For financial institutions, the GHG emissions related to financing are often the most significant amongst all the emissions related to their activities. These financed emissions are central to assesing climate-related risks and opportunities by identifying hotspots in the portfolio. For climate scenario analysis, they are a key input as the pricing of carbon-intensive activities through national climate policies has a direct impact on loans and investments and their probabilities of default. The analysis of financed emissions serves to set targets in line with the Paris Agreement and to engage lendees and other stakeholders on the pathway to net zero. Furthermore, regulatory requirements and the increasing demand for transparency can be met by disclosing financed emissions.

The carbon footprint for investments is accounted for in category 15 of Scope 3 (Corporate Value Chain) of the GHG Protocoll. Based on this and in an effort to standardize, the Partnership for Carbon Accounting Financials (PCAF) has further detailed carbon accounting for the financial industry in their Global GHG Accounting and Reporting Standards for the Financial Industry. The purpose of this standard is to provide financial institutions with transparent, harmonized methodologies to measure and report the emissions they finance through loans and investments.

The standard covers the following asset classes.

• Listed equity and corporate bonds
• Business loans and unlisted equity
• Project finance
• Commercial real estate
• Mortgages
• Motor vehicle loans

From the (absolute) financed emissions, several relative metrics can be derived and used for different purposes. In the example above, the weighted average carbon intensity is shown. It is the exposure-weighted average of carbon emissions per Euro revenue of the companies in the loan portfolio. As such it measures the portfolio's exposure to carbon-intensive companies and may directly be compared to the carbon intensity of benchmark companies or industry sectors. Other intensity metrics include the economic emissions intensity and the physical emissions intensity.

If an institution lends to companies in the same value chain, double counting between different scopes may occur (e.g., Scope 1 emissions of a supplier are counted as Scope 3 for its customer). While this double counting is difficult to avoid, it is recommended to make it transparent by reporting Scope 1, 2, and 3 seperately as in the example above.