Residential Mortgages - is 100% attributed emissions intensity acceptable in lieu of financed emissions intensity?

Criteria
1

Hi there,

Can I please check what type of target metrics would be acceptable for residential mortgages? In a previous query, you have confirmed that the following 2 are acceptable:

  • Attributed intensity: SUM[attributed emissions]/SUM[attributed activity].
  • Portfolio weighted intensity: SUM[emissions intensity X outstanding amount/total portfolio value]

Would non-attributed intensity be acceptable? This means that the attribution factor would be assumed as 100%.

Additionally, you have previously mentioned that ‘other’ metrics are acceptable. Can I please ask for a list of acceptable metrics?

Many thanks,

Ana

2

Dear Ana,

Thank you very much for your question.
You need to follow the instructions in the FI Guidance (page 115-124, and 121 in particular) to estimate attributed activity and financed emissions.

This approach is consistent with the GHG accounting method for mortgages developed by the Partnership for Carbon Accounting Financials (PCAF 2020).

Instructions for Implementation
Calculating the base year absolute emissions
The first step is to calculate the GHG emissions intensity of the mortgage portfolio in the base year. Specifically, this involves the following steps:

  1. Collecting or estimating the annual energy consumption of residential buildings, including the energy consumption of the household in the mortgage portfolio for which the financial institution seeks to set a target.
  2. Calculating the base year scope 1 and 2 emissions per residential buildings using fuel- and energy specific emissions factors, such as those provided by the IEA or national energy agencies.
  3. Attributing the annual scope 1 and 2 emissions per building based on the ratio between the outstanding amount versus the total property value at time of origination; and
  4. Summing up all attributed scope 1 and 2 emissions per building to derive the total annual scope 1 and 2 emissions of buildings in the mortgage portfolio.

Base year absolute emissions should be assessed at a fixed point in time in line with the financial reporting cycle.

Calculating the base year emissions intensity
Translating the absolute emissions in the base year into an emissions intensity at portfolio level involves the following steps:

  1. Collecting the gross floor area of residential buildings (in m2 ) for which the financial institution seeks to set a target
  2. Attributing the gross floor area per building (in m2 ) based on the ratio between the outstanding amount versus the total property value at time of origination;
  3. Summing up the attributed gross floor area per building to derive total gross floor area at portfolio level; and Financial Sector Science-Based Targets Guidance 122
  4. Dividing the total annual scope 1 and 2 emissions of buildings in the mortgage portfolio by the total gross floor area at portfolio level.

I hope this information helps to clear your question.
Monica