PCAF Methodology for Project Finance
PCAF Methodology for Project Finance
The PCAF for account and reporting GHG emissions linked to the financing provided to projects such as energy, power, industrial, infrastructure, and agricultural projects that rely primarily on the project’s cash flow for repayment.
Scope
This asset class includes all loans or equities to projects for specific purposes (i.e., with known use of proceeds as defined by the GHG Protocol) that are on the balance sheet of the financial institution. The financing is designated for a defined activity or set of activities, such as the construction and operation of a gas-fired power plant, a wind or solar project, or energy efficiency projects.
Financial institutions shall report the absolute scope 1 and 2 emissions of the project. Scope 3 emissions should be covered if relevant. Avoided and removed emissions may be reported if relevant but must be reported separately from absolute emissions.
Approach
In Project Finance the Use of Proceeds is assumed known. To calculate emissions, only the financed (ring-fenced) activities are included. Emissions and financials related to existing activities outside the financed project but within the financed organization are not considered.
Attribution
As a basic attribution principle, the financial institution accounts for a portion of the annual emissions of the financed project determined by the ratio between the institution’s outstanding amount (numerator) and the total equity and debt of the financed project (denominator). This ratio is called the attribution factor
