Scope 3 Category 15: Financed Emissions
Category 15 (investments) covers the emissions financed through a company's equity investments, debt portfolios, project finance, and insurance underwriting. For banks, asset managers, and insurers, Category 15 represents 99%+ of total emissions — making it the most consequential Scope 3 category in the financial sector.
Category 15 (investments) covers the emissions financed through a company's equity investments, debt portfolios, project finance, and insurance underwriting. Category 15 emissions are calculated by attributing a proportion of each investee's or borrower's GHG emissions to the financial institution, based on the proportion of the company's financing provided.
How Category 15 attribution works
Category 15 emissions are calculated by attributing a proportion of each investee's or borrower's GHG emissions to the financial institution, based on the proportion of the company's financing provided.
For listed equity: (Investment value / Company market capitalisation) × Company total emissions (Scope 1 + 2, sometimes + 3).
For corporate bonds: (Outstanding amount / (Total equity + Total debt)) × Company total emissions.
For corporate loans: (Outstanding loan amount / (Total equity + Total debt)) × Company total emissions.
For project finance: (Loan amount / Total project cost) × Project annual emissions.
For real estate: (Loan outstanding / Property value) × Property energy-related emissions.
The PCAF (Partnership for Carbon Accounting Financials) standard, published 2020 and updated 2022, provides detailed methodology for each asset class. PCAF is the de facto standard referenced by ESRS E1-6 for financial sector Scope 3 Category 15.
PCAF data quality scores — the 1-5 scale
PCAF introduced a data quality score (1 = highest quality, 5 = lowest quality) to communicate the reliability of financed emission calculations. Alongside the Category 15 emission figure, companies must disclose the weighted average data quality score of their portfolio.
Score 1: Company-reported, verified GHG data used for the calculation. The investee has a third-party assured GHG inventory. This is the gold standard — as CSRD reporting matures, Score 1 data availability will increase significantly.
Score 2: Company-reported, unverified GHG data. The investee publishes GHG emissions but without third-party assurance.
Score 3: Reported energy data used to estimate GHG emissions. The investee reports energy consumption but not GHG — emissions are calculated by the financial institution.
Score 4: Estimated using revenue-based emission factors (EEIO approach). No company-specific data available — sector-average intensity applied to revenue.
Score 5: Physical activity-based estimates or production data used. Only physical outputs known — sector emission factors applied to production volume.
For a large European bank: a typical 2025 portfolio will have 20–30% Score 1-2 data (from CSRD Wave 1 reporters) and 70–80% Score 3-5 data. As CSRD Wave 2 reporting begins in 2028, Score 1-2 coverage will expand significantly.
Financed emissions targets and net zero commitments
The Net Zero Banking Alliance (NZBA), Net Zero Asset Managers initiative (NZAM), and Net Zero Insurance Alliance (NZIA) have all committed member institutions to aligning their portfolios with net zero by 2050 — with interim sector-specific targets by 2030.
Setting financed emission targets requires: a baseline Category 15 calculation by sector; sector-specific decarbonisation pathways (IEA NZE scenarios by sector); and attribution of company-level targets to portfolio holding level.
The Paris Agreement Capital Transition Assessment (PACTA) tool provides a free methodology for assessing portfolio alignment with Paris Agreement scenarios — particularly useful for listed equity and corporate bond portfolios in high-emission sectors (energy, automotive, steel, cement).
For ESRS E1-4: financial institutions in CSRD scope must disclose their financed emission reduction targets under the same requirements as non-financial companies. The target must cover material Scope 3 categories — for banks and asset managers, Category 15 is almost always material and must be included in the target boundary.
Frequently asked questions
Do we include Scope 3 of investees in our Category 15 calculation?
PCAF guidance and GHG Protocol allow inclusion of investee Scope 3 for certain asset classes — particularly for sectors where Scope 3 dominates (oil and gas, automotive). Many financial institutions start with investee Scope 1 and 2 only and progressively include Scope 3 as data quality improves. Disclose which investee emission scopes are included in your Category 15 calculation.
How do we handle investments in companies that are not GHG reporters?
Use PCAF Score 4 or 5 methodology — revenue-based EEIO factors or production-based estimates. As CSRD extends to more companies, the share of non-reporters will decline. For private equity investments in non-reporters, engage portfolio companies to provide GHG data — this is increasingly a standard part of ESG value creation in PE.
Does Category 15 include insurance underwriting?
Yes — the PCAF standard includes an Insurance-Associated Emissions methodology for property and casualty insurance. The calculation attributes emissions from insured assets to the insurer based on the proportion of asset value insured. Insurance-associated emissions are typically disclosed separately from investment-associated emissions due to different methodology and data availability.