Greenhouse gas accounting and targets

This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.

Greenhouse Gas accounting at project and portfolio level More info
No GHG accounting at project or portfolio level.
Some progress
Limited, sectoral or full tracking of emissions but no target to reduce emissions.
Paris aligned
Have a comprehensive approach to project-level GHG emissions and an ambitious absolute emissions target for greenhouse gas to be achieved across the portfolio.
Science-based target to reduce portfolio emissions (or better), covering both direct and indirect lending and Scopes 1, 2 and 3.


This metric explores the use of greenhouse gas accounting at both project and portfolio level, including any targets to reduce emissions across the portfolio. Categories are assessed sequentially for this metric, meaning that if it is judged that an institution has reached one benchmark, it is assessed for the next one up 

In terms of project-level GHG accounting, the inclusion threshold for project assessments, and the sectoral coverage of GHG accounting were both considered. The importance of ‘gross’ emission accounting was taken into consideration, since the calculation of project net emission reductions often depends upon a hypothetical baseline known as the ‘without project’ scenario.  

To be ‘Paris-aligned’, in addition to having a comprehensive approach to project-level GHG emissions, an institution must have a portfolio-level emission reduction policy, or a target in place for reducing portfolio emissions across multiple sectors. For example, this could include a ‘peaking’ target for the portfolio greenhouse gas (GHG) emissions or a an absolute target for greenhouse gas (GHG) to be achieved across the portfolio. At this stage, this target is not necessarily a “science-based target” in line with available science or evidence.  To be ‘Transformational’, an institution must have introduced a science-based target to reduce portfolio emissions, as well as policies for disclosure and reduction of exposure to high-carbon indirect lending.  

Although definitions differ, a ‘science-based target’ is defined to mean a target which has been reviewed against available evidence and updated to align with the 1.5 degrees Paris Agreement goals.  

We note that there is an ongoing debate around the incentives created by portfolio-level GHG targets, and intend to continue to engage in that debate.

Evolution of this indicator 

Next steps to improve this indicator or develop the research could involve assessment against the implementation of project-level GHG accounting in practice, by analysing a sample of projects. Progress against any portfolio-level GHG targets could also be assessed.  


Greenhouse gas (GHG) accounting and the use of targets to reduce greenhouse gas emissions are one of the many tools that can be used to approach and measure alignment to the Paris Agreement.  

Many private sector financial institutions and companies already report on their direct and indirect GHG emissions and have set targets to reduce them in line with sectoral decarbonisation pathways*. Greenhouse gas accounting methodologies are well established for reporting at corporate or group level**. The industry-led Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board to create a framework for companies to provide information on climate risk to investors and other stakeholders, has recommended that banks and insurers disclose all their direct and indirect greenhouse gas emissions. The idea is that this will promote financial market stability by increasing the transparency of systemic climate-related financial risks. Of course there are many challenges to measuring a company’s GHG emissions, including where to draw the emissions boundary. It should be noted that TCFD only recommends the inclusion of Scope 3 emissions “when appropriate”, which can reduce the usefulness of the metric. 

There is less consensus on reporting methodologies for projects, portfolios and individual financial investments. Portfolio analysis is particularly complex as investments may include a mixture of project finance, debt and equity. The UN Environment Program’s Roadmap for a Sustainable Financial System has noted that “consensus is building around methodologies for the disclosure of certain types of information … such as the carbon footprint of investment portfolios”. 

As regards international financial institutions (IFIs), 13 multilateral and bilateral development banks have agreed on a common approach to calculating their project GHG emissions, with a more detailed approach for energy efficiency projects as these present additional complexity. Project-based greenhouse gas accounting can be more challenging than entity-based accounting that is based on physical measurements. In particular, the calculation of net GHG emission reductions may be conducted against a hypothetical baseline (the ‘without project’ scenario); this involves the use of assumptions and adds to uncertainty. Future emissions are estimated and are likely to differ from actual emissions. Project lifetimes are also best estimates rather than known quantities. All of this points to the need for accounting of absolute emissions as well as relative emissions. 

The use of financial intermediaries by public banks presents another challenge to full transparency. Financial intermediaries are not currently subject to GHG emissions assessments, as the 13 IFIs have committed only to “accounting for the GHG emissions of direct investment projects” in their harmonised approach.  

Emission reduction targets at organisational level can be framed in terms of absolute reductions, peaking, emissions intensity, net zero or negative emissions targets. Absolute targets are numerical and are set in relation to a baseline (usually a specific year). Relative targets may be expressed as a percentage or a ratio based on activity, e.g. a reduction in emissions per dollar lent, or per project. While intensity metrics can be useful, it is good practice also to report absolute emissions figures. A third type of target involves setting a time-limited goal for peaking emissions – again this can be useful but should be science-based and Paris aligned and requires an underlying absolute emissions reduction target to be meaningful. 

At project level, the IFI common guidance makes it clear that banks should publish the total (gross) projected emissions of any project, as well as the net calculated reduction in emissions compared to the baseline scenario. On reporting “each IFI, at a minimum, shall report annually on the aggregate net GHG emissions for screened-in mitigation projects, estimated to arise from the previous year’s approved or signed investments”. However, to be ‘Paris-aligned’, IFIs must undertake additional reporting on baselines, gross emissions, portfolio-wide net emissions, and lifetime GHG emissions. 

*See for example the work of CDP which has over 7,000 companies representing USD 35 trillion by market capitalisation. Furthermore, 600+ companies have joined the Science Based Targets initiative and set science-based GHG reduction targets. 

**Notably the Greenhouse Gas Protocol and the ISO 14064 standard. 

Last Updated: November 2020.

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