Industries
ESG and GHG inventory in banks and insurers
Banks and insurers: financed emissions under PCAF, green asset ratio, SFDR and own report.
Challenges
What matters for banks and insurers
- 01
Typical material topics
Own operations are small; the lending, investment and insurance business is large. Material topics are therefore usually climate through the portfolio (E1), consumers and end-users (S4), and anti-money-laundering and anti-corruption (G1). Sustainability strategy and governance are a matter for the management and supervisory bodies.
- 02
Reporting duty and frameworks
After the Omnibus, many institutions fall outside the CSRD duty. In Austria, public-interest institutions with more than 500 employees, that is, first-wave undertakings, that do not exceed at least one of the two thresholds (EUR 450 million turnover or 1,000 employees) keep preparing a non-financial report under the previous law, unless they apply the new rules voluntarily. Institutions above both thresholds report under the ESRS. In Germany, the CSRD has not yet been transposed (as of November 2026); until then, the previous rules on the non-financial statement apply. Anyone without a duty reports voluntarily, for example under the VS standard. Anyone offering portfolio management or insurance-based investment products is a financial market participant under the SFDR: with an average of more than 500 employees, for parent undertakings at group level, the entity-level statement on principal adverse impacts (PAI) is mandatory; below that, “comply or explain” applies. Anyone offering only investment advice is a financial adviser and states on their website whether they consider these impacts. The proposed SFDR revision would delete this statement; it has not been adopted (as of November 2026).
- 03
Financed emissions
The emissions of borrowers and investees are attributed proportionally to the bank or insurer, in Scope 3 category 15. The PCAF standard sets out for each asset class how to calculate and provides for a data quality score for each position. Anyone reporting under the ESRS considers PCAF.
- 04
Borrower data
Institutions within the scope of the CSRD report the green asset ratio; those that claim no taxonomy-aligned activities may instead give a standard statement until the end of 2027. For the ratio, for green financial products and for managing ESG risks, institutions need data per client and per asset: published taxonomy KPIs of borrowers that must report, and building and vehicle data for mortgages and motor vehicle loans to households. Since the simplified taxonomy disclosure of 2026, financing of companies without a CSRD duty that belong to no reporting group also falls out of the GAR denominator; it did not count in the numerator before either. If such a customer reports taxonomy KPIs voluntarily or the use of proceeds is known, the bank may include it. Insurers within the scope of the CSRD report their own KPIs instead of the GAR, for investments and, except in life insurance, for insurance business.
Worked example
Your own operations are the smallest part
Switch on financed emissions and see how small your own footprint is next to the portfolio.
- Own operations Scope 1: heating and company cars 400 t 400 t
- Own operations Scope 2: electricity 300 t 300 t
- Corporate loans Category 15: loans and unlisted equity 0 t 120,000 t
- Securities Category 15: listed equity and corporate bonds 0 t 45,000 t
- Project finance Category 15: projects with a known use of proceeds 0 t 25,000 t
- Sovereign debt Category 15: sovereign bonds and loans 0 t 10,000 t
- Residential mortgages Category 15: loans for the purchase and refinancing of residential property 0 t 40,000 t
Illustrative example for a regional bank with an insurance business. Alongside and not added: insurance-associated emissions from commercial property insurance, here 20,000 t. PCAF provides for reporting them as a supplementary note to category 15 and not adding them to financed emissions.
Why the portfolio dominates
- 01
The emissions arise at customers
Heating, electricity and company cars are manageable. What borrowers and investees emit, the GHG Protocol attributes to the bank proportionally, depending on the financing, in Scope 3 category 15.
- 02
PCAF calculates proportionally, per asset class
For loans and investments, the attribution factor is the share of the outstanding amount in the total value of the company or project; it is multiplied by the emissions of that company or project. The insurance business follows a method of its own.
- 03
Data quality is part of the result
Each position gets a score from 1 to 5; 1 is the best quality. It shows how reliable the large number is.
Approach
How we solve it with NetCero
Calculate the portfolio under PCAF, keep operations next to it, build your own report from both.
- 01
PCAF by money flow
Each position is calculated with the rule of its asset class and gets its data quality score. Portfolio and own operations sit next to each other in one inventory.
In NetCero Twelve PCAF value types in the GHG inventory: corporate loans and unlisted equity, listed equity and bonds, project finance, sovereign debt and asset finance, plus commercial property insurance, liability and reinsurance. If reported values are missing, the value is approximated by revenue or cost.
- 02
Your own report under the VS standard or the ESRS
The voluntary report follows the structure of the VS standard. Institutions that must report do so under the ESRS.
In NetCero The VS report and the ESRS report come from the same data base as the operational inventory. Data points for SFDR, Pillar 3 and the management summary can be tagged and retrieved together.
- 03
Materiality, strategy and targets for the top level
Material topics, sustainability strategy, governance and targets are prepared so that the management and supervisory boards can decide on them. Each measure has owners and a status.
In NetCero The double materiality assessment rates topics, impacts, risks and opportunities for your institution. ESG management holds strategy and targets as measures with owners and status.
- 04
EU Taxonomy from the same data base
Economic activities are classified and assessed for alignment. The key figures come from the same data as the inventory and the report.
In NetCero The taxonomy module holds activities, assessment and key figures.
Assignment
Where the emissions of a bank or insurer sit
For most institutions, the largest part lies in the portfolio, not in their own house.
| Source | Belongs in | Why |
|---|---|---|
| Heating and company cars | Scope 1 | Combustion in installations and vehicles under own control. |
| Electricity for branches and offices | Scope 2 | Purchased energy, used in-house. |
| Business travel and commuting | Category 6 and 7 | Travel by employees in third-party vehicles. |
| Corporate loans and unlisted equity without control | Category 15 | Financed emissions under PCAF, attributed proportionally by attribution factor. Under the GHG Protocol, reporting general corporate loans without a known use of proceeds is optional; under the ESRS, category 15 is reported if it is significant. |
| Listed equity and corporate bonds | Category 15 | Financed emissions under PCAF, with the enterprise value including cash (EVIC) as denominator; for bonds of private companies, equity plus debt. |
| Project finance and sovereign debt | Category 15 | Own asset classes with their own calculation rule. Anyone financing a relevant project as initial sponsor or first lender additionally reports under the GHG Protocol, in the year of financing, the projected scope 1 and scope 2 emissions of the entire project lifetime, separately from scope 3. |
| Residential mortgages, commercial real estate and motor vehicle loans | Category 15 | Own asset classes. The denominator is the property or vehicle value at origination; the emissions come from metered consumption, energy performance certificates or vehicle data, otherwise from statistical averages. |
| Commercial, project and personal motor insurance, reinsurance | Supplementary note to category 15 | Insurance-associated emissions under PCAF, separately from financed emissions. Under the GHG Protocol, reporting is optional. |
- Scope 1 or 2
- Scope 3, category
- Supplementary note to category 15, reporting optional
Misallocations
Typical mistakes
-
Accounting only for own operations
That usually leaves out by far the largest part, Scope 3 category 15.
-
Using the borrower’s full emissions
Only the institution’s own share is attributed; anything more counts twice, because other lenders hold shares too.
-
Simply averaging the data quality score
PCAF recommends a score weighted by outstanding amount and requires the score for borrowers’ Scope 3 separately from the one for Scope 1 and 2.
Regulations
Further resources
Frequently asked questions
For each position, the outstanding amount and the total value of the company, plus its emissions. Verified reported emissions give the best data quality, unverified ones the second best. If they are missing, the calculation uses energy or production data, otherwise sector factors per revenue or per asset.
Under the GHG Protocol, reporting is optional. Anyone applying PCAF reports insurance-associated emissions, where material and where data is available, as a supplementary note to Scope 3 category 15, separately from financed emissions. The two are not added, so that investment and insurance business stay distinct.
The core banking system and the credit file for outstanding amounts, collateral, industry codes, property and vehicle data; custody and securities data with enterprise value (EVIC) and reported emissions from data providers; energy performance certificates of the financed buildings; facility management and the vehicle fleet for own operations.
This page explains the legal position in simplified form and is not legal or tax advice. The linked legal texts, as currently in force, are authoritative.
Book a demo
Financed emissions and your own report from one data base.
We show you how PCAF values are kept next to the operational footprint and used for the report and for supervision.
Book a demo