Achieving net-zero targets has become increasingly important for financial institutions today. One of the most critical elements on this path is understanding and managing the environmental impacts of their portfolios.

PCAF (Partnership for Carbon Accounting Financials) is an initiative launched by financial institutions in 2015, committed to transparently and consistently reporting emissions related to financial activities (Scope 3, Category 15). The primary goal of this initiative is to reduce the financial sector's impact on climate change and enhance transparency in this area. CDP works in a global partnership with PCAF to ensure that financial institutions report transparently and effectively. CDP's alignment with PCAF will facilitate the reporting of portfolio impact metrics and promote their standardized and high-quality reporting. Furthermore, recent developments, such as the ISSB's (International Sustainability Standards Board) S2 standard, emphasize the necessity for consistent reporting by financial institutions.

For financial institutions, climate impact is driven by the activities they finance – in other words, portfolio impacts. CDP's questionnaires have included questions related to portfolio impact metrics since 2020, and this new alignment is part of CDP's efforts to enhance harmonization and strengthen investor alignment.

According to data reported to CDP in 2022, emissions related to financial activities were, on average, 750 times greater than operational emissions for financial institutions. This highlights once again the importance of managing portfolio impacts. In 2023, 575 financial institutions globally responded to CDP's Financial Services questionnaire, representing a 73% increase compared to 2020, indicating that financial institutions are becoming better at understanding the environmental risks and opportunities they face

Thanks to the collaboration between PCAF and CDP, financial institutions can now report emissions related to financial activities more transparently. Additionally, CDP and PCAF are jointly committed to supporting financial institutions in their efforts to align with the ISSB S2 Standard.

CDP and PCAF recently hosted a webinar about the questions in CDP's Financial Services 2024 questionnaire, specifically in Module 12, which are aligned with the PCAF Greenhouse Gas Accounting Standard. 

Click here for the webinar recording: CDP-PCAF Alignment on Reporting and Data Quality Scoring on Vimeo.  
For more information, you can visit the CDP website and explore resources prepared for financial institutions: Guidance for companies - CDP.