why they matter
Financial institutions sit at a uniquely influential point in the energy transition. This isn’t solely due to emissions from their own operations, although that is certainly a factor. Rather, they have an outsized role to play given the emissions generated by their financing, investing, and lending activities. For most institutions, these emissions—called financed emissions—represent the largest share of their overall carbon footprint, making measurement a critical foundation for stronger risk management, credible disclosure, and better decision-making.
While external pressure from regulators, investors, and civil society continue to build, the larger opportunity is strategic. Institutions that accurately measure and monitor these emissions across investment, lending, and product portfolios can improve their risk management, make more informed decisions about capital allocation, and ultimately drive business value.
To capture that value, institutions should first understand what financed emissions are, how they are calculated, and the levers available to reduce them.
What are financed emissions?
Financed emissions are the greenhouse‑gas (GHG) emissions associated with the companies and projects a financial institution finances through lending or investment activities, allocated in proportion to its share of capital provided. The concept reflects the role that capital providers play in enabling real-economy activities and their associated emissions, with financial emissions often dwarfing a financial institution’s operational emissions footprint by 750 to 1.1 Other financial relationships such as insurance underwriting and capital markets facilitation may also be considered within a company’s financial emissions inventory.
How are financed emissions calculated?
Attribution approaches vary by underlying asset class, reflecting differences in financial exposure, ownership structures, and data availability. The Greenhouse Gas Protocol—the global corporate GHG accounting standard—categorizes financed emissions under Scope 3, Category 15 (Investments), but has historically provided limited guidance on how to apply attribution logic across different financial activities. To address this implementation gap, the Partnership for Carbon Accounting Financials (PCAF) developed Part A of its standard, introducing asset-class-specific methodologies for corporate and project finance, equity and debt investments, mortgages, vehicle loans, and more. As practice matures, methodologies continue to evolve. For example, PCAF has recently expanded Part A to cover securitizations and structured products, while the GHG Protocol is expected to update its Scope 3 guidance by 2028.2
Why calculating financed emissions matters now
As financial institutions face increasing regulatory requirements and stakeholder expectations, accurately calculating financed emissions is becoming essential.
An approach for measuring and managing financed emissions
Our approach for measuring and managing financed emissions provides key actions and considerations to help organizations establish robust processes and uphold compliance with evolving regulatory and stakeholder expectations.
How PwC can help
PwC offers practical support to help organizations address key challenges in financed emissions management, from establishing robust data foundations to meeting evolving regulatory requirements. The following capabilities enable clients to improve data quality, automate processes, and align their sustainability strategies with industry standards.
Sources
1. “CDP-PCAF alignment: Simplifying reporting on financed emissions.” CDP. September 19, 2024.
2. “PCAF launches updated GHG accounting standard.” Partnership for Carbon Accounting Financials press release. December 2, 2025.
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