Scope 3 Category 15: A Complete Guide to Financed Emissions Reporting

Category 15: The Financial Sector's Carbon Footprint

The GHG Protocol Scope 3 Standard defines its fifteenth and final category as "investments." For banks, insurance companies, and asset managers, this category represents the largest component of their total carbon footprint — typically more than 95 percent of total emissions (WRI/WBCSD, 2011).

Financed emissions represent the greenhouse gas emissions a financial institution indirectly supports through its lending and investment portfolio. The PCAF Global Standard has become the global reference methodology for measuring these emissions consistently and comparably (PCAF, 2022).

Calculation Methodology

Core Formula

For each asset class:

Financed Emissions = Σ (Attribution Factorᵢ × Emissionsᵢ)

The attribution factor is the ratio of financing provided by the financial institution to the borrower company's total capital structure (debt + equity).

Asset Class Approach

Data Quality Scale

PCAF's 1-5 scale scores data reliability for each calculation:

• Score 1: Verified primary data (most reliable)
• Score 2: Unverified primary data
• Score 3: Calculated from physical activity data
• Score 4: Estimated from economic activity data
• Score 5: Sector average (lowest reliability)

A weighted average data quality score across the portfolio should be reported (PCAF Global Standard, 2022).

PCAF vs GHG Protocol Differences

While the GHG Protocol Scope 3 Standard provides a general framework for Category 15, PCAF translates this framework into detailed methodology. Key differences:

• GHG Protocol: Offers multiple options for attribution approaches
• PCAF: Specifies a single standardized approach for each asset class
• PCAF: Adds a data quality scoring system
• PCAF: Provides detailed formulas by asset class

The CDP Financial Services questionnaire references PCAF methodology for financed emissions disclosure (CDP, 2024).

Implementation Roadmap

Phase 1: Scoping (Months 1-2)

• Map asset classes in your portfolio
• Prioritize by total asset volume
• Select asset classes to cover in the first cycle

Phase 2: Data Collection (Months 3-6)

The data collection phase is where theory meets practice. Each asset class requires different data sources:

• Business loans: Extract emissions data from borrower sustainability reports, CDP disclosures, or direct data requests. For large corporates, Scope 1 and 2 data is increasingly available. For SMEs without published emissions data, use sector average emission factors as a starting point.
• Mortgages: Collect energy performance certificates and building characteristics (size, construction year, heating type). Where EPC data is unavailable, use building archetype models based on construction era and regional climate.
• Project finance: Obtain project-level environmental impact assessments for infrastructure and energy projects. For renewable energy projects, emissions are typically near-zero; for fossil fuel projects, lifetime emission profiles must be modeled.

Phase 3: Calculation and Reporting (Months 7-9)

• Apply PCAF formulas
• Record data quality scores
• Report results by asset class

Phase 4: Improvement (Ongoing)

• Identify data gaps and create a closure plan
• Increase primary data share through borrower engagement programs
• Improve data quality scores annually

Context for Turkish Financial Institutions

Turkish banks are at a critical juncture for financed emissions measurement. Three converging pressures make PCAF implementation increasingly urgent:

TSRS reporting requirements. KGK's TSRS, based on IFRS S1 and S2, requires climate-related financial disclosures including Scope 3 emissions. For banks, Category 15 is the dominant Scope 3 category — without PCAF-based measurement, meaningful Scope 3 reporting is impossible.

BRSA sustainable banking expectations. The BRSA's guidance principles expect banks to integrate environmental risks into management processes (BRSA, 2022). Measuring portfolio carbon exposure is a prerequisite for climate risk assessment and stress testing.

International financing access. IFC, EBRD, and other development finance institutions increasingly require borrower banks to demonstrate climate risk management capacity. Financed emissions measurement is a core component of this capacity.

Starting with the largest asset classes is pragmatic. For most Turkish banks, business loans to large corporates represent the highest-emission portfolio segment and also the segment where borrower data is most accessible (through annual reports, CDP disclosures, or direct requests). Starting with this segment and expanding to mortgages and SME lending in subsequent years follows PCAF's own recommended phased approach.

Net-Zero Banking Connection

Measuring financed emissions is a prerequisite for meeting Net-Zero Banking Alliance (NZBA) commitments. NZBA requires member banks to set targets for achieving net-zero portfolio emissions by 2050 (UNEP FI, 2021). The pathway from measurement to target-setting to portfolio management is sequential — you cannot set meaningful decarbonization targets for your lending portfolio without first understanding its current carbon profile.

For Turkish banks considering NZBA membership or engaging with climate-conscious international investors, PCAF-based financed emissions measurement is the entry ticket. The measurement establishes the baseline from which all portfolio climate strategy flows.

Action Item: Category 15 shows the big picture of financial institutions' climate impact. You cannot manage what you cannot measure — start with PCAF and improve data quality every year. Begin with your largest corporate lending portfolio where borrower data is most accessible, and expand to other asset classes in subsequent reporting cycles.