The PCAF was established to facilitate the alignment of the financial industry with the Paris Climate Agreement. Its primary goal is to create a transparent and accountable system for measuring and disclosing greenhouse gas (GHG) emissions associated with the lending and investment activities of financial institutions. This effort is crucial in enabling financial institutions to align their portfolios with the goals of the Paris Agreement and contribute to decarbonizing the economy.

PCAF's scope extends to any financial institution globally, making its GHG accounting methodologies applicable across various financial entities. The framework currently covers several asset classes, including listed equity & corporate bonds, business loans and unlisted equity, project finance, mortgages, commercial real estate, and motor vehicle loans. PCAF collaborates with banks and investors worldwide, recognizing the vital role these entities play in driving the transition to a low-carbon society.

PCAF's methodology is based on the Global GHG Accounting and Reporting Standard for the Financial Industry, focusing on measuring and reporting financed emissions. This standard provides detailed guidance for calculating GHG emissions linked to six major asset classes using the GHG Protocol methodology. Financial institutions are expected to account for Scope 1, 2, and specific Scope 3 emissions from their borrowers and investees. The standard emphasizes key accounting principles like completeness, consistency, transparency, accuracy, and attribution of emissions proportional to the institution’s share of financing.

By measuring portfolio emissions, financial institutions can identify climate risks and carbon-intensive sectors requiring action. This understanding is pivotal for developing strategies to decarbonize portfolios and disclosing progress on emissions and alignment with climate goals. PCAF's approach promotes steering capital towards low-carbon technologies and away from fossil fuels, thus accelerating the transition to a net-zero economy.

The PCAF Standard requires financial institutions to disclose absolute financed emissions annually and encourages the disclosure of emission intensities. Data quality is scored from 1-5 and should be improved over time. Financial institutions are encouraged to begin the process even with limited or estimated data to identify hotspots and initiate the journey towards lowering financed emissions.