Financed emissions: Navigating the data challenge

Robust data allows for more effective risk management and greater confidence in decision making, both vital in net zero alignment and decarbonisation strategies.

Considering their sustainability reporting requirements and the robustness of existing financed emissions models, firms should set in place initiatives to improve the quality and consistency of emissions data underpinning these.

PwC can support you in improvement of existing models or starting your journey towards measurement.

Measuring financed emissions

• The financial services industry has an important role in the transitioning towards a low carbon economy and incentivising carbon reduction towards 2050 Net Zero commitments.
• Financed emissions, which are the emissions linked to lending and investment activities, are the most significant component of financial institutions’ carbon footprint.

Importance of data quality

• The data source and method used to measure and estimate are equally important for financed emissions modelling primarily for two reasons:
  
  • Reporting and disclosure – the need to comply with sustainability reporting requirements around financed emissions, such as ISSB and CSRD, as well as disclosing data quality.
  • Strategic implications – the impact of decarbonisation strategies and target setting, such as the Transition Plan Taskforce (TPT) on firms should consider data accuracy and robustness
• Therefore, while data quality is always important, sourcing robust data is vital to decision making and decarbonisation strategies.
  

Complexity of data management for financed emissions

• The complexity of solving the data problem for financed emissions should not be underestimated. To provide portfolio coverage, a range of internal, external (subscribed) and publicly available information is needed. This extends across many data types; emissions data, financial data, lending and investment information as well as proxy data to estimate emissions.
• Financial institutions are increasingly seeking external assurance on their emissions disclosures, including on sourced third party data.
  

Scope and purpose of the paper

The scope of this paper is data sourcing for financed emissions modelling under the following key areas:

• Practical support on where to get started on your journey and understanding the complexity.
• Common data challenges experienced by those already disclosing financed emissions.
• Ten key criteria to support selecting data sources and providers, including coverage, quality, regional, industry, structural, timing and relationship considerations.
• Next steps for firms both beginning or enhancing their financed emissions models and data environments.