Reporting standards for carbon accounting have been developed to assist financial institutions in compiling their financed emissions — the client emissions that are attributable to the institution’s financing. Some of these include guidance on determining data quality for data sources used. For instance, the Partnership for Carbon Accounting Financials (PCAF) data quality hierarchy proposes reported and verified emissions disclosures as the most accurate and reliable source of emissions data, followed by various methods of inferred and estimated emissions.

In this paper, we examine the extent to which guidance on data quality are aligned with the practical considerations and availability of emissions information for financial institutions. For financial institutions, an understanding of differences in data quality is particularly important, as they need to compile emissions data across multiple individual companies in their portfolio.

However, the way these disclosures have been calculated by corporations can vary in methodology and accounting boundaries. This can result in several problems since variability in reporting methods or boundaries can amplify divergence in reporting errors, emissions estimation, and emissions that are attributable to the financial institution — ultimately impacting the way emission targets are set and progress or alignment monitored. We further explore revised guidance on assessing data quality, and the accuracy and precision of other methods of emissions estimation.