Given the increasing demand by the insurance industry and other stakeholders for tools to measure and report greenhouse gas (GHG) emissions, there is a need to develop a set of global, standardized methodologies for measuring and disclosing the GHG emissions associated with re/insurance underwriting portfolios for accounting purposes. Against that background, the Partnership for Carbon Accounting Financials (PCAF) insurance-associated emissions Working Group aims to develop a Global GHG Accounting and Reporting Standard for the Insurance Industry.
This document is a Progress Report on the current development of the methodologies that have been considered by the Working Group to date. It has been prepared to facilitate a public consultation for the purposes of receiving feedback from all interested parties on the methodological approaches and reporting requirements considered. The segments that are currently in-scope for the purposes of this consultation are commercial lines insurance and personal motor lines. For each of these two segments, this progress report presents several options for accounting methodologies under discussion.
Based on the feedback from the public consultation, the Working Group will continue with the further development of the insurance-associated emissions Standard. The ultimate purpose of the Upcoming Standard is to provide re/insurers with transparent, standardized, and robust methodologies to measure and report insurance-associated emissions which supplements the requirements of the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
Guidehouse is the Global Secretariat for PCAF and is uniquely positioned to support financial institutions in their efforts to measure, manage, and reduce the financed emissions within their portfolios, which then facilitates the next steps of target setting, strategy development, taking action, and disclosure. PCAF has developed standard methodologies across six different asset classes for assessing and disclosing the GHG emissions from their loans and investments, and methodologies for additional asset classes are forthcoming.
PCAF also provides useful guidance to financial institutions regarding data management, one of the biggest challenges they face as they seek to assess their current level of financed emissions. Specifically, PCAF provides in-depth guidance on managing data limitations, including the use of estimated or proxy data where reported data is not available, data quality scoring for increased transparency, and data quality improvements in both the medium- and long-term.
Between investor pressure, public sentiment regarding sustainability, and now, regulatory requirements, financial institutions should start making their portfolios greener, but do not necessarily have all the tools to do so. Guidehouse has extensive experience assisting financial institutions in their application of PCAF’s industry-led and widely adopted standard, experts who can help financial institutions assess and strengthen their internal reporting controls, and a strong understanding of the climate environment in which financial institutions operate. Drawing on this experience, Guidehouse can help financial institutions pave the way to consistent, comparable, and actionable information that is decision-useful for investors and in compliance with applicable regulatory requirements.
Measuring and Reporting Financed Greenhouse Gas Emissions to Get to Net-Zero (Bloomberg Tax)