Prepared in partnership with Integrum ESG
What are financed emissions?
Financed emissions represent the greenhouse gas emissions linked to the lending, investment and underwriting activities of financial institutions. Classified as scope 3, category 15 emissions under the Greenhouse Gas Protocol, they capture the environmental impact of where capital is deployed, rather than the direct operations of the institution itself.
For many financial institutions, financed emissions dwarf their operational footprint, sometimes by hundreds of times. A major bank’s financed emissions, if treated as a country, could rank among the world’s top emitters. This scale makes financed emissions one of the most material levers for managing the climate impact across the financial system.
The measurement approach, primarily guided by the Partnership for Carbon Accounting Financials (PCAF), allocates emissions proportionally based on a financial institution’s share of an investee’s total financing. This covers asset classes including loans, equity, bonds, mortgages, project finance and sovereign debt.
Why do financed emissions matter for investors?
From an investment perspective, financed emissions serve three critical functions:
- First, they provide a more accurate measure of climate accountability, revealing the real climate footprint of financial activity rather than just operational emissions. This transparency is essential for aligning investment decisions with Paris Agreement goals and net-zero commitments where applicable.
- Second, they represent both risk and opportunity. Institutional investors face growing regulatory and stakeholder pressure to account for financed emissions in their portfolios. Unmanaged, these emissions may translate into stranded assets, regulatory penalties or reputational damage. However, proactive management can unlock opportunities in climate-aligned sectors and transition finance, where returns are increasingly supported by policy tailwinds.
- Third, they are becoming a key factor in capital allocation decisions. Companies that transparently disclose and manage their financed emissions are better positioned to attract capital from climate-conscious investors, while emissions-intensive balance sheets may face higher borrowing costs or capital constraints.
What are the key challenges?
Despite their increasing importance, financed emissions present several practical challenges. Data quality remains a significant hurdle; many investee firms still lack reliable emissions reporting, creating gaps for investors and lenders attempting to make a comprehensive measurement.
The regulatory landscape is also evolving rapidly. Methodologies and expectations remain inconsistent across jurisdictions, making it difficult for global institutions to establish uniform approaches. For companies, collecting and maintaining emissions data is resource-intensive, while investors need new capabilities and systems to integrate this information into portfolio analysis effectively.
How are leading institutions approaching this?
Examples from European banks illustrate both the potential and the challenges of financed emissions reporting. Barclays has taken a notably transparent approach, with clear policies, detailed metrics and specific targets. The bank disclosed financed emissions of 1,029tCO₂e per US$m revenue, 56% lower than the average for companies in its sector and region.
Exhibit 1: Barclays has a clear policy on financed emissions with detailed metrics and targets

Source: Barclays Bank, Annual Report 2024/25, page 218
While also demonstrating high transparency, ING Group in contrast has more concerning figures. Despite having policies and targets in place, its reported financed emissions of 10,732.87tCO₂e per US$m revenue are 361% higher than the sector average, highlighting that transparency alone is insufficient without meaningful progress on actual emissions reduction.
Exhibit 2: ING’s reporting shows good transparency but its disclosed figures raise concerns

Source: ING, Annual Report 2024/25, page 69
What tools and frameworks are emerging?
Several initiatives are creating common ground for measurement and disclosure. The SBTi Financial Institutions Net-Zero (FINZ) Standard represents the first net-zero framework designed specifically for financial institutions, offering a structured pathway for managing financed emissions.
Broader initiatives including the Glasgow Financial Alliance for Net Zero (GFANZ), the Task Force on Climate-Related Financial Disclosures (TCFD), PCAF, the Net-Zero Banking Alliance and CDP are establishing measurement standards and disclosure expectations. Meanwhile, transition finance is gaining traction as an alternative to divestment, allowing investors to support the decarbonisation of high-emitting sectors rather than simply avoiding them.
Why this matters beyond compliance
Beyond the regulatory compliance requirements, the actual scale of financed emissions is substantial. In the UK alone, banks have channelled over £75bn into companies developing large-scale fossil fuel projects, highlighting the disconnect between financial flows and stated net-zero goals.
For both investors and companies, financed emissions serve as a lens for understanding how well-aligned capital deployment is with long-term climate resilience. As methodologies, regulatory requirements and investor expectations continue developing, financed emissions should be viewed not as a one-off reporting exercise but as an ongoing strategic priority.
Edison insight
Financed emissions represent a fundamental shift in how we measure climate accountability in finance. While measurement challenges persist, early movers are finding that transparent reporting and proactive management create competitive advantages in capital allocation. For investors, understanding financed emissions is becoming increasingly important for both risk management and identifying opportunities in the transition to a net-zero economy.
About Integrum ESG
Integrum ESG is an ESG intelligence company that combines proprietary artificial intelligence with specialised human intelligence to deliver insight and understanding of material ESG risks to investors. The company has developed over 200 machine learning models, each tailored to specific ESG metrics, ensuring access to the highest-quality data. From regulatory needs like the Sustainable Finance Disclosure Regulation (SFDR) and TCFD to broader ESG analytics, Integrum’s suite of reporting tools makes compliance and reporting seamless, giving investors the clarity and control they need in just a few clicks.