For financial institutions, Scope 3 emissions are dominated by a single category: financed emissions. The carbon footprint of a bank’s loan portfolio or an investor’s equity holdings typically dwarfs the institution’s own operational emissions by a factor of 100 or more.
The Partnership for Carbon Accounting Financials (PCAF) provides the methodology for measuring financed emissions. The approach attributes a share of a borrower’s or investee’s emissions to the financial institution based on the proportion of financing provided. Data quality varies from audited company data to sector averages, but the methodology is now well-established.
For Indian banks and financial institutions, financed emissions measurement is becoming a practical necessity. RBI’s guidelines on climate risk management and the international Net-Zero Banking Alliance both push for portfolio-level emissions assessment and target-setting.
RSustain helps financial institutions measure financed emissions, conduct climate scenario analysis on their portfolios, set science-based targets, and develop engagement strategies for high-emitting clients. We also help banks integrate ESG criteria into credit assessment and investment decision-making.
The financial sector’s climate impact is indirect but decisive. Where capital flows, emissions follow — or don’t. Financial institutions that redirect capital toward low-carbon activities will do more for climate action than any single industrial emitter.