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Untangling Financed Emissions
3/19/2025 ~ 8:00:39 AM

For financial institutions, financed emissions - the emissions associated with the companies they invest in or lend to - are a key measure of climate impact.

However, accurately measuring and reporting them remains a challenge.

What Are Financed Emissions?

Under the GHG Protocol, financed emissions fall under Category 15 (Investments) of Scope 3 emissions, covering the emissions linked to loans, investments and other financial services.

The Partnership for Carbon Accounting Financials (PCAF), which builds off the GHG protocol, provides guidance for financial institutions to disclose Scope 1 & 2 emissions of their portfolio companies.

However, if a portfolio company operates in a sector where Scope 3 emissions are deemed material (e.g. Oil & Gas), then its Scope 3 emissions must also be included.

Measuring financed emissions will vary depending on the type of financial service provided.

How should financed emissions be scaled?

One challenge is determining the appropriate scaling factor for financed emissions, to ensure effective benchmarking.

We looked at 10 publicly listed asset managers' disclosed absolute financed emissions:

Company
Country
Absolute Financed Emissions (tCO₂e)
Northern Trust Corp
United States
411232377
M&G
United Kingdom
122315000
Janus Henderson Group
United Kingdom
77984516
Ameriprise Financial
United States
18000000
Azimut Holding S.p.A
Italy
12495050
Nomura Holdings
Japan
7480000
Apollo Asset Management
United States
7450808
IGM Financial
Canada
6400000
Polar Capital
United Kingdom
5261232
Eurazeo
France
3549051

To benchmark them we first scale by revenue - but acknowledging that the asset management fee structure can significantly impact this, despite similar levels of invested capital, we also scale by AUM. Naturally, the results vary considerably.

To see these benchmarked tables, please click here.

Is the scaled AUM table a fairer comparison? It can be, depending on the methodology.

AUM is arguably a better benchmark than revenue as it directly reflects exposure to investments and emissions tied to its portfolio, while revenue can be impacted by external factors or fee structures.

However, scaling by revenue allows for wider comparisons, not only between AMs but also with the financials sector as a whole.

Is the data comparable at this stage?

Another existing challenge is data comparability.

Many public companies do not disclose their full emissions in line with recognised standards, e.g. the GHG protocol, particularly when it comes to Scope 3 data.

This then becomes a challenge for banks that are required to report their financed Scope 3 emissions, as public company disclosures of Scope 3 data remain inconsistent or incomplete.

This raises a key question: Is it fair to expect financial institutions to disclose their portfolio’s Scope 3 emissions when they ultimately rely on the underlying company reported data?

What is Integrum’s approach?

At Integrum ESG, as we’ve been collecting financed emissions data for financial institutions, we have debated what the right approach is.

Should we accept a bank’s reported financed emissions if they have only disclosed Scope 1 & 2 for their portfolio companies?

Or should we be strict and only include companies that provide full Scope 1, 2, and 3 figures in line with PCAF guidance, even if that significantly reduces the dataset?

Ultimately, we decided that best practice for financial institutions is to clearly define what their Scope 3 Category 15 financed emissions value includes.

We believe financial institutions should clearly define their approach, specifying:

🏦 The % of their AUM covered

🏭 Which scopes (1, 2, and/or 3) have been included and why

🧮 If they have used third-party estimates to fill in disclosure gaps

Conclusion

As long as a financial institution is transparent about its methodology, adheres to a recognised standard, and provides a justified explanation for any exclusions (such as the omission of Scope 3 emissions) then we believe its reported value can be considered reliable.

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𝗧𝗵𝗶𝘀 𝗮𝗿𝘁𝗶𝗰𝗹𝗲 𝘄𝗮𝘀 𝘄𝗿𝗶𝘁𝘁𝗲𝗻 𝗯𝘆 𝗜𝗻𝘁𝗲𝗴𝗿𝘂𝗺 𝗘𝗦𝗚 𝗦𝗲𝗻𝗶𝗼𝗿 𝗔𝗻𝗮𝗹𝘆𝘀𝘁 𝗠𝗼𝗹𝗹𝘆 𝗙𝗿𝗮𝘇𝗲𝗿.

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