PCAF Asset Classes

PCAF Asset Classes

Overview

The Standard currently provides guidance for the measurement and disclosure of financed emissions encompassing six asset classes.

These current asset classes include:

• Listed Equity and Corporate Bonds
  Example: Common Stock
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• Business Loans and Unlisted Equity
  Example: Lines of credit used for capital expenditures
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• Project Finance
  Example: Loans used to build a bridge
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• Commercial Real Estate
  Example: Loans used to purchase a new office building
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• Mortgages
  Example: Loans for a new house
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• Motor Vehicle Loans
  Example: Loans to purchase a new car
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PCAF intends to add more asset classes in the future as the Standard evolves. Soon, it will expand to cover sovereign bonds, green bonds, and insurance.

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Let's take a closer look at these six asset classes.

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Asset Classes

Each asset class has a specific methodology to accurately measure emissions. Each methodology considers different scopes and requires distinct data sets that provide various levels of validity.

Later in this module, we will cover the different calculation methods for each asset class.

Listed Equity & Corporate Bonds

PCAF defines this asset class as all listed corporate bonds and all listed equity for general corporate purposes (e.g. unknown use of proceeds) that are traded on a market and are on the balance sheet of the financial institution.

Business Loans & Unlisted Equity

PCAF defines this asset class as all business loans and equity investments in private companies (e.g. unlisted equity)

Business loans include all loans and lines of credit for general corporate purposes (e.g. unknown use of proceeds) to businesses, non-profits, and any other structure of organization that are not traded on a market and are on the balance sheet of the financial institution.

Unlisted equity includes all equity investments for general corporate purposes (e.g. unknown use of proceeds) to businesses, non-profits, and any other structure of organization that are not traded on a market and are on the balance sheet of the financial institution.

Project Finance

PCAF defines this asset class as loans or equity to projects for specific purposes (e.g. with known use of proceeds) 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 an energy efficient project.

Commercial Real Estate (CRE)

This asset class is defined as on-balance sheet loans for the purchase and refinance of commercial real estate (CRE), and on-balance sheet investments in CRE. This implies the properties are used for income-generating activities and commercial activities, such as retail, hotels, office space, industrial, or large multifamily rentals.

Mortgages

This asset class is defined as on-balance sheet loans for specific consumer purposes (e.g. the purchase and refinance of residential property), including individuals homes and multifamily housing with a small number of units.

The definition implies that the property is used only for residential purposes and not for income-generating activities.

Mortgages used to construct or renovate a house are not required at this point given that the homeowner does not directly account for construction emissions.

Motor Vehicle Loans

PCAF defines this asset class as on-balance sheet loans and lines of credit for specific (corporate or consumer) purposes to businesses and consumers that are used to finance one or several motor vehicles.

This methodology does not prescribe a specific list of vehicle types falling within this asset class; instead it leaves it open for financial institutions to decide and define what vehicle types to include in their inventory of financed emissions.