The first step for banks serious about tackling financed emissions within their Scope 3 is establishing a credible baseline. The Partnership for Carbon Accounting Financials (PCAF) has developed one of the most widely used methodologies, which allows lenders to estimate the emissions associated with their lending and investment portfolios.
Egypt’s Commercial International Bank (CIB) is one of those that has adopted the PCAF standard to quantify emissions across its lending portfolio. Prioritising a sector-level approach, the bank has developed a portfolio decarbonisation strategy with a particular focus on power generation and real estate.
Recognising the structure of the Egyptian economy, however, the bank emphasises engagement with clients, rather than a rapid retreat from carbon-intensive industries. “Instead of wholesale divestment, the bank engages clients in credible transition planning, supporting progressive emissions reduction in ways that are both economically realistic and aligned with national priorities,” says Islam Zekry, Group Chief Finance and Operation Officer and Executive Board Member.
Several large southern African lenders have begun publishing financed emissions disclosures as part of their expanded climate reporting. South Africa’s Standard Bank now reports portfolio emissions and sector exposure in its Climate-related Financial Disclosures Report. Absahasexpanded financed-emissions disclosure and sectoral climate exposure in its Sustainability and Climate Report, drawing in part on the PCAF methodology.
But progress remains uneven across the continent. The WWF’s 2025 Sustainable Banking Assessment for Africa (SUSBA) found that banks in South Africa and Kenya lead the region in ESG integration and climate disclosure, reflecting stronger regulatory frameworks and more developed reporting expectations. The report attributes much of this lead to regulatory and disclosure drivers including requirements from institutions such as the Johannesburg Stock Exchange and Nairobi Securities Exchange.
Over 80% of African banks still fail to disclose portfolio emissions, according to the WWF report. As climate reporting evolves, more lenders are beginning to publish financed-emissions baselines and sector transition pathways. Methodologies will need tightening and data quality will have to improve. But disclosure is a key first step, and one that the continent’s banks are increasingly taking.
Engagement over exit
The next challenge is translating measurements and metrics into meaningful action. CIB has launched sector-specific decarbonisation pathways covering industries including oil and gas, power, real estate, transportation, cement and steel. These pathways aim to translate global climate scenarios into sector-level expectations for emissions reductions.
In practice, the bank says the pathways function as a framework for both client engagement and internal risk management. “They create a common language for engagement, enabling structured dialogue on credible transition planning and helping clients understand the emissions implications of their business models,” Zekry says.
Rather than setting immediate exclusion policies for high-emitting sectors, the approach focuses on identifying operational improvements, cleaner technologies and transition investments that can gradually reduce emissions over time. In many cases, these strategies are supported through partnerships with development finance institutions (DFIs), which provide both capital and technical support for climate-related projects.
But in Africa, banks’ ability to reduce financed emissions is heavily reliant on the broader landscape in which they operate. DFIsare well aware that credible progress depends heavily on national context — including energy systems, regulatory frameworks and economic priorities.
“When we define what credible progress means for banks, we look at both the context in which they operate — regulation, policies, country resources — as well as their internal capacity to set climate ambitions and implement them,” says Nicola Mustetea, director and head of climate at British International Investment (BII).
This approach allows progress to be measured not just by outright reduction in emissions, but by improvements in governance, transition planning and the provision of climate finance. Just like CIB, development financiers often argue that engagement with high-emitting clients is more effective thansimplywithdrawing capital.
“Stepping away from high-emissive clients without engaging, whether you are a DFI or an African bank with a highly emissive portfolio, means you are only opening up the opportunity to another investor without a credible Paris Alignment approach to plug the gap,” Mustetea says.
Data gaps and reporting challenges
Despite growing momentum around financed emissions accounting, data availability remains a major headache, particularly for banks operating in emerging markets. Client-level emissions data is often incomplete, particularly in sectors where companies have not yet begun detailed carbon reporting.
“The even bigger challenge is availability of Scope 3 data,” Mustetea says. “We engage with our investees to improve data availability and look for ways to plug the gaps where we can with modelled data.”
Modelled estimates or regional proxies are useful sticking plasters when calculating financed emissions, and global reporting standards are evolving to allow their use. PCAF methodologies assign “data quality scores” depending on whether emissions are directly reported by borrowers or estimated using sector averages or regional proxies.
Recent changes to global reporting standards also reflect these practical challenges. Amendments to the IFRS S2 climate disclosure standard in late 2025 narrowed the scope of mandatory financed-emissions reporting for financial institutions, allowing lenders to focus more clearly on emissions they can directly influence.
Multilaterals,meanwhile, have been working to address the most glaring data gaps. The UNEP Finance Initiative programme on measuring financed emissions in Africa and the Middle East is helping banks adopt accounting frameworks such as PCAF and improve emissions measurement across lending portfolios.
Regulators are also beginning to incorporate climate risk into financial supervision. The South African Reserve Bank, for example, has started integrating climate-related financial risks into its supervisory framework, reflecting growing concern about the financial stability implications of the energy transition.
Some regulators are also exploring climate stress testing to understand how banks’ portfolios could be affected by the transition to a low-carbon economy. Initiatives supported by organisations such as the Network for Greening the Financial System are helping several regulators develop climate risk scenarios for the banking sector.
But even as banks expand climate disclosure, many continue to finance highly-emitting industries that remain central to economic development. Several regional lenders have faced scrutiny from environmental groups over involvement in projects such as the East African Crude Oil Pipeline, highlighting the tension between development priorities and financed emissions reduction.
Ultimately, the pace at which banks can reduce financed emissions will depend not only on their internal policies, but also on the broader transformation of energy systems and industrial sectors.