Scope 3 Category 15 Financed Emissions for Indian BFSI 2026 — PCAF Third Edition + RBI Climate Risk Framework + GHG Protocol
Financed emissions India 2026: PCAF Third Edition (Dec 2025) 10 asset classes, RBI Climate Risk Disclosure draft, GHG Protocol Scope 3 Cat 15, NZBA + SBTi FI.
Scope 3 Category 15 — Investments — is where Indian BFSI’s climate-disclosure story actually lives. For a typical mid-size Indian bank, financed emissions are 700-1000x Scope 1+2 combined, making Scope 3 Cat 15 the single largest disclosure category by orders of magnitude. The reporting standard is the PCAF Global GHG Accounting and Reporting Standard for the Financial Industry — Third Edition launched 2 December 2025 with four new asset-class methodologies and explicit IFRS S2 alignment. This page covers the standard, the RBI Draft Climate Risk Disclosure Framework, the six-phase build, and the multi-framework data-reuse playbook for Indian banks preparing BRSR + CDP + IFRS S2 + NZBA / SBTi-FI disclosures from a single inventory.
Why financed emissions is the disclosure that matters for Indian BFSI
For an Indian listed bank, the climate disclosure question has three answers depending on the framework. Scope 1 (own operations) is typically small — corporate office HVAC, owned vehicle fleet, branch operations. Scope 2 (electricity) is moderate. Scope 3 — and specifically Category 15 (Investments) covering the bank’s loan book and investment portfolio — is everything else, often 99%+ of total climate footprint.
Reporting Scope 1 + 2 without Category 15 materially understates the bank’s climate impact and risks both investor pushback (institutional investors and lenders now screen on financed emissions specifically) and regulator scrutiny (RBI’s draft Climate Risk Disclosure Framework explicitly requires Scope 3 disclosure). The standard for measuring financed emissions is PCAF; the binding-by-2026-or-shortly-after regulatory anchor is RBI.
PCAF Third Edition — what launched in December 2025
The Partnership for Carbon Accounting Financials (PCAF) is the industry-led collaborative that publishes the Global GHG Accounting and Reporting Standard for the Financial Industry. The standard is published in three Parts:
- Part A — Financed Emissions (loans and investments — the core disclosure)
- Part B — Facilitated Emissions (capital markets activities, underwriting)
- Part C — Insurance-Associated Emissions (general insurance, life insurance, reinsurance)
The Third Edition of Part A, released 2 December 2025, expanded the financed-emissions asset class coverage to ten classes and added four new methodologies. Major changes:
| Update | What it covers |
|---|---|
| Use of proceeds structures | Green bonds, sustainability-linked bonds, social bonds — allocation tied to the actual use of proceeds rather than the issuer’s general profile |
| Securitizations and structured products | Allocation flows to underlying assets, not just the securitization tranche |
| Sub-sovereign debt | State, municipal, and regional government bonds — new asset class |
| Undrawn loan commitments | Optional reporting on emissions associated with the undrawn portion of committed credit |
| IFRS S1/S2 alignment | Methodology now explicitly compatible with IFRS S2 paragraph 29(a)(vi) and B61-B62 disclosure requirements |
The ten covered asset classes are now: (1) Listed equity and corporate bonds; (2) Business loans and unlisted equity; (3) Project finance; (4) Commercial real estate; (5) Mortgages; (6) Motor vehicle loans; (7) Sovereign debt; (8) Sub-sovereign debt; (9) Use of proceeds structures; (10) Securitizations and structured products.
The attribution method — financial control approach
PCAF’s core attribution is the financial control approach: a financial institution’s share of an investee’s emissions is proportional to its share of the investee’s total capital structure.
For listed equity / corporate bonds: attribution factor = outstanding amount / enterprise value including cash (EVIC). For unlisted equity and business loans: attribution factor = outstanding amount / total equity-plus-debt. For project finance: attribution factor = outstanding amount / total project funding. For mortgages: outstanding amount / property value.
Once the attribution factor is computed per exposure, the financial institution’s attributed emissions = attribution factor × investee total emissions (Scope 1 + Scope 2; Scope 3 included where material and available).
The Data Quality Score — a transparency mandate
PCAF prescribes a five-level Data Quality Score (DQS) that must be disclosed alongside every financed-emissions figure:
| DQS | Data input quality |
|---|---|
| 1 | Verified emissions data from investee (audited GHG inventory) |
| 2 | Unverified self-reported emissions data |
| 3 | Physical activity data + emission factors (e.g. fuel volumes × emission factor) |
| 4 | Economic activity data + sector-average emission factors (e.g. revenue × sector intensity) |
| 5 | Asset-class-level proxies (e.g. sector-average intensity × loan exposure) |
DQS 5 is the entry-level reality for a new portfolio assessment. DQS 1-2 is the maturity target. Banks are expected to improve DQS over time as borrowers themselves improve climate disclosure (often catalysed by the bank’s own engagement — “we need your Scope 1+2 data to attribute correctly” pushes the borrower toward better disclosure).
The DQS breakdown is critical for interpreting year-on-year movement. A bank reporting ‘reduced financed emissions YoY’ may have actually reduced emissions (good), or simply improved DQS (replacing high-default proxies with verified lower numbers — methodologically positive but not a real-world emission reduction). The PCAF disclosure format requires the bank to separate these two sources of movement.
The RBI Draft Climate Risk Disclosure Framework
RBI published the Draft Disclosure Framework on Climate-related Financial Risks in February 2024, applicable to scheduled commercial banks (excluding Regional Rural Banks, Small Finance Banks, and Payments Banks), Tier-IV Primary Co-operative Banks, all-India Financial Institutions (NABARD, SIDBI, EXIM Bank, NHB), and large NBFCs.
The framework’s four pillars derive from TCFD (now consolidated into IFRS S2):
| Pillar | What’s disclosed |
|---|---|
| Governance | Board-level oversight of climate-related risks and opportunities; committee structure; management responsibility allocation; alignment with executive remuneration |
| Strategy | Climate-related risks and opportunities identification; impact on business / strategy / financial planning; resilience under climate scenarios |
| Risk Management | Climate-risk identification / assessment / management processes integrated into overall ERM |
| Metrics and Targets | GHG emissions Scope 1, 2, 3 (incl. financed emissions per Category 15); climate-vulnerable-sector exposure; transition risk metrics; physical risk metrics |
The framework remains in draft as of May 2026 — final timeline awaited. Major Indian banks (SBI, HDFC, ICICI, Axis, Kotak, Yes) are already preparing under PCAF + the draft architecture in parallel.
The six-phase build for an Indian bank
Typical 12-18 months end-to-end:
Phase 1 — Portfolio mapping (4-6 weeks). Map the loan and investment book to PCAF’s 10 asset classes. Identify exposures, EAD, counterparty mapping, data-availability gaps. Output: portfolio map with asset-class assignment for every exposure.
Phase 2 — Methodology + DQS strategy (8-12 weeks). For each asset class, select the PCAF methodology, identify required data inputs, define the DQS-improvement roadmap. Output: methodology document with per-class data architecture.
Phase 3 — Initial inventory build (12-16 weeks). Collect borrower / investee emissions data (top exposures get verified-data outreach; long tail uses sector proxies). Apply attribution factors per exposure. Compute portfolio financed emissions with DQS breakdown. Output: financed-emissions inventory v1 with DQS table.
Phase 4 — Targets and trajectory (4-6 weeks). Set NZBA-aligned and / or SBTi-FI-validated targets. Compute interim trajectory (typically 5-year intervals to 2050). Integrate into the institution’s transition plan. Output: target memorandum + trajectory model.
Phase 5 — Disclosure preparation (6-8 weeks). Prepare BRSR Principle 6 narrative + BRSR Core GHG Footprint disclosure with financed-emissions integration; cross-reference for CDP + IFRS S2 + RBI Draft Framework. Output: integrated disclosure pack.
Phase 6 — Assurance (4-6 weeks). Engage a partner CA firm under SAE 3000 (Revised) for limited or reasonable assurance scope; document evidence pack. Output: signed assurance report bundled with the BRSR Core assurance.
Indian banks that have published 2026-cycle financed-emissions disclosures (HDFC Bank, Axis, ICICI, Yes Bank as of recent annual reports) report 14-22 months from kick-off to first-disclosed inventory.
The target-setting framework choice — NZBA, SBTi-FI, or GFANZ
Three converging frameworks:
Net-Zero Banking Alliance (NZBA). UN-convened, 140+ banks globally including (variously) HDFC Bank, Axis Bank, YES Bank, ICICI Bank from India. Signatories commit to net-zero financed emissions by 2050 with intermediate targets every five years and annual progress reporting. Lightest-touch entry path.
SBTi Financial Institutions Net-Zero Standard V1.0. Science-based-target validation specifically for FIs; aligns with 1.5°C trajectory. Highest market credibility. V1.1 update expected post the V2 Corporate Net-Zero Standard launch (mandatory from 1 January 2028).
GFANZ — Glasgow Financial Alliance for Net Zero. Umbrella body coordinating sector alliances (NZBA, NZAOA, NZAMA). Publishes the most-substantive financial-institution transition-plan guidance.
Many Indian banks use all three: NZBA membership + SBTi-FI validation + GFANZ-aligned transition plan. The combination is non-redundant — NZBA is the commitment, SBTi-FI is the science validation, GFANZ is the plan architecture.
How the inventory feeds multi-framework disclosure
A single PCAF-aligned financed-emissions inventory feeds:
| Framework | Where financed emissions surfaces |
|---|---|
| BRSR Principle 6 | Narrative environmental disclosure + BRSR Core GHG Footprint quantitative attribute with financed emissions identified separately |
| CDP Climate Change | Module C-FS (financial services) layered on top of the general questionnaire; specific financed-emissions disclosures (FS3.1, FS3.2, FS3.3) with PCAF references |
| IFRS S2 | Paragraph 29(a)(vi) + paragraphs B61-B62 — financed emissions disclosure for financial activities |
| ESRS E1 (EU-in-scope groups) | ESRS E1-6 paragraphs 51 and 52 — financed emissions reporting |
| RBI Draft Framework | Metrics and Targets pillar, Scope 3 explicit |
| NZBA + SBTi-FI | Annual progress reporting; trajectory validation |
The 60-70% multi-framework data reuse observed across BRSR + CDP + IFRS S2 + SBTi extends to financed emissions, plus the marginal effort of asset-class-specific disclosure formatting.
How BatchWise approaches financed-emissions work
BatchWise does not build financed-emissions inventories. This is genuinely a scope where (a) the bank’s internal sustainability team owns the methodology and inventory build, (b) a specialised consultancy (KPMG, EY, PwC, Deloitte, Sphera, ERM, or Indian boutiques like Climate Connect, ESGenSphere, EY Climate Risk Advisory) supports the methodology and data architecture, and (c) BatchWise coordinates the assurance leg via a partner CA firm under SAE 3000 (Revised) — extending the BRSR Core Assurance scope to include the financed-emissions data within Principle 6 GHG Footprint reporting. The methodology and inventory you build with your sustainability consultant; the assurance signature comes from the partner CA firm coordinated through BatchWise. For broader transition-plan context see the Climate Transition Plan methodology; for the upstream materiality choice see the Materiality Assessment guide.
Frequently asked questions
What are financed emissions and why do they matter for Indian BFSI in 2026?
Financed emissions are the share of GHG emissions of borrowers and investee companies that a financial institution attributes to itself through its lending and investing activities. Under the GHG Protocol Scope 3 Standard, these are classified as Category 15 (Investments) — emissions from equity investments, debt investments, and project finance. For Indian BFSI in 2026 the topic is moving from voluntary to regulated: the RBI Draft Disclosure Framework on Climate-related Financial Risks (February 2024) prescribes climate-related disclosures across Governance / Strategy / Risk Management / Metrics-and-Targets for scheduled commercial banks (excluding RRBs / SFBs / PBs), Tier-IV Primary Co-operative Banks, all-India Financial Institutions, and large NBFCs. Financed emissions are the headline metric. PCAF Third Edition (December 2025) is the operative measurement standard.
What is PCAF and what changed in the December 2025 Third Edition?
The Partnership for Carbon Accounting Financials (PCAF) is the industry-led collaborative that publishes the Global GHG Accounting and Reporting Standard for the Financial Industry — the de facto methodology for measuring and disclosing financed emissions. The standard is published in three Parts (A Financed Emissions, B Facilitated Emissions, C Insurance-Associated Emissions). The **Third Edition of Part A, released on 2 December 2025**, expanded the financed-emissions asset class coverage to ten classes and added four new methodologies: (1) **use of proceeds** structures (green bonds, sustainability-linked bonds, social bonds — accounting allocation tied to the use); (2) **securitizations and structured products** (allocation to underlying assets); (3) **sub-sovereign debt** (state, municipal, regional government bonds); (4) **undrawn loan commitments** (optional reporting). The 2025 update is explicitly aligned with IFRS S1 and S2 disclosure requirements, which materially simplifies cross-framework reporting for Indian banks pursuing both PCAF and IFRS S2.
Which asset classes does PCAF cover and how are emissions attributed?
Ten asset classes after the December 2025 update: (1) Listed equity and corporate bonds; (2) Business loans and unlisted equity; (3) Project finance; (4) Commercial real estate; (5) Mortgages; (6) Motor vehicle loans; (7) Sovereign debt; (8) Sub-sovereign debt (new); (9) Use of proceeds structures (new); (10) Securitizations and structured products (new). The attribution method is the **financial control approach**: emissions are attributed to the financial institution in proportion to its share of the borrower's or investee's total capital structure (typically computed as outstanding amount / enterprise value including cash for listed exposures, or outstanding amount / total equity-plus-debt for unlisted). PCAF also defines a five-level Data Quality Score (1 = best — verified emissions data; 5 = worst — sector-average proxies) which must be disclosed alongside the emission figures for transparency.
What does the RBI Draft Disclosure Framework require for Indian banks?
The RBI Draft Disclosure Framework on Climate-related Financial Risks (issued February 2024) applies to scheduled commercial banks (excluding RRBs / SFBs / PBs), Tier-IV Primary Co-operative Banks, all-India Financial Institutions, and large NBFCs. Disclosures are required across four pillars (TCFD-derived architecture now consolidated into IFRS S2): **Governance** — board-level oversight of climate-related risks and opportunities, committee structure, management responsibility allocation; **Strategy** — climate-related risks and opportunities identification, business / strategy / financial-planning impact, resilience under scenarios; **Risk Management** — climate-risk identification / assessment / management processes integrated into overall risk management; **Metrics and Targets** — GHG emissions across Scope 1, 2, and 3 (including financed emissions per Category 15), climate-vulnerable-sector exposure, climate-resilience-practice metrics, transition risk metrics, physical risk metrics. The framework remains in draft as of May 2026; final timeline is awaited but the directional commitment is clear and major Indian banks (SBI, HDFC Bank, ICICI Bank, Axis, Kotak, Yes Bank) are preparing under PCAF + the draft's architecture in parallel.
How does PCAF relate to BRSR Core for Indian BFSI listed entities?
Significant overlap. BRSR Core's nine quantitative attributes include GHG Footprint (Scope 1 + Scope 2 + relevant Scope 3, with intensity per revenue) — and for Indian financial institutions, Scope 3 financed emissions (Category 15) is often the single largest emission category, typically 700-1000x the Scope 1+2 total for a mid-size Indian bank. Reporting just Scope 1 + Scope 2 without Category 15 materially understates the climate footprint and risks investor / regulator pushback in BRSR Core assessment or assurance. Recommended sequencing for an Indian BFSI listed entity: build the PCAF-aligned financed-emissions inventory first (asset-class-by-asset-class with Data Quality Scores documented), then report aggregated financed emissions in BRSR Section A Principle 6 narrative and in the BRSR Core GHG Footprint attribute with footnote disclosure of the PCAF methodology and Data Quality breakdown. The same dataset feeds CDP Climate Change, IFRS S2 Financial-sector module, NZBA target progress reporting, and SBTi Financial Institutions Net-Zero Standard validation.
What is the Data Quality Score and why does it matter?
PCAF prescribes a five-level Data Quality Score (DQS) hierarchy that must be disclosed alongside every financed-emission figure: **DQS 1** — verified emissions data from the investee (audited GHG inventory); **DQS 2** — unverified self-reported emissions data; **DQS 3** — physical activity data combined with emission factors (e.g. fuel volumes + emission factors); **DQS 4** — economic activity data combined with sector-average emission factors (e.g. revenue × sector intensity); **DQS 5** — asset-class-level proxies (e.g. sector-average intensity × loan exposure). DQS 5 is the entry-level for a new portfolio assessment; DQS 1-2 is the maturity target. Banks are expected to improve DQS over time as borrowers / investees themselves improve climate disclosure. Disclosed financed emissions with the DQS breakdown lets investors and supervisors understand the underlying confidence. A bank reporting 'reduced financed emissions year-on-year' must distinguish between actual emission reductions and DQS improvements that simply replace high-default proxies with verified lower numbers — these are different signals.
What's the role of NZBA / SBTi-FI / GFANZ for Indian banks setting financed-emissions targets?
Three converging target-setting frameworks. **Net-Zero Banking Alliance (NZBA)** — UN-convened, 140+ banks globally including (variously over time) HDFC Bank, Axis Bank, YES Bank, ICICI Bank from India; signatories commit to net-zero financed emissions by 2050 with intermediate targets every five years. **SBTi Financial Institutions Net-Zero Standard V1.0** — the science-based-target validation standard specifically for FIs; aligns with 1.5°C trajectory; expected V1.1 update post the V2 Corporate Net-Zero Standard launch (mandatory from 1 January 2028). **GFANZ (Glasgow Financial Alliance for Net Zero)** — umbrella body coordinating sector alliances (NZBA, NZAOA, NZAMA), publishes guidance on financial-institution transition plans. For an Indian bank choosing a target framework: NZBA is the lightest-touch entry; SBTi-FI validation carries the highest market credibility; GFANZ transition-plan guidance is the most-substantive plan-architecture reference. Many Indian banks use all three — NZBA membership + SBTi-FI validation + GFANZ-aligned transition plan.
What evidence does the assurance practitioner expect for financed emissions?
For BRSR Core assessment-or-assurance under SAE 3000 (Revised) — which extends to Scope 3 financed emissions where they form part of the disclosed GHG Footprint — the practitioner expects: (a) **Asset-class inventory** with portfolio-level outstanding-amount and number-of-counterparts breakdown; (b) **PCAF methodology selection per asset class** documented with Data Quality Score per data input; (c) **Attribution-factor calculations** for each sample exposure tested; (d) **Borrower / investee data** for top-N exposures (typically top-20 by EAD) — either verified inventory or sector-default proxy with documented sector mapping; (e) **Reconciliation to financial reporting** — the portfolio aggregates should reconcile to the financial statements (loan book + investment book balances); (f) **Year-on-year movement bridge** distinguishing actual emission changes from DQS improvements from portfolio composition changes from emission-factor updates. Without this last bridge, the year-on-year financed-emissions movement is meaningless. PCAF guidance and SBTi-FI guidance both prescribe this bridge format.
What's the practical sequencing for an Indian bank starting financed-emissions reporting in 2026?
Six-phase build, typically 12-18 months end-to-end. **Phase 1 (4-6 weeks): Portfolio mapping.** Map the loan and investment book to PCAF asset classes; identify exposures, EAD, and counterparty mapping; identify data-availability gaps. **Phase 2 (8-12 weeks): Methodology selection + DQS strategy.** Per asset class, select the PCAF methodology, identify required data inputs, define the DQS-improvement roadmap. **Phase 3 (12-16 weeks): Initial inventory build.** Collect borrower / investee emissions data; apply attribution factors; compute portfolio financed emissions with DQS breakdown. **Phase 4 (4-6 weeks): Targets and trajectory.** Set NZBA-aligned and / or SBTi-FI-validated targets; compute interim trajectory; integrate into transition plan. **Phase 5 (6-8 weeks): Disclosure preparation.** Prepare BRSR Principle 6 narrative + BRSR Core GHG Footprint disclosure with financed-emissions integration; cross-reference for CDP + IFRS S2 + RBI Draft Framework. **Phase 6 (4-6 weeks): Assurance.** Engage partner CA firm under SAE 3000 (Revised) for limited or reasonable assurance scope; document evidence pack. The Indian banks that have published 2026-cycle financed-emissions disclosures (HDFC Bank, Axis, ICICI, Yes Bank as of recent annual reports) report 14-22 months from kick-off to first-disclosed inventory.
How does this map across BRSR + CDP + IFRS S2 + ESRS for a multi-listed Indian bank?
A single PCAF-aligned financed-emissions inventory feeds all four framework disclosures. **BRSR Principle 6** — narrative on environmental impact + BRSR Core GHG Footprint quantitative attribute (Scope 1+2+3 intensity per revenue) with financed-emissions explicitly identified. **CDP Climate Change** — Module C-FS (financial services) layered on top of the general questionnaire; specific financed-emissions disclosures (FS3.1, FS3.2, FS3.3) with PCAF methodology references. **IFRS S2** — paragraph 29(a)(vi) requires financed-emissions disclosure for financial activities; paragraphs B61-B62 prescribe the methodology and approach. **ESRS E1** (for EU-in-scope groups) — financed-emissions reporting under ESRS E1-6 paragraph 51 and 52. **RBI Draft Framework** — financed emissions under Metrics and Targets pillar. The 60-70% data reuse observed across multi-framework BRSR + CDP + IFRS S2 + SBTi extends to financed emissions for BFSI entities, plus the marginal effort of asset-class-specific disclosure formatting. The dataset and the inventory build are the same; the format and granularity vary by framework.