This article explains how Pathzero Navigator is designed to be used to progress from initial emissions estimates at a PCAF data quality score of 5 or 4, towards more accurate calculations at a data quality score of 2 or 1.
PCAF data quality scores
The Partnership for Carbon Accounting Financials (PCAF) Standard provides a methodology for the calculations and associated data inputs required to report financed emissions across several asset types. The PCAF Standard also includes a data quality scale from 5 (lowest certainty / lowest score) to 1 (highest certainty / best score) to indicate the quality of data used in the calculation.
- A PCAF score of 5 or 4 indicates that sector and region-based emissions factors have been used to estimate emissions of the investee company.
- A PCAF score of 2 or 1 indicates that the emissions of the investee company have been calculated at a detailed level following the Greenhouse Gas Protocol (Score 1 also requires verification by a third-party auditor).
Estimating emissions at a PCAF 5 score is quicker and easier than calculating at a score of 1 because the data required for the calculations is typically readily available to any investor (sector, country of operation and net asset value of the investment or amount invested).
The PCAF Standard is designed to allow financial institutions to begin their financed emissions journey at a high level and progress to more accurate calculations over time. Pathzero Navigator facilitates this progression. Further information about PCAF can be found here.
How Pathzero Navigator can be used to progress from PCAF 5 to PCAF 1
Pathzero Navigator is designed to facilitate progression towards a PCAF score of 1 – from any starting point.
Starting with initial estimates
PCAF 5 and 4 calculations use sector and region-based factors to estimate financed emissions.
This can be achieved with financial data that an investment manager typically has to hand. This means an initial estimate can be achieved immediately without having to engage the investee, provided the information is available.
Using initial estimates to identify areas of carbon-related risk
Carbon intensive activities can be considered as at risk in a world committed to converge towards net zero emissions from business activities.
The initial PCAF 5 or 4 estimates can be used to analyse the carbon emissions in a portfolio, sector, country or company.
This, in turn, can be used to guide decarbonisation efforts – allowing investment managers to direct their efforts in the most appropriate way for their unique circumstances. For example, towards the areas of highest risk first, or the easiest-to-tackle emissions first.
These efforts may include collecting more accurate data from certain companies or across certain scopes.
Progressing towards PCAF 1
Investment managers can request more accurate data (at PCAF 3, 2 or 1) from investee companies at a scope or underlying emissions category level. For example, an investment manager may initially request calculated emissions data for only scopes 1 and 2 .
Where more accurate data is collected in Pathzero Navigator, this replaces the PCAF 5 or 4 estimate for that scope or category but preserves estimates elsewhere. This moves the PCAF score down towards 2. When calculated emissions have been verified by a third party, this can be flagged in the system, moving the PCAF score to 1 for that category.
Over time, as estimates are replaced with more accurate measurements, the weighted PCAF score improves towards 2 and ultimately 1.
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