--- title: How Banks & Family Offices Can Measure & Reduce Financed Emissions description: Learn how banks and family offices can measure, manage, and reduce financed emissions to meet regulations and boost sustainability leadership. image: https://www.fiegenbaum.solutions/hubfs/pexels-cluster-images/33407081.jpg --- [Skip to content](https://www.fiegenbaum.solutions/en/blog/measuring-reducing-financed-emissions-banks-family-offices#main-content) [![Fiegenbaum Solutions Logo](https://www.fiegenbaum.solutions/hubfs/Branding/Fiegenbaum-Solutions_Logo.svg) ![Fiegenbaum Solutions Logo](https://www.fiegenbaum.solutions/hubfs/Branding/Fiegenbaum-Solutions_Logo.svg)](https://www.fiegenbaum.solutions/en/?hsLang=en) - [English](https://www.fiegenbaum.solutions/en/blog/measuring-reducing-financed-emissions-banks-family-offices) - [Deutsch](https://www.fiegenbaum.solutions/blog/financed-emissions-leitfaden-fuer-hausbanken-family-offices) - Services - [Climate Risk Assessment](https://www.fiegenbaum.solutions/en/climate-risk-analysis-for-companies) - [VSME Report](https://www.fiegenbaum.solutions/en/vsme-reporting-for-smes) - [ESG Due Diligence VCs & Series A+](https://www.fiegenbaum.solutions/en/esg-due-diligence-vcs-series-a-startups) - [Corporate Carbon Footprint](https://www.fiegenbaum.solutions/en/company-carbon-footprint-methods-tools-best-practice) - Tools - [Scope 3 Quick-Check](https://www.fiegenbaum.solutions/en/scope-3-quick-check) - [ESG Investment Quick-Check](https://www.fiegenbaum.solutions/en/esg-investment-quick-check) - [CSRD Materiality Screening](https://www.fiegenbaum.solutions/en/csrd-materiality-screening) - [Pricing](https://www.fiegenbaum.solutions/en/esg-climate-consulting-fixed-prices-carbon-footprint-vsme-due-diligence-climate-risk) - [About me](https://www.fiegenbaum.solutions/en/about-me) - [Blog](https://www.fiegenbaum.solutions/en/blog) - [Contact](https://www.fiegenbaum.solutions/en/contact) ###### 13 min read # How Banks and Family Offices Can Measure and Reduce Financed Emissions By: [Johannes Fiegenbaum](https://www.fiegenbaum.solutions/en/blog/author/johannes-fiegenbaum) on 5/28/25, 2:26 PM · Last updated October 6, 2026 [Carbon Accounting & Scope 3](https://www.fiegenbaum.solutions/en/blog/tag/carbon-accounting-scope-3) [Green Finance & Funding](https://www.fiegenbaum.solutions/en/blog/tag/green-finance-funding) ![Black and white river scene with power lines and factories](https://www.fiegenbaum.solutions/hubfs/pexels-cluster-images/33407081.jpg) **Financed emissions account for around 95% of banks’ CO₂ footprint.** They arise from loans and investments and fall under the [Scope 3 category of the Greenhouse Gas Protocol](https://ghgprotocol.org/). This article shows how banks and family offices can measure, manage, and reduce these emissions, a challenge that is rapidly moving to the top of the financial sector’s agenda as regulatory and stakeholder pressures mount. Here are the key points: - **Definition:** Financed emissions are indirect emissions caused by loan and investment portfolios, and are often far greater than banks’ direct operational emissions. According to the [PCAF 2022 Annual Report](https://carbonaccountingfinancials.com/files/pcaf-2022-annual-report.pdf), these emissions can be up to 700 times higher than a bank’s own footprint. - **Regulations:** EU directives such as [CSRD](https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en), [EU Taxonomy](https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy_en), and [SFDR](https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/sustainable-finance-disclosure-regulation_en) require expanded reporting and sustainable strategies, pushing institutions toward greater transparency and action. - **Measurement:** The [PCAF standard](https://carbonaccountingfinancials.com/) provides methods for accurate calculation, e.g., for equities, loans, real estate, and vehicles. This standardized approach is now widely adopted by leading banks and asset managers globally. - **Data sources:** Verified [emissions](https://www.fiegenbaum.solutions/en/blog/unlocking-business-value-copernicus-climate-data?hsLang=en) reports (Level 1) to industry averages (Level 4) are crucial, with data quality directly impacting the credibility of disclosures and the effectiveness of reduction strategies. - **Steps to reduction:** Portfolio analysis, emissions measurement, and integration into ESG reports are essential for meeting both regulatory and market expectations. **Quick comparison of key regulations:** | Regulation | Main aspects | Impacts | | --- | --- | --- | | CSRD | Reporting obligations for non-financial information | Companies with more than 1,000 employees and more than €450 million net turnover | | EU Taxonomy | Defines sustainable economic activities | Introduction of the Green Asset Ratio (GAR) | | SFDR | Transparency requirements | Disclosure of sustainability risks | This guide offers concrete approaches to managing financed emissions and meeting regulatory requirements. Start with a portfolio analysis and leverage specialized tools for data management and ESG reporting. As the [UNEP Finance Initiative](https://www.unepfi.org/news/industries/banking/financed-emissions-are-the-next-frontier-for-banks-on-climate/) notes, tackling financed emissions is now seen as the “next frontier” for banks on climate. ## PCAF Standard Measurement Guide ![PCAF](https://www.fiegenbaum.solutions/hubfs/blog-bilder-archiv/a7173278519ab4625f08b09c3a4be20b.jpg) **Live data:** the Fiegenbaum Atlas provides green bond volumes, CSRD benchmarks, EU ETS prices, updated automatically. [Open the dashboard](https://atlas.fiegenbaum.solutions/en/esg-kapitalmarkt?utm_source=fiegenbaum-solutions&utm_medium=blog&utm_campaign=atlas-esg-kapitalmarkt&utm_content=measuring-reducing-financed-emissions-banks-family-offices). ### PCAF Basics The **Partnership for Carbon Accounting Financials (PCAF) Standard** is the leading method for measuring and reporting financed emissions. More than 550 financial institutions worldwide use this standard, which provides a clear framework for assessing climate risks in the financial sector. The PCAF approach is endorsed by the [UN-convened Net-Zero Asset Owner Alliance](https://www.unepfi.org/net-zero-alliance/) and is increasingly referenced by regulators and investors alike. The standard covers seven asset classes: | **Asset Class** | **Valuation Approach** | **Special Features** | | --- | --- | --- | | Listed equities & bonds | Enterprise value-based | Emissions allocated proportionally by ownership share | | Corporate loans | Loan volume-based | Attribution by outstanding amount over equity plus debt | | Project finance | Project-specific | Total project emissions are allocated | | Commercial real estate | Area-based | Incl. energy consumption data | | Mortgages | Property-based | Assessment of building energy efficiency | | Vehicle finance | Vehicle-specific | CO₂ emissions per vehicle are considered | | Sovereign bonds | Country-based | National emissions data used | ### Calculation Methods The PCAF standard uses a **bottom-up approach** to enable detailed assessment at the client level. This granular method helps financial institutions pinpoint high-emission assets and prioritize decarbonization efforts. Basic formula for calculation: > *"Financed emissions = Attribution factor × Emissions of the company/project"* The attribution factors vary by asset class: - **Listed equities:** Investment share of enterprise value - **Loans:** Ratio of the outstanding loan amount to the company's total equity plus debt - **Project finance:** Emissions calculated according to financing share Reliable emissions data are essential for accurate calculations. As highlighted by the [CDP](https://www.cdp.net/en/articles/investor/financed-emissions-why-they-matter), access to high-quality, verified data is a growing expectation from both regulators and investors. ### Obtaining Emissions Data The quality of emissions data is rated using a **5-level system**, with Level 1 being the highest and Level 5 the lowest quality. Banks that invest in higher-quality data not only improve compliance but also gain a competitive edge in sustainable finance. | **Data Source** | **Quality Level** | **Application** | | --- | --- | --- | | Verified emissions reports | 1 | Directly measured and audited data | | CDP database | 2 | Standardized climate reports | | Sustainability reports | 2 to 3 | Company-specific information | | Industry averages | 4 | Estimates based on sector data | | PCAF data portal | 3 to 4 | Standardized estimates | For German retail banks and family offices, the PCAF methodology is particularly relevant as it is compatible with the EU Taxonomy and CSRD requirements. This data forms a solid foundation for ESG reports and further analysis, and is increasingly expected by stakeholders across Europe and [beyond](https://www.fiegenbaum.solutions/en/blog/unlocking-long-term-value-esg-data-business-success?hsLang=en). ## 3-Step Approach to Emissions Management ### 1. Portfolio Analysis The first step in capturing financed emissions is a thorough portfolio analysis. Studies show that emissions within a portfolio often far exceed a company’s direct emissions. For banks, financed emissions are typically many times larger than their operational emissions, which is why the PCAF standard puts them at the centre. A structured approach to portfolio [analysis](https://www.fiegenbaum.solutions/en/blog/choosing-right-ssp-scenario-climate-resilient-business?hsLang=en) could look like this: | **Analysis Step** | **Methodology** | **Result** | | --- | --- | --- | | Sectoral assessment | Use of industry averages and proxy data | Identification of high-emission sectors | | Client-specific analysis | Evaluation of individual emissions data and CDP reports | Determination of detailed emissions profiles | | Risk classification | Application of PCAF quality scale | Prioritization of measures | Based on this analysis, precise measurement of emissions can take place in the next step. ### 2. Emissions Measurement Emissions are measured according to the PCAF methodology, which ensures a structured and consistent approach. Certain key figures play a central role in accurate measurement: **Key metrics:** - CO₂ equivalents per euro invested - Absolute emissions, broken down by asset class - Emissions intensity compared to sector-specific benchmarks The quality of the underlying data is crucial. A study from March 2023 shows that 373 financial institutions worldwide are already applying the PCAF methodology, reflecting its growing acceptance and the urgency of climate disclosure ([PCAF 2022 Annual Report](https://carbonaccountingfinancials.com/files/pcaf-2022-annual-report.pdf)). ### 3. Integration into the ESG Report After accurate measurement, emissions data must be integrated into the ESG report to meet regulatory requirements. For companies in CSRD scope, this makes robust ESG reporting a business-critical process. > "The various reporting regimes [should](https://www.fiegenbaum.solutions/en/blog/esg-venture-capital?hsLang=en) be synchronized so that each data point only needs to be reported once. Every CFO could tell stories about how the same data is reprocessed multiple times. More fundamental regulations with less micromanagement are needed. In addition, European and international regulations must be interpreted and aligned consistently." An ESG report should cover the following core aspects: | **Report Component** | **Requirements** | **Relevant Standards** | | --- | --- | --- | | Emissions metrics | Absolute and relative CO₂ values | [GRI 305](https://www.globalreporting.org/), CSRD | | Risk assessment | Evaluation of climate-related risks in the portfolio | [ISSB](https://www.issb.io/), Pillar 3 | | Targets | Science-based reduction targets | [Paris Agreement](https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement) | | Action plan | Concrete steps for decarbonization | EU Taxonomy | Integrating this data requires a central platform that consolidates information from various sources and ensures seamless documentation. It is especially important to consider [Materiality Assessment for SMEs: From ESG Compliance to Growth](https://www.fiegenbaum.solutions/en/blog/materiality-assessment-smes-esg-compliance-growth?hsLang=en) as required by CSRD. This demands assessment of both the impact on the company and the company’s impact on the environment and society. The [concept of double materiality](https://eur-lex.europa.eu/eli/reg_del/2023/2772/oj) is now seen as a cornerstone of credible sustainability reporting. ## Software and Tools Guide After precise data collection and integration within the ESG report, deploying specialized software solutions is a logical next step. A well-designed software infrastructure is essential for efficiently managing financed emissions. Below, I highlight key areas of modern software solutions for data collection, risk assessment, and portfolio management. ### Data Management Systems Modern data management systems are designed to aggregate data from different sources and ensure seamless documentation. A central platform should fulfill several essential functions: | **Function Area** | **Requirements** | **Benefits** | | --- | --- | --- | | **Data collection** | Automatic integration of various sources | Less manual input | | **Validation** | Check for completeness and plausibility | Higher data quality | | **Version control** | Traceability of all changes | Transparent documentation | | **Reporting** | Standardized reporting formats | Compliance with regulatory requirements | ### Risk Assessment Tools Specialized tools are required to assess climate-related risks within a portfolio. These analyze emissions and emissions intensity based on sector, region, and company. Advanced platforms use big data analytics and AI to identify ESG patterns, automate regulatory compliance, and provide real-time insights into performance. ### Portfolio Management Software Integrating emissions data into portfolio management requires specialized software that can not only calculate the CO₂ footprint but also support strategic decision-making. The costs for such solutions vary greatly depending on scope and target group: | **Software Category** | **Annual Cost (approx.)** | | --- | --- | | **Enterprise solutions** | €37,000 to €264,000 | | **Mid-market solutions** | €10,000 to €42,000 | | **SME solutions** | €3,000 to €15,000 | When selecting suitable software, financial institutions should pay particular attention to compatibility with existing systems, automation options, and user-friendliness. Equally important are integration into existing IT structures and the ability to scale the solution as needed. ## Next Steps Structure your management of financed emissions in a targeted way. ### **First Steps** The EBA guidelines on the management of ESG risks (EBA/GL/2025/01) have applied to large institutions since 11 January 2026 and apply to small and non-complex institutions from 11 January 2027. Two building blocks come first: | Action Area | Measures | | --- | --- | | **Data management** | Implementation of systems for emissions data collection | | **Governance & Risk** | Establishment of an ESG committee and integration into lending processes | These steps lay a solid foundation for effective emissions management and regulatory compliance. ### **Mid-term Strategies** The ECB has defined climate and environmental risks as central topics for 2025 to 2027. Focus on: - Development of forward-looking tools for transition risk assessment - Building integrated ESG data management - Linking sustainability goals with compensation models These strategies help adapt your portfolio to evolving regulatory and market requirements. According to [ECB guidance](https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr230303~e4e8e8a5a6.en.html), banks that proactively manage climate risks will be better positioned for future supervisory expectations. > *“Quantifying financed emissions is a tangible first step in building trust that financial institutions are integrating climate change into their core capital allocation processes.”* ([UNEP FI](https://www.unepfi.org/news/industries/banking/financed-emissions-are-the-next-frontier-for-banks-on-climate/)) ### **Long-term Perspective** Under Directive (EU) 2026/470, the CSRD covers companies with more than 1,000 employees and more than €450 million in net turnover; newly covered companies report from financial year 2027. Most borrowers of a regional bank or a family office portfolio fall outside that scope, so much of the emissions data will have to be collected directly from them. In the long term, you should take the following actions: - Expand technological approaches to ESG risk assessment - Develop comprehensive decarbonization strategies - Introduce engagement processes with portfolio companies These measures will secure your position in a dynamic market environment. ## FAQs 1\. How can retail banks and family offices analyse and reduce their financed emissions? Retail banks and family offices can better understand and assess their financed emissions by applying the **PCAF methodology** (Partnership for Carbon Accounting Financials). This approach provides a clear method for calculating the greenhouse gas emissions resulting from financing activities. The focus is especially on **Scope 3 emissions** (Category 15), which are caused by the activities of borrowers and investments. A detailed analysis of the portfolio makes it possible to [measure](https://www.fiegenbaum.solutions/en/blog/eu-omnibus-package-2025-simplifying-csrd-reporting?hsLang=en) and disclose these emissions transparently. To effectively reduce emissions, it is crucial to develop sustainable financing strategies. This includes targeted investment in **low-carbon and environmentally friendly projects** as well as integrating **ESG objectives** into the decision-making process. These approaches not only help achieve climate goals but also strengthen the long-term stability and sustainability of portfolios. 2\. What are the benefits of the PCAF standard for measuring and reporting financed emissions? The **PCAF standard** (Partnership for Carbon Accounting Financials) provides financial institutions with a unified method to calculate and disclose the greenhouse gas emissions of their investment and credit portfolios. This facilitates comparison between institutions and strengthens **accountability** within the sector. Furthermore, the standard helps banks and family offices to set **science-based climate targets** aligned with the Paris Agreement. Thanks to specific approaches for different asset classes, the PCAF standard enables precise reporting that meets both regulatory requirements and supports ESG objectives. 3\. What is the importance of the EU Taxonomy and CSRD for the regulation of financed emissions, and how can financial institutions practically implement these requirements? The **EU Taxonomy** and the **CSRD (Corporate Sustainability Reporting Directive)** play a central role in the [regulation of financed emissions](https://www.fiegenbaum.solutions/en/blog/mastering-measuring-and-reporting-a-how-to-guide-for-financed-emissions?hsLang=en). The EU Taxonomy defines which economic activities can be classified as sustainable and obliges financial institutions within the CSRD scope to assess and disclose their investments and loans accordingly. The main objective: to create greater transparency and direct capital towards sustainable projects. For financial institutions within its scope, more than 1,000 employees and more than €450 million net turnover, the CSRD requires reporting of financed emissions where they are material. To meet this obligation, companies should rely on standardised methods such as the **PCAF standards (Partnership for Carbon Accounting Financials)**. These standards provide a unified basis for measuring and disclosing emissions. At the same time, they support the achievement of ESG objectives and compliance with regulatory requirements. Accurate data and transparent reporting are indispensable in this context. Next step Turn climate risk or ESG data into a decision? In a 30-minute intro call we map where your biggest lever is, with no obligation. [Book an intro call](https://www.fiegenbaum.solutions/en/contact?hsLang=en) ![Johannes Fiegenbaum](https://www.fiegenbaum.solutions/hubfs/Johannes_07-modified.png) ### Johannes Fiegenbaum ESG and sustainability consultant based in Hamburg, specialised in VSME reporting, carbon accounting and climate risk analysis. Works with mid-sized companies, investors and financial institutions, and built the VSME reporting software VSEasy. [More about](https://www.fiegenbaum.solutions/en/about-me?hsLang=en) Related articles ## You may also like ### [Carbon Accounting & Scope 3 Mastering Measuring and Reporting: A How-to Guide for Financed Emissions This guide helps sustainability managers learn how to measure and report financed emissions. It provides useful tips for managing these emissions and aligning investment policies ... Read more →](https://www.fiegenbaum.solutions/en/blog/mastering-measuring-and-reporting-a-how-to-guide-for-financed-emissions?hsLang=en) ### [Carbon Accounting & Scope 3 10 Critical Scope 3 Emissions Mistakes and How to Avoid Them Read more →](https://www.fiegenbaum.solutions/en/blog/scope-3-emissions-mistakes-how-to-avoid?hsLang=en) ### [Biodiversity & Nature Understanding TNFD: Integrating Nature Risks and Opportunities in Financial Decisions Read more →](https://www.fiegenbaum.solutions/en/blog/understanding-tnfd-integrating-nature-risks-and-opportunities-in-financial-decisions?hsLang=en) ### [Climate VC & Impact Investing 5 Common Sustainability Pitfalls in Pitch Decks and How to Avoid Them Read more →](https://www.fiegenbaum.solutions/en/blog/sustainability-pitfalls-pitch-decks?hsLang=en) ### [Carbon Accounting & Scope 3 ESG Metrics for Climate VCs: CO₂ Intensity and Avoided Emissions Read more →](https://www.fiegenbaum.solutions/en/blog/essential-esg-metrics-climate-vcs-2026?hsLang=en) ### [ClimateTech Startups AI Token Pricing 2025: Cost Trends & Sustainability Impact Read more →](https://www.fiegenbaum.solutions/en/blog/dramatic-drop-ai-token-prices-opportunities-challenges-sustainability?hsLang=en) ##### Johannes Fiegenbaum Johannes Fiegenbaum I turn climate risk and ESG data into capital and financing decisions. 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This approach provides a clear method for calculating the greenhouse gas emissions resulting from financing activities. The focus is especially on Scope 3 emissions (Category 15), which are caused by the activities of borrowers and investments. A detailed analysis of the portfolio makes it possible to measure and disclose these emissions transparently. To effectively reduce emissions, it is crucial to develop sustainable financing strategies. This includes targeted investment in low-carbon and environmentally friendly projects as well as integrating ESG objectives into the decision-making process. These approaches not only help achieve climate goals but also strengthen the long-term stability and sustainability of portfolios." }, "name" : "How can retail banks and family offices analyse and reduce their financed emissions?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The PCAF standard (Partnership for Carbon Accounting Financials) provides financial institutions with a unified method to calculate and disclose the greenhouse gas emissions of their investment and credit portfolios. This facilitates comparison between institutions and strengthens accountability within the sector. Furthermore, the standard helps banks and family offices to set science-based climate targets aligned with the Paris Agreement. Thanks to specific approaches for different asset classes, the PCAF standard enables precise reporting that meets both regulatory requirements and supports ESG objectives." }, "name" : "What are the benefits of the PCAF standard for measuring and reporting financed emissions?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The EU Taxonomy and the CSRD (Corporate Sustainability Reporting Directive) play a central role in the regulation of financed emissions . The EU Taxonomy defines which economic activities can be classified as sustainable and obliges financial institutions within the CSRD scope to assess and disclose their investments and loans accordingly. The main objective: to create greater transparency and direct capital towards sustainable projects. For financial institutions within its scope, more than 1,000 employees and more than €450 million net turnover, the CSRD requires reporting of financed emissions where they are material. To meet this obligation, companies should rely on standardised methods such as the PCAF standards (Partnership for Carbon Accounting Financials) . These standards provide a unified basis for measuring and disclosing emissions. At the same time, they support the achievement of ESG objectives and compliance with regulatory requirements. Accurate data and transparent reporting are indispensable in this context." }, "name" : "What is the importance of the EU Taxonomy and CSRD for the regulation of financed emissions, and how can financial institutions practically implement these requirements?" } ] } ```