Financed Emissions in 2026: What Banks Must Still Report, and Why Borrowers Will Feel It
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Financed emissions, the carbon financed by a bank's loans and investments rather than burned in its own buildings, are the defining climate number for the financial sector, routinely hundreds of times larger than a lender's operational footprint. In December 2025 the ISSB narrowed what IFRS S2 demands of financial institutions here, effective from 2027, and on 12 August PwC became the latest global firm to join the PCAF accredited partner programme that dominates how these numbers are actually built. Two moves, one message: the reporting is getting more focused, not going away, and the data demand lands on corporate borrowers either way.1,2,3
Key takeaways
The ISSB's targeted amendments to IFRS S2, issued 11 December 2025, let financial institutions limit Scope 3 Category 15 disclosure to financed emissions only.
Emissions attributable to derivatives, facilitated (investment banking) activities and insurance underwriting are no longer required, and mandatory GICS classification is dropped.
Two jurisdictional reliefs were added, for measurement methods and global warming potential values.
Effective for reporting periods beginning on or after 1 January 2027, early application permitted, flowing into regimes built on IFRS S2 from Australia's AASB S2 to Singapore's proposed SFRS S2.
The core survives untouched: lending and investment portfolios must still be measured and disclosed, which is why PCAF, and its widening circle of accredited partners including PwC, S&P Global, Workiva and Persefoni, keeps growing. For corporates the consequence is unchanged: your lenders' Category 15 is your Scope 1, 2 and 3, and the data requests are getting more specific.
01What are financed emissions, and why are they the number that matters?
Category 15 is where a bank's climate exposure actually lives. Under the GHG Protocol, Scope 3 Category 15 (investments) captures the emissions of the companies and projects a financial institution finances, allocated in proportion to its share of their financing. For a typical bank or asset manager, this category dwarfs everything else the institution reports, which is why investors, regulators and standard-setters treat it as the disclosure that matters.4,5
The arithmetic is attribution. The PCAF Standard, the methodology referenced by IFRS S2 and used by most reporting institutions, allocates each borrower's or investee's emissions by the financier's share of its capital:4
02What did the December 2025 IFRS S2 amendments change?
The ISSB traded breadth for feasibility. After implementation feedback that Category 15's full sweep was impracticable for parts of the financial sector, the ISSB issued targeted amendments on 11 December 2025. They apply to reporting periods beginning on or after 1 January 2027, with early application permitted, and they change four things.1,2
| Activity / requirement | Before the amendments | After the amendments |
|---|---|---|
|
Loans and investments lending, equity, bonds, project finance |
Required | Still requiredthe core of Category 15 is untouched |
| Derivatives | Within Category 15's sweep | May excludedisclosure can be limited to financed emissions |
|
Facilitated emissions investment banking, underwriting of issuances |
Within Category 15's sweep | Not required |
|
Insurance-associated emissions underwriting, reinsurance |
Within Category 15's sweep | Not required |
|
GICS classification for disaggregation |
Required | Flexiblealternative classification systems permitted |
| Measurement method & GWP values | GHG Protocol and latest IPCC GWPs | Jurisdictional relieflocal methods and regulator-mandated GWPs usable, including for parts of a group |
Read the reliefs precisely. “Not required under IFRS S2” is not “prohibited” or “irrelevant”: institutions already reporting facilitated or insurance-associated emissions, many under PCAF's dedicated standards for both, face investor expectations to continue, and jurisdictions layering extra requirements on top of the ISSB baseline can still demand more. What the amendments deliver is a defensible common floor, and cleaner comparability on the part of Category 15 investors care most about.2,4
03What does PwC joining PCAF signal?
The methodology layer is consolidating. On 12 August 2026, PwC joined the Partnership for Carbon Accounting Financials as a Global Accredited Partner, alongside S&P Global, Schneider Electric's SE Advisory Services, Persefoni, Workiva and Watershed, bringing measurement, data governance and assurance capability into the programme PCAF runs to help institutions implement its standard. PCAF's own framing of the demand: institutions are “increasingly looking to strengthen the quality, consistency, and transparency of emissions accounting across their portfolios.”3
The signal for reporters is standardisation, then scrutiny. When the dominant methodology, the dominant disclosure standard and the Big Four assurance firms line up on one way of computing a number, that number stops being a soft estimate and starts being an auditable figure. Financed emissions are travelling the same road Scope 1 and 2 travelled five years ago, from voluntary estimate to assured disclosure, and the data-quality scores inside a PCAF inventory are where the pressure lands first.3,4
04Why corporate borrowers will feel this, whatever they report themselves
Your bank's Category 15 is built out of your emissions. Every improvement a lender makes to its financed-emissions inventory is, mechanically, a request to its borrowers: actual Scope 1 and 2 figures instead of sector averages, production data for physical-intensity metrics, and increasingly your own Scope 3. A mid-market company that has never faced a disclosure mandate can still find its cost of borrowing quietly linked to the quality of its emissions data, because PCAF data-quality scores reward lenders for replacing estimates with borrower-reported, verified numbers.4,5
01Emissions data is becoming a credit document
Expect emissions questions inside loan renewals, sustainability-linked loan ratchets and private-placement due diligence, answered from the same inventory you use for CBAM, climate reporting or voluntary disclosure. One set of numbers, consistently cited, beats three inconsistent ones.
02Verified beats estimated, and it shows
A lender using your actual, assured figures books a better PCAF data-quality score than one estimating you from industry averages. Companies with clean, source-documented inventories are simply easier to finance at scale.
03The floor is rising on schedule
With the amendments effective for 2027 reporting periods and early application permitted, banks are building their processes through 2026, which is why borrower data requests are intensifying now rather than next year.1
05Frequently asked questions
What are financed emissions?
Financed emissions are the greenhouse gas emissions of the companies, projects and assets a financial institution finances through loans and investments, attributed to the institution in proportion to its share of the financing. They sit in Scope 3 Category 15 of the GHG Protocol and typically dwarf a financial institution's operational emissions.
What did the ISSB change about financed emissions in IFRS S2?
The targeted amendments issued 11 December 2025 allow financial institutions to limit Category 15 disclosure to financed emissions, so emissions attributable to derivatives, facilitated (investment banking) activities and insurance underwriting are no longer required, remove the mandatory GICS classification for disaggregation, and add jurisdictional reliefs for measurement methods and global warming potential values.
When do the IFRS S2 amendments take effect?
For annual reporting periods beginning on or after 1 January 2027, with early application permitted. National regimes built on IFRS S2 adopt the changes on their own timetables as they incorporate the updated standard.
What is PCAF?
The Partnership for Carbon Accounting Financials is the industry body whose Global GHG Accounting and Reporting Standard is the dominant methodology for measuring financed emissions, referenced in frameworks including IFRS S2 and the EU's CSRD. Its accredited partner programme, which PwC joined in August 2026 alongside S&P Global, Persefoni, Workiva and Watershed, connects institutions with implementation support.
Do banks still have to report financed emissions at all?
Yes. The core requirement, measuring and disclosing the emissions financed through lending and investment portfolios, is untouched by the amendments. What changed is the boundary around harder-to-attribute activities such as derivatives, facilitation and insurance underwriting, and flexibility in classification and measurement inputs.
Why do financed emissions matter to companies that are not banks?
Because lenders build their financed-emissions inventories from borrowers' data. Companies with verified, source-documented emissions figures improve their lenders' data-quality scores, which increasingly shows up in loan due diligence, sustainability-linked pricing and the volume of data requests a finance team receives at renewal.
References
- IFRS Foundation, ISSB issues targeted amendments to IFRS S2 to support implementation, 11 December 2025, accessed August 2026.
- ESG News, ISSB Eases Financed Emissions Rules Under IFRS S2, Giving Banks and Asset Managers Reporting Relief, accessed August 2026.
- ESG Today, PwC, PCAF Partner to Help Banks, Investors Measure & Report Financed Emissions, 12 August 2026, accessed August 2026.
- PCAF, The Global GHG Accounting and Reporting Standard for the Financial Industry, accessed August 2026.
- PwC, Financed emissions: what financial institutions need to know, accessed August 2026.
This guide is general information, not accounting, assurance or investment advice. Jurisdictional adoption of the IFRS S2 amendments varies; check the primary sources above for the current position in your reporting jurisdiction.
