The map

Where Category 15 sits

The GHG Protocol Corporate Standard splits emissions into three scopes: direct emissions (Scope 1), purchased energy (Scope 2), and everything else in the value chain (Scope 3)GHG Protocol.

The Scope 3 Standard then breaks that third scope into fifteen categories GHG Protocol Scope 3 Standard.

Category 15, Investments, captures the emissions associated with a reporting company's equity and debt investments and its project financeGHG Protocol Scope 3 Standard.

For an industrial company it is usually negligible.

For a financial institution it is the business, which is why it has its own name in finance: financed emissions.

The breakdown

The four investment types

The Scope 3 Standard sets out four types of investment within Category 15, and a financial institution maps its holdings onto them GHG Protocol Scope 3 Standard:

  • Equity investments — shares in companies, including listed equity and unlisted holdings
  • Debt investments — corporate bonds and loans with known use of proceeds
  • Project finance — investment in specific projects, such as infrastructure or energy
  • Managed investments and client services — assets managed or advised on behalf of others

These map closely onto the asset classes the PCAF standard then provides attribution rules for, which is how an abstract GHG Protocol category becomes a calculable figurePCAF Standard, Part A.

The detail of that calculation is on the PCAF standard page.

Why it matters

Why Category 15 dominates for finance

A financial institution's direct footprint — its offices, its servers, its travel — is small.

Its economic purpose is to allocate capital, and the carbon consequence of that capital sits in Category 15 GHG Protocol Scope 3 Standard.

For most banks, insurers and asset managers it is the overwhelming majority of total emissions.

That is also why it is the hardest to measure: it depends on data from thousands of investees of varying quality, which is the problem PCAF's data-quality scoring is designed to make transparent PCAF Standard.

IFRS S2 requires Scope 3, so this category cannot simply be omitted IFRS S2.

Into the regime

From Category 15 to UK SRS

UK SRS S2 — the UK's adoption of IFRS S2 — requires Scope 1, 2 and 3 emissions, which brings Category 15 squarely into mandatory disclosure for in-scope institutionsIFRS S2.

Under the FCA's CP26/5 proposals, Scope 3 carries one year of transitional relief and becomes comply-or-explain a year after S2 first applies FCA CP26/5.

So the chain runs: GHG Protocol defines Category 15; PCAF makes it measurable; IFRS S2, adopted as UK SRS S2, requires it; and the FCA sets whenFCA CP26/5.

Which institutions are caught, and how the figure is framed, is on the financial-services hub.