The Partnership for Carbon Accounting Financials (PCAF) announced the release of the second version of its Global GHG Accounting and Reporting Standard for Financed Emissions, adding guidance for the measurement of carbon removals and a methodology to account for sovereign debt.

Financing activities typically make up the vast majority of financial institutions’ climate impact, with financed emissions often hundreds of times greater than operational emissions, and accounting for most of their ‘Scope 3’ or value chain emissions.

The PCAF is a global partnership of financial institutions, launched in 2019 with a mission to develop and implement a harmonized approach to assess and disclose the greenhouse gas (GHG) emissions associated with loans and investments. The organization has experienced rapid growth since launch, with over 345 financial institutions representing more than $85 trillion in assets committed to reporting on emissions associated with activities including lending, investing, and insurance.

In November 2020, the PCAF launched the Global GHG Accounting and Reporting Standard for the Financial Industry, designed to provide a standardized, robust and clear way for banks, asset managers, and asset owners to measure and report the GHG emissions impact of their loans and investment portfolios. According to the PCAF, the standard has become the single most widely used methodology for measuring and reporting financed emissions globally, and was recently officially embedded into the Task Force on Climate-related Financial Disclosures’ (TCFD) climate disclosure recommendations for financial services.

The first update of the standard, adding a method for sovereign debt and guidance to account for emission removals, follows PCAF’s release last month of an accounting and reporting standard for emissions associated with insurance and reinsurance underwriting portfolios.

The organization is currently working a standard for accounting and reporting “Facilitated Emissions,” or those associated with capital markets transactions.

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