Glossary›Emissions accounting and measurement›Financed emissions / PCAF
Glossary term
Cluster D · D46
Tier 2
Financed emissions / PCAF
Definition
Financed emissions are the greenhouse gas emissions attributed to an investor or lender in proportion to its share of the money invested in a counterparty. They are the core of Scope 3 Category 15. The recognised methodology is the PCAF Global GHG Accounting and Reporting Standard, which sets attribution rules and a data quality score by asset class.
PCAF Global GHG Accounting and Reporting Standard, Part A
· third edition, December 2025 · practice, referenced through AASB S2 Category 15; no Australian legal force
On this page
In practice
The term carries a banking accent it does not deserve. PCAF was written by and for financial institutions, and most of its ten asset classes (mortgages, motor vehicle loans, sovereign debt, securitisation) will never apply to a manufacturer. But two of them apply to a great many ordinary Australian businesses: business loans and unlisted equity, which covers direct equity in private companies, and listed equity and corporate bonds, which covers a treasury portfolio.
If your company holds a 30 per cent equity stake in an unlisted joint venture, PCAF gives you the method for that stake and calls it financed emissions. It is not a claim that you are a bank. It is a claim that the attribution arithmetic is the same either way.
PCAF’s genuinely useful contribution to a private business is the data quality score: a one-to-five scale where 1 is the investee’s own GHG Protocol-compliant reported emissions and 5 is a sector-average proxy applied to revenue or asset value. Scoring every position and disclosing the weighted average tells a reader exactly how much of your Category 15 number is real. For an entity whose joint venture partners do not report, that score will be poor in the first year, and disclosing a poor score honestly is a stronger position than presenting a proxy-derived number as though it were measured.
Adopting PCAF is not mandatory in Australia. AASB S2 requires Category 15 to be measured in accordance with the GHG Protocol; PCAF is the operationalisation of it for this category and is the method an Australian assurer is most likely to recognise. Using something else is permitted and requires explanation.
What the assurer does with it
The assurer tests the attribution factor first, because it is the one input that is verifiable to a document. Numerator to the shareholders agreement, unit register or loan agreement; denominator to the investee’s own audited balance sheet, at a date that matches the emissions period. A mismatch between the equity percentage used here and the percentage used for equity accounting in the financial statements is the most frequent finding, and it usually arises because one was updated after a capital raise and the other was not.
They then test the emissions input: an investee’s assured inventory is accepted readily, an investee’s unassured inventory is accepted with the data quality score disclosed, and a proxy is accepted only where the proxy’s basis is stated.
They reject an attribution with an unevidenced denominator, a data quality score assigned with no supporting rationale per position, and a weighted average score presented without the underlying distribution. If you have used PCAF, expect to be asked which edition, because the asset class definitions changed between editions.
Commonly confused with
Facilitated emissions and insurance-associated emissions, which are PCAF Parts B and C and are separate from financed emissions: a distinction AASB S2025-1 now makes explicit. And the investee’s own reported emissions, which are a gross figure; yours is your attributed share of it.
Timing and relief
The standard Scope 3 position applies: the category may be omitted from the first annual reporting period under AASB S2 Appendix C paragraph C4(b), with paragraph C5 carrying the relief into the comparative. The AASB S2025-1 limitation described under Category 15 applies to periods beginning on or after 1 January 2027, with early application permitted.
Sources
1
The Global GHG Accounting and Reporting Standard for the Financial Industry
PCAF
2
3
Corporate Value Chain (Scope 3) Accounting and Reporting Standard, full text
GHG Protocol
Review status
Review required
Last reviewed
15 September 2026
Editorial pass, unsigned
Reviewer required
Carbon accounting specialist and registered company auditor
Next scheduled review
1 January 2027
AASB S2025-1 effective date
Part of
Cluster D, Emissions accounting and measurement
49 terms from the head term carbon accounting down to individual Scope 3 categories and the mechanics of factors, boundaries and data quality. The largest cluster in the glossary.
Related terms
The category financed emissions sit inside
The Australian framework the PCAF one-to-five score maps against
What separates a score of 1 from a score of 5
Related questions
Our suppliers will not give us emissions data. What do we do?
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You estimate, and you disclose that you estimated. Nothing in AASB S2 requires primary supplier data, because the standard works on information that is reasonable and supportable and available without undue cost or effort. Rank suppliers by estimated emissions, engage the top of that list, and leave the tail on a documented spend-based method.
Can we estimate Scope 3 and still pass assurance?
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Yes. Estimates are expected in Scope 3 and are not a problem for assurance in themselves, because what fails is an undocumented estimate. The practitioner tests whether the method is appropriate and disclosed, the inputs are traceable, the application is consistent, and the estimation uncertainty is described honestly.
How do we work out which Scope 3 categories are material for us?
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You screen all fifteen GHG Protocol categories, estimate each roughly off accounts payable spend, and document why you included or excluded each one. The screen is the deliverable as much as the answer, because the practitioner will test the reasoning behind an exclusion at least as hard as the numbers behind an inclusion. Expect the answer to be concentrated in a handful of categories.
Other terms in this cluster
Financed emissions / PCAF