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Insurance-Associated Emissions

The

GLOBAL GHG

ACCOUNTING

& REPORTING Standard PART C

First Version

November 2022

Part C: Insurance-Associated Emissions

Table of Contents

Important note 3

Acknowledgements 4

Executive summary 5

1. Introduction 7

2. GHG accounting in re/insurance 12

3. GHG accounting can be used as a basis to achieve business goals 15

4. Principles and requirements of GHG accounting for re/insurers 18

4.1 GHG accounting requirements derived from the GHG Protocol’s principles 18

4.2 Additional requirements for accounting and reporting insurance-associated emissions 20

5. Methodology to measure insurance-associated emissions 27

5.1 General considerations 27

5.2 Emissions associated with commercial lines portfolios 32

5.3 Emissions associated with personal motor portfolios 41

6. Reporting requirements, recommendations, and metrics 51

7. Glossary 65

8. Acronyms 68

9. Annex 1: Due diligence for third-party data providers 70

10. Annex 2: Detailed data quality score tables per line of business 71

11. Annex 3: Sample table templates displaying reported emissions for a given fiscal year 75

12. Annex 4: Guiding principles for developing the GHG accounting methodology for

re/insurance underwriting 78

13. Annex 5: Commercial insurance – Template to capture attribution data at the source 80

14. Annex 6: Sample classifications for vehicle types in the EU and US 81

Part C: Insurance-Associated Emissions

Important note

The Partnership for Carbon Accounting Financials (PCAF) Global GHG Accounting and

Reporting Standard for the Insurance Industry ("Insurance-Associated Emissions Standard")

derives from the work conducted by the PCAF’s Insurance-Associated Emissions Working Group

("Working Group").

The Working Group has, at all times, sought to ensure that the accounting methodologies and

reporting requirements proposed in this Standard are compatible with applicable law, including

antitrust laws. The development of the methodologies and reporting requirements set out in this

Standard, including associated discussions and work undertaken by the Working Group, has been

undertaken in compliance with applicable laws, including antitrust laws.

The methodologies and the context provided (e.g., examples of the possible use of such

methodologies) in this Standard are not to be construed as prescriptive. The adoption and use of

the methodologies discussed or included in this Standard are voluntary and must be determined

independently by each company.

The use of such methodologies by a company is subject to applicable laws, rules and regulations

in the jurisdictions in which that company operates. In case of conflict of applicable laws, rules

and regulations with the methodologies or the reporting requirements described in this Standard,

the applicable laws, rules and regulations shall prevail, but any deviations from the Standard

should be highlighted to protect the goal and value of the Insurance-Associated Emissions

Standard.

The work leading to the adoption of this Standard included a public consultation on the proposed

methodologies for measuring and reporting insurance-associated emissions. The consultation

was open to all interested parties, including regulators, participants from across the re/insurance

industry, brokers, policymakers, data providers, consultants, academia, non-governmental

organizations (NGOs), associations of insureds, and civil society as a whole. The Working Group

considered the input and feedback received during the consultation process, which were

reflected in this Standard, to the extent it was feasible and implementable and compatible with

applicable laws and regulations.

/82

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Insurance-AssociatedEmissionsTheGLOBALGHGACCOUNTING&REPORTINGStandardPARTCFirstVersionNovember20222PartC:Insurance-AssociatedEmissionsTableofContentsImportantnote3Acknowledgements4Executivesummary51.Introduction72.GHGaccountinginre/insurance123.GHGaccountingcanbeusedasabasistoachievebusinessgoals154.PrinciplesandrequirementsofGHGaccountingforre/insurers184.1GHGaccountingrequirementsderivedfromtheGHGProtocol’sprinciples184.2Additionalrequirementsforaccountingandreportinginsurance-associatedemissions205.Methodologytomeasureinsurance-associatedemissions275.1Generalconsiderations275.2Emissionsassociatedwithcommerciallinesportfolios325.3Emissionsassociatedwithpersonalmotorportfolios416.Reportingrequirements,recommendations,andmetrics517.Glossary658.Acronyms689.Annex1:Duediligenceforthird-partydataproviders7010.Annex2:Detaileddataqualityscoretablesperlineofbusiness7111.Annex3:Sampletabletemplatesdisplayingreportedemissionsforagivenfiscalyear7512.Annex4:GuidingprinciplesfordevelopingtheGHGaccountingmethodologyforre/insuranceunderwriting7813.Annex5:Commercialinsurance–Templatetocaptureattributiondataatthesource8014.Annex6:SampleclassificationsforvehicletypesintheEUandUS813PartC:Insurance-AssociatedEmissionsImportantnoteThePartnershipforCarbonAccountingFinancials(PCAF)GlobalGHGAccountingandReportingStandardfortheInsuranceIndustry("Insurance-AssociatedEmissionsStandard")derivesfromtheworkconductedbythePCAF’sInsurance-AssociatedEmissionsWorkingGroup("WorkingGroup").TheWorkingGrouphas,atalltimes,soughttoensurethattheaccountingmethodologiesandreportingrequirementsproposedinthisStandardarecompatiblewithapplicablelaw,includingantitrustlaws.ThedevelopmentofthemethodologiesandreportingrequirementssetoutinthisStandard,includingassociateddiscussionsandworkundertakenbytheWorkingGroup,hasbeenundertakenincompliancewithapplicablelaws,includingantitrustlaws.Themethodologiesandthecontextprovided(e.g.,examplesofthepossibleuseofsuchmethodologies)inthisStandardarenottobeconstruedasprescriptive.TheadoptionanduseofthemethodologiesdiscussedorincludedinthisStandardarevoluntaryandmustbedeterminedindependentlybyeachcompany.Theuseofsuchmethodologiesbyacompanyissubjecttoapplicablelaws,rulesandregulationsinthejurisdictionsinwhichthatcompanyoperates.Incaseofconflictofapplicablelaws,rulesandregulationswiththemethodologiesorthereportingrequirementsdescribedinthisStandard,theapplicablelaws,rulesandregulationsshallprevail,butanydeviationsfromtheStandardshouldbehighlightedtoprotectthegoalandvalueoftheInsurance-AssociatedEmissionsStandard.TheworkleadingtotheadoptionofthisStandardincludedapublicconsultationontheproposedmethodologiesformeasuringandreportinginsurance-associatedemissions.Theconsultationwasopentoallinterestedparties,includingregulators,participantsfromacrossthere/insuranceindustry,brokers,policymakers,dataproviders,consultants,academia,non-governmentalorganizations(NGOs),associationsofinsureds,andcivilsocietyasawhole.TheWorkingGroupconsideredtheinputandfeedbackreceivedduringtheconsultationprocess,whichwerereflectedinthisStandard,totheextentitwasfeasibleandimplementableandcompatiblewithapplicablelawsandregulations.4PartC:Insurance-AssociatedEmissionsAcknowledgementsInSeptember2019,thePartnershipforCarbonAccountingFinancials(PCAF)waslaunchedgloballytoharmonisegreenhousegas(GHG)accountingmethodsandtoenablefinancialinstitutionstoconsistentlymeasureanddisclosetheGHGemissionsfinancedbytheirloansandinvestments(so-calledfinancedemissions).In2020,thefirstversionofTheGlobalGHGAccounting&ReportingStandardfortheFinancialIndustry(the"FinancedEmissionsStandard")waslaunched.Asanindustry-ledpartnership,PCAFisgovernedbyaSteeringCommitteeformedbyABNAMRO,AmalgamatedBank,ASNBank,theGlobalAllianceforBankingonValues,MorganStanley,NMBBank,TriodosBank,andarepresentativefromtheUnitedNations(UN)-convenedNet-ZeroAssetOwnerAlliance.Atthetimeofpublishingthisdocument,morethan329financialinstitutions,includingbanks,investors,assetmanagers,re/insurers,participateinPCAF.1AnewPCAFworkinggroupwasinitiatedinOctober2021toco-createaseparateglobalGHGaccounting&reportingstandardforemissionsassociatedwithre/insuranceunderwritingportfolios(i.e.,Insurance-AssociatedEmissionsStandard).ThisStandardisPartCoftheoverallGlobalGHGAccounting&ReportingStandardfortheFinancialIndustry.The16membersofthePCAFInsurance-AssociatedEmissionsWorkingGrouparedepictedbelow:ThePCAFSecretariatandSwissRe,asChairoftheWorkingGroupfocusingoninsurance-associatedemissions,facilitatedtheWorkingGroup’sactivitiesbymoderatingtheirtechnicaldiscussions,reviewingthecontent,andcompilingandeditingthisdocument.ThePCAFSecretariatisoperatedbyGuidehouse,aglobalconsultancyfirmspecialisinginenergy,sustainability,risk,andcomplianceforthefinancialindustry.ThroughoutthedevelopmentofthisStandard,PCAFhasengagedwithstakeholderstosolicitfeedback,discussPCAFmethodologicalapproaches,andconsidertheircommentsandsuggestions.PCAFpublisheda“ScopingDocument”fortargetedconsultationinMarch2022.DuringJulyandAugust2022,PCAFissuedapublicconsultationona“ProgressReport”tofacilitateapublicconsultationwithregulators,there/insuranceindustry,brokers,policymakers,dataproviders,consultants,academia,non-governmentalorganizations(NGOs),andinsuranceassociations.1ThefulllistofPCAFparticipantscanbefoundat:https://carbonaccountingfinancials.com/financial-institutions-taking-action#overview-of-institutions5PartC:Insurance-AssociatedEmissionsExecutivesummaryThePartnershipforCarbonAccountingFinancials(PCAF)isanindustry-ledinitiativethathelpsfinancialinstitutionsassessanddisclosetheirindirectgreenhousegas(GHG)emissions(scope3emissions).GHGaccountingreferstotheprocessesrequiredtoconsistentlymeasureandreporttheamountofGHGsgenerated,avoided,orremovedbyanentity,allowingittotrackandreporttheseemissionsovertime.Itenablesfinancialinstitutionstodisclosetheseemissionsatafixedpointintimeandinlinewithfinancialaccountingperiods.Untilnow,therehasnotbeenagloballyacceptedstandardformeasuringandreportingemissionsassociatedwithre/insuranceunderwritingportfolios(“insurance-associatedemissions”).Respondingtoincreasingdemandfromtheinsuranceindustryandotherstakeholders,PCAFdevelopedtheGlobalGHGAccountingandReportingStandardforInsurance-AssociatedEmissions.ThisnewStandardconstitutesPartCofPCAF’sGlobalGHGAccountingandReportingStandardfortheFinancialIndustry.Assuch,thisStandardsupplementstherequirementsoftheGHGProtocol"CorporateValueChain(Scope3)AccountingandReportingStandard".ThisdocumentisthefirstversionoftheInsurance-AssociatedEmissionsStandard.ItprovidesdetailedmethodologicalguidanceforthemeasurementanddisclosureofGHGemissionsassociatedwithtwosegments:TheStandardprovidesdetailedguidanceforeachsegmenttocalculatetheinsurance-associatedemissionsresultingfromactivitiesintherealeconomythatarere/insured.Emissionsareassociatedwithre/insuranceportfoliosbasedonrobust,consistentaccountingrulesspecifictoeachsegment.Byfollowingthemethodologies,re/insurerscanmeasureGHGemissionsforeachsegmentandproducedisclosuresthatareconsistent,comparable,reliable,andclear.Limiteddataisoftenthemainchallengeincalculatinginsurance-associatedemissions;however,datalimitationsshouldnotdeterre/insurersfromstartingtheirGHGaccountingjourneys.TheStandardprovidesguidanceondataqualityscoringpersegment,facilitatingdatatransparencyandencouragingimprovementstodataqualityinthemediumandlongterm.ThisStandardalsoprovidesrecommendationsandrequirementsforreporting.Anyrequirementsnotfulfilledmustbeaccompaniedbyanexplanation.UsingthisStandardequipsthere/insuranceindustrywithstandardised,robustmethodstomeasureanddiscloseinsurance-associatedemissions.CommerciallinesPersonalmotorlinesThePartnershipforCarbonAccountingFinancials(PCAF)isanindustry-ledinitiativeenablingfinancialinstitutionstomeasureanddisclosegreenhousegas(GHG)emissionsassociatedwiththeirfinancialactivities.OVER329FINANCIALINSTITUTIONS,WITHOVER$81TRILLIONINFINANCIALASSETSCOMMITTEDTOPCAFNOVEMBER2022PersonalmotorlinesCommerciallinesGHGaccountingfortwosegmentsAttributionfactori=Re/InsurancepremiumiCustomerrevenuei(Industry)Attributionfactorp=TotalcostsassociatedwithvehicleownershipofallvehiclesInsuranceindustry’stotalpremiumfromthemotorlineofbusinessor(forcaseswhereriskcarriersareunabletousetheindustryattributionfactorabove)FORMULASTOCALCULATEINSURANCEASSOCIATEDEMISSIONS(Individual)Attributionfactorp=TotalcostsassociatedwithvehicleownershipoftheportfolioPvehiclesInsurerspeciﬁcpremiumfromthemotorlineofbusiness7PartC:Insurance-AssociatedEmissions1.IntroductionTHEROLEOFTHERE/INSURANCEINDUSTRYThere/insuranceindustryisoneofthelargestglobalindustriesandamajorholderofassetsundermanagement.Totalpremiumswritteninlifeandnon-lifeinsuranceamounttoclosetoUSDeighttrillion,or6.8%ofglobaleconomicoutput.2There/insuranceindustryplaysanimportantroleinsupportingthetransitiontoalow-emissioneconomy.Asinstitutionalinvestors,re/insurerscaninvestinzero-andlow-emissiontechnologiesandengagewiththeirinvesteecompaniesontheirdecarbonizationpathways.Asprofessionalriskmanagers,re/insurerscanhelpcommunitiesunderstand,prevent,andreduceclimaterisk.Asprofessionalriskcarriers,re/insurersprotectbusinesses,households,publicentities,andgovernmentsbyabsorbingeconomicshocksduetoweather-relatedriskssuchascyclones,floods,extremeheat,anddroughts.Fortheirownoperations,re/insurerscansettheirownclimatepoliciesandinfluencelow-emissionsgoodsandservices.Demandfromthere/insuranceindustryandotherstakeholdersfortoolstomeasureandreportgreenhousegas(GHG)emissionsisincreasing.Assuch,thereisaneedtodevelopasetofglobal,standardisedmethodologiesformeasuringanddisclosingtheGHGemissionsassociatedwithre/insuranceunderwritingportfoliosforaccountingpurposes(throughoutthedocumentreferredtoasinsurance-associatedemissions).THEROLEOFPCAFANDGHGEMISSIONSACCOUNTINGINREPORTING,MANAGINGRISKSANDOPPORTUNITIES,ANDENSURINGCOMPATIBILITYOFFINANCIALFLOWSWITHTHEPARISAGREEMENTThePartnershipforCarbonAccountingFinancials(PCAF)isanindustry-ledinitiativewhichwascreatedin2015by14Dutchfinancialinstitutions.In2018PCAFexpandedintoNorthAmericaandwentglobalinSeptember2019.PCAFaimstostandardisethewayfinancialinstitutionsmeasureandreportfinancedemissions,facilitatedemissions,andinsurance-associatedemissions.Inaddition,itaimstoincreasethenumberoffinancialinstitutionsthatcommittomeasuringanddisclosingthesescope3emissionsinlinewiththemethodsitdevelops.In2020,thefirsteditionofthe"GlobalGHGAccountingandReportingStandardfortheFinancialIndustry"coveringfinancedemissions(“FinancedEmissionsStandard”)waspublished.3ThisstandardisbuiltupontheGHGProtocolstandardsforcorporatereporting.IthasbeenreviewedbytheGHGProtocolandisinconformancewiththerequirementssetforthinthe"CorporateValueChain(Scope3)AccountingandReportingStandard"forcategory15investmentactivities.Sincethen,banksandinvestorshaveaskedtoexpandthestandardwithmoremethods,alsocoveringotheravtivitiesofthefinancialindustry.From2021onwards,PCAFstartedtheworkonthreepartsundertheumbrellaoftheGlobalGHGAccountingandReportingStandardfortheFinancialIndustry:2SigmaNo4/2022,Worldinsurance,SwissRe3PCAF(2020):TheGlobalGHGAccountingandReportingStandardfortheFinancialIndustry8PartC:Insurance-AssociatedEmissions•PartA:updateofthefirstversionstandardonmeasuringandreportingfinancedemissions("FinancedEmissionsStandard-secondversion")•PartB:developmentofastandardformeasuringandreportingtheGHGemissionsassociatedtothecapitalmarketfacilitationactivities("FacilitatedEmissionsStandard")•PartC:developmentofastandardformeasuringandreportingtheGHGemissionsassociatedtore/insuranceunderwritingportfolios("Insurance-AssociatedEmissionsStandard")THERE/INSURANCEINDUSTRYANDFINANCEDEMISSIONSThere/insuranceindustryisinauniquepositionwithassetownerandunderwritingactivitiesonthesamebalancesheet.PCAF’sFinancedEmissionsStandard4coversmethodologiesformeasuringandreportingtheGHGemissionsassociatedwithloansandinvestments,knownasfinancedemissions.Fortheirassetownerandmanagementactivities,re/insurerscanusethisexistingFinancedEmissionsStandardsubjecttotheirexistingregulatoryrequirements.Thecoredifferencebetweenfinancedandinsurance-associatedemissionsisthenatureoftherelationshipofthefinancialinstitutionwiththeclient(seeChapter4.2formoredetails).Are/insurer’sPropertyandCasualty(P&C)linesofbusiness(LoB)transferrisksassociatedwitheconomicactivitybutdonotfinancetheactivitynorimplyanyformofownership.Are/insurerholdsnocapitalinterestintheprimaryinsurancecustomer’soperations,andnofinancialordirectoperationalcontrolisexerted.5Thelackofownershipordirectcontroloverthecustomer’sactivityimpactstheinfluenceare/insurerwillhaveonthedecisionsmadebythecustomertoreducetheassociatedemissions.However,evenwithoutthisownershipinterest,are/insurermayinfluenceacustomer’sactivities.Theabilityofacustomertoengageinitsspecificbusinessactivityislimitedwithoutthesupportofinsurance.Inotherwords,re/insuranceenablesacustomer’sbusinessactivities.ABOUTTHISDOCUMENT:STANDARDIZINGGHGEMISSIONSACCOUNTINGFORRE/INSURANCEThisdocumentisthefirstversionofthe"GlobalGHGAccountingandReportingStandardforInsurance-AssociatedEmissions".Throughoutthisdocument,itwillbereferredtoastheInsurance-AssociatedEmissionsStandardorshortStandard.ThisStandardconstitutesPartCofthe"GlobalGHGAccounting&ReportingStandardfortheFinancialIndustry".6ThepurposeofthisStandardistoprovidere/insurerswithtransparent,standardised,androbustmethodologiestomeasureandreportinsurance-associatedemissions,asasupplementtotherequirementsoftheGHGProtocol"CorporateValueChain(Scope3)AccountingandReportingStandard".PleasenotethattheInsurance-AssociatedEmissionsStandarddoesnotaddresstargetsettingnorunderwriting/pricing.Nordoesitdetermineexplicitlyorimplicitlyanystrategyacompanymaychoosetofollowindependentlyasaresultofadoptingsuchmethodologies.4PCAF(2020):TheGlobalGHGAccountingandReportingStandardfortheFinancialIndustry5Creditre/insurersmighthavecomparablerightsunderspecificconstellations(e.g.,defaultofcorporateloan,whichisinsuredbythere/insurer).That’swhycreditre/insurancemightbeconsidereddifferently(seealsoTable5-1).6PartAisthePCAFStandardonfinancedemissionsandPartBisthePCAFStandardonfacilitatedemissions.9PartC:Insurance-AssociatedEmissionsThisStandardwasdevelopedbythePCAFInsurance-AssociatedEmissionsWorkingGroup(i.e.,the“WorkingGroup”).Thisisagroupofinsurersandreinsurersofdifferentsizesandfromdifferentregions,namelyAllianz,Aviva,AXA,BradescoSeguros,Generali,ICEALion,LibertyMutual,Lloyd’s,MunichRe,NNGroup,QBE,SCOR,SOMPOHoldings,SwissRe,TokioMarineandZurich.AttheendofOctober2021,theWorkingGroupinitiateddiscussionsonwhichLoBsshouldbeincludedinthescopeofthisStandard.TheStandardcoversthefollowingLoBs/segments(primaryinsuranceandfacultativereinsuranceonly),whicharediscussedinmoredetailinChapter5:ThroughoutthedevelopmentofthisStandard,PCAFhasengagedwithstakeholderstosolicitfeedbackanddiscussPCAFmethodologicalapproachesandconsideredtheircommentsandsuggestions.PCAFpublisheda“ScopingDocument”fortargetedconsultationinMarch2022.DuringJulyandAugust2022,PCAFissueda“ProgressReport”tofacilitateapublicconsultationwithregulators,there/insuranceindustry,brokers,policymakers,dataproviders,consultants,academia,non-governmentalorganizations(NGOs),andinsuranceassociations.Morethan40stakeholdersprovideddirectfeedbacktotheProgressReport.BUILTONTHEGHGPROTOCOLThisworkbytheWorkingGroupisbasedontheGHGProtocolstandardsforcorporatereporting,suchasthe"GHGProtocolCorporateAccountingandReportingStandard"7,the"CorporateValueChain(Scope3)AccountingandReportingStandard"8,andthesupplemental"TechnicalGuidanceforCalculatingScope3Emissions"9.Morespecifically,thisInsurance-AssociatedEmissionsStandardwillsupplementtheGHGProtocol"CorporateValueChain(Scope3)AccountingandReportingStandard"byprovidingadditionaldetailedguidanceastohowre/insurancecompaniescanreportoninsurance-associatedemissions.ThisInsurance-AssociatedEmissionsStandardispendingofficialGHGProtocolreviewandapproval.Beyondreportingthescope3category15emissionscoveredbythisStandard,re/insurersshallalsomeasureandreporttheirscope1and2emissionsaswellasanyotherrelevantcategoriesofscope3emissionsinlinewiththeGHGProtocol’sstandards.RELATIONSHIPWITHOTHERFINANCIALSECTORCLIMATEINITIATIVESMultipleclimateinitiativesforfinancialinstitutionshavebeenlaunched,includingforhigh-levelcommitments,scenarioanalyses,targetsettingprotocols,andclimateactionandreportingguidance.Measuringinsurance-associatedemissionshelpsfacilitateconsistentreportingacrosstheinsuranceindustryforthesepurposes,butdoesnotintrinsicallyrequireordemandthatre/insurerstakeanyfurtheraction(Figure1-1).7Moreinformationcanbefoundat:https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf8Moreinformationcanbefoundat:https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf9Moreinformationcanbefoundat:https://ghgprotocol.org/sites/default/files/standards/Scope3_Calculation_Guidance_0.pdfCommerciallinesPersonalmotorlines10PartC:Insurance-AssociatedEmissionsFigure1-1.Measuringinsurance-associatedemissionsasthefoundationforotherinitiativesInsurance-associatedemissionsSource:(PCAF,2020)Themanyexistingclimateinitiativesthatsupportfinancialinstitutionswiththeirclimate-relatedbusinessgoalsinclude:•PCAFfocusesonstandardizingthemeasurementandreportingoffinancedemissions,facilitatedemissions,andinsurance-associatedemissions.•TheTaskForceonClimate-RelatedFinancialDisclosures(TCFD)providesaframeworkforclimate-relatedfinancialdisclosure.•TheCarbonDisclosureProject(CDP)providesaplatformforemissionreportingandrating.•TheScienceBasedTargetsInitiative(SBTi)guidestargetsettingthroughitsFinancialSectorScience-BasedTargetsGuidance.•Otherinitiatives,suchastheUN-convenedNetZeroInsuranceAlliance(NZIA)andindustry-specificinitiatives(e.g.,PoseidonPrinciplesforMarineInsurance),supportre/insurersindefiningconcreteclimatestrategiesandactions.11PartC:Insurance-AssociatedEmissionsHOWTOREADTHISSTANDARDThisStandardusesthefollowinglanguagetoindicatewhichprovisionsarerequirements,whicharerecommendations,andwhichareallowableoptionsthatre/insurersmaychoosetofollow.ThefollowingtermsareusedthroughoutthisStandard:•“Shall”or“required”:IndicateswhatisrequiredforaGHGinventorytoconformwiththisStandard.•“Should”:Indicatesarecommendationbutnotarequirement.•“May”:Indicatesanallowedoption.•“Needs”,“can”,and“cannot”:Usedtoprovideguidanceonimplementingarequirementortoindicatewhenanactionisorisnotpossible.Figure1-2providesthestructureofthisStandardandthestepsfordisclosinginsurance-associatedemissions.Figure1-2.OverviewoftheStandardandstepsfordisclosinginsurance-associatedemissionsIntroductionCHAPTER1CHAPTER2UnderstandwhatGHGaccountingisIdentifybusinessgoalsofGHGaccounting&reportingCHAPTER3INTRODUCTIONANDBACKGROUNDAPPLYACCOUNTINGMETHODOLOGIESCHAPTER4ReviewaccountingandreportingprinciplesandrulesCHAPTER5ApplyaccountingmethodologiesReportemissionsCHAPTER612PartC:Insurance-AssociatedEmissions2.GHGaccountinginre/insuranceWHATISGHGACCOUNTING?GHGemissionsaccounting(“GHGaccounting”)referstotheprocessesrequiredtoconsistentlymeasuretheamountofGHGsgenerated,avoidedorremovedbyanentity,allowingittotrackandreporttheseemissionsovertime.TheemissionsmeasuredarethesevengasesmandatedundertheKyotoProtocolandtobeincludedinnationalinventoriesundertheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)—carbondioxide(CO2),methane(CH4),nitrousoxide(N2O),hydrofluorocarbons(HFCs),perfluorocarbons(PFCs),sulphurhexafluoride(SF6)andnitrogentrifluoride(NF3).Foreaseofaccounting,thesegasesareusuallyconvertedtoandexpressedascarbondioxideequivalents(CO2e).GHGaccountingismostcommonlyusedbygovernments,corporations,andotherentitiestomeasurethedirectandindirectemissionsthatoccurthroughouttheirvaluechainsasaresultoforganizationalandbusinessactivities.AccordingtotheGHGProtocolCorporateAccountingandReportingStandard,10directemissionsareemissionsfromsourcesownedorcontrolledbythereportingcompany.Indirectemissionsareemissionsthatareaconsequenceoftheoperationsofthereportingcompany,butthatoccuratsourcesownedorcontrolledbyanothercompany.Directandindirectemissionsarefurthercategorisedbyscopeanddistinguishedaccordingtothesourceoftheemissionsandwhereinanorganization’svaluechaintheemissionsoccur.ThethreescopesdefinedbytheGHGProtocol—scope1,scope2andscope3—arebrieflydescribedbelowandareillustratedinFigure2-1.•Scope1:DirectGHGemissionsthatoccurfromsourcesownedorcontrolledbythereportingcompany—i.e.,emissionsfromcombustioninownedorcontrolledboilers,furnaces,vehicles,etc.•Scope2:IndirectGHGemissionsfromthegenerationofpurchasedoracquiredelectricity,steam,heating,orcoolingconsumedbythereportingcompany.Scope2emissionsphysicallyoccuratthefacilitywheretheelectricity,steam,heating,orcoolingisgenerated.•Scope3:AllotherindirectGHGemissions(notincludedinscope2)thatoccurinthevaluechainofthereportingcompany.Scope3canbebrokendownintoupstreamemissionsthatoccurinthesupplychain(forexample,fromproductionorextractionofpurchasedmaterials)anddownstreamemissionsthatoccurasaconsequenceofusingtheorganization’sproductsorservices.TheGHGProtocol"CorporateValueChain(Scope3)AccountingandReportingStandard"11categorisesscope3emissionsinto15categories,asshowninFigure2-1.AccordingtotheGHGProtocol,accountingandreportingonemissionsassociatedwithareportingcompany’sinsuranceunderwritingactivitiesareoptionalunderscope3category15(Investments,otherinvestmentsorfinancialservices).TheWorkingGroupproposesthatinsurance-associatedemissionsarereportedasasupplementaryaccountingnotewithinthere/insurers’scope3category15(Investments).PleaseseeChapter6formoredetailsonreportingrecommendations.10(WRIandWBCSD,2004)11(WRIandWBCSD,2011)13PartC:Insurance-AssociatedEmissionsFigure2-1.OverviewofGHGProtocolscopesandemissionsacrossthevaluechainScope3INDIRECTinvestmentsprocessingofsoldproductsend-of-lifetreatmentofsoldproductsuseofsoldproductsleasedassetsfranchisesReportingcompanyUpstreamactivitiesDownstreamactivitiescompanyfacilitiescompanyvehiclesScope1Scope2INDIRECTScope3INDIRECTpurchasedgoodsandservicescapitalgoodspurchasedelectricity,steam,heating&coolingforownusebusinesstravelwastegeneratedinoperationsfuelandenergyrelatedactivitiestransportationanddistributionemployeecommutingleasedassetsDIRECTtransportationanddistributionNO2SF6NF3HFCsPFCsCO2CH4Scope3Category15Source:(WRIandWBCSD,2011)adaptedbyPCAF,2022THEIMPORTANCEOFGHGACCOUNTINGOFUNDERWRITINGBYTHERE/INSURANCEINDUSTRYTolimitglobalwarmingandachievethegoalsoftheParisAgreement,globalGHGemissionsmustbecutdrastically.GHGaccountingisanecessarystepfororganisationstobetterunderstandandmanagetheiremissions.Forare/insurer,scope3category15emissions–financedemissionsandinsurance-associatedemissions–arethemostsignificantpartofitsindirectGHGemissionsinventory.Specialconsiderationmustthereforebemadetohowthesearemeasured.Measuringinsurance-associatedemissionsisanimportantstepare/insurercantaketoidentifyandassessclimate-relatedtransitionrisksandidentifypotentialopportunities.GHGACCOUNTINGHELPSMEASURETHREETYPESOFCLIMATEIMPACT:GENERATEDEMISSIONS,EMISSIONREMOVALS,ANDAVOIDEDEMISSIONSGHGaccountingistheannualcorporateaccountinganddisclosureofinsurance-associatedemissionsin(partsof)theportfolioofare/insureratafixedpointintimeandinlinewithfinancialaccountingperiods.Insurance-associatedemissionscanbemeasuredastheamountsofGHGsgenerated,avoided,orremovedbyaninsuredinstitution.ThevolumeofabsoluteemittedGHGemissionsofaninsuredthatissubsequentlyassociatedwithare/insurancecompanyforthepurposesofGHGaccountingiscommonlyreferredtoastheinsured’sgenerated(absolute)emissions.Notallunderwritingactivitiesareassociatedwithgeneratedinsurance-associatedemissions.Re/insurancecoverscanalsocontributetothedeploymentofemissionremovalsolutionsthatabsorbCO2efromtheatmosphereandstoreitindurablematerials,terrestrialcarbonsinks,oringeologicalreservoirsdeepunderground.Forinstance,underwritingsustainableforestry14PartC:Insurance-AssociatedEmissionsprojectsislikelytoincreasetheforestcarbonstockthroughdiversificationoftreespecies,moreunderbrush,andhealthierforestsoils.OtherexamplesareP&CcoversformachinerythatfiltersCO2edirectlyfromtheatmosphereandtransformsitintocarbonatemineralslockedinsideconcreteblocks.ThevolumeofCO2eabsorbedanddurablystoredisconsideredanemissionremovalthatcanalsobequantifiedandreported.Carbonremovalactivitieswillbecomeimportanttoachieveglobalnetzero,namelytonet-out(balance)residualemissions.Currently,though,therearenointernationalrulesfornegativeemissionsaccounting.FinalguidancebytheGHGProtocolonemissionsremovalsisexpectedtobepublishedin2023.12WhilePCAFacknowledgesthatemissionsremovalsareintegraltocombattingclimatechange,13thisStandarddoesnotprovideguidanceonhowtomeasureandreportinsurance-associatedemissionsremovals.Forthetimebeing,PCAFreferstotheforthcomingguidancefromtheGHGProtocol.FutureversionsofthisStandardmaypotentiallyincludemorespecificguidanceonemissionsremovals.Lastly,emissionsaccountingintherealeconomysometimescomparesactualemissionsofazero-orlow-emissionproject(projectemissions)tothehypotheticalemissionsofhigh-emissionalternatives(baselineemissions).Thedifferencebetweenthetwoisreferredtoasavoidedemissions.Insurance-associatedavoidedemissionscouldbecalculatedandaccountedforinthesameway.TheworkinggroupforPCAF’sfinancedemissionsstandardhadalsosuggestedspecificguidanceforavoidedemissionsaccounting,limitedtoaparticularassetclass(projectfinance)andprojecttype(renewableelectricity).Reportingavoidedemissionsisanattemptbycompaniestodemonstrateaquantifiablepositivecontributiontodecarbonization,albeitbasedonpredictionsofbaselineemissionsthataredifficulttodelimitandhavesufferedfromsystematicoverestimationinthepast.14Amoredirectwaytounderstandacompany’scontributiontodecarbonizationfollowsfromthetrendinthegenerated(absolute)emissionsdatareportedovertime.Consequently,theWorkingGrouphasdecidednottoprovidespecificguidanceoninsurance-associatedavoidedemissions.Re/insurersmayreportonemissionremovalsandonavoidedemissions.Theyshallalwaysdososeparatelyfromthere/insurer’sscope1,2,and3GHGinventoriesandreporttheirmethodologicalformulaforcalculatingthesetypesofemissions(i.e.,emissionremovalsandavoidedemissions)inaccordancewiththeguidancecontainedinChapter6.EMISSIONSMETRICSINTHECONTEXTOFINSURANCE-ASSOCIATEDEMISSIONSDifferentemissionsmetricscanbeusedfordifferentpurposesandsomekeyinsurance-associatedemissionsmetricsandtheirmeritsarediscussedinTable6-1“Emissionmetricsforthecontextofinsurance-associatedemissions,”inChapter6;thisisnotexhaustive.12TheGHGProtocol’s‘LandSectorandRemovalsGuidance’iscurrentlybeingdevelopedthroughamulti-stakeholderdevelopmentprocess.ThedraftguidanceispublishedforbothpilottestingandreviewinJune2022.Finalpublicationisexpectedin2023.https://ghgprotocol.org/land-sector-and-removals-guidance13IPCCWGIII6thAssessmentReport,2022.14AnEUStudy(ref.N°CLIMA.B.3/SERI2013/0026r)from2017concludedthatupto85%ofthecarbonavoidanceprojectsundertheCleanDevelopmentMechanism(CDM)havealowlikelihoodofensuringthatemissionreductionsareadditionalandnotover-estimated.https://ec.europa.eu/clima/system/files/2017-04/clean_dev_mechanism_en.pdf15PartC:Insurance-AssociatedEmissions3.GHGaccountingcanbeusedasabasistoachievebusinessgoalsTheexistingPCAFFinancedEmissionsStandardhighlightsfourofthemajorbusinessgoalsthatfinancialinstitutionscanpursueinthecontextoftheirsustainabilityandclimate-relatedstrategiesthatGHGaccountingcouldsupport(seeFigure3-1).Thissetofbusinessgoalsisvoluntaryinnatureandbynomeansexhaustive.Inthischapter,thesebusinessgoalsarerecastintermsofre/insurance.Theeffectivenessorabilityofre/insurerstoputinplacesuchbusinessgoalsmayberestrictedbyfactorssuchasthemandatory/compulsorynatureofsomeLoBincertainjurisdictions,theinfluenceofgovernment-backedschemesacrosscertainLoBincertainjurisdictions,regulatoryrequirements,creditratingconcerns,and/orthebusinessstrategiesofindividualre/insurancecompanies.Understandingtheclimateimpactofunderwritingportfoliosmakesgoodbusinesssenseforare/insurer.GHGaccountingcanhelpre/insurersachievemultipleobjectives,suchascreatingtransparencyforstakeholders,managingfinancialrisksassociatedwithclimatepoliciesandregulations,creatingnewinsuranceproductstosupportdecarbonizationefforts,andensuringthattheirownunderwritingportfoliosarecompatiblewiththeParisAgreementasappropriate.Figure3-1.GHGaccountingcanhelpfinancialinstitutionsmeetmultiplebusinessgoalsMeasurementofinsurance-associatedemissionsCreatetransparencyforstakeholdersManageclimate-relatedtransitionrisksDevelopclimate-friendlyproductsDevelopandsetclimatetargetsBusinessGoal1BusinessGoal2BusinessGoal3BusinessGoal4Thelevelofdetailintheassessmentofinsurance-associatedemissionscaninformhowwelltheresultingGHGinventorycansupportthebusinessgoalspursuedbythereportingre/insurer.Forexample,ifare/insurerwishestousetheinventorytomanagerisk,itmayconsidermeasuringandrecordingsector-levelinsurance-associatedemissionstoidentifythecarbon-intensiveindustriesinitsunderwritingportfolios.Otherre/insurersmaywanttostructuretheirinventoriesinawaythathelpsthemtracktheirinsurance-associatedemissionsreductiongoals,whererelevant,yearoveryear.Ultimately,whatiscapturedintheinventoryshouldservetheappropriatebusinessgoals,whicharedeterminedbyeachre/insurerindependently.16PartC:Insurance-AssociatedEmissionsBUSINESSGOAL1:CREATETRANSPARENCYFORSTAKEHOLDERSRe/insurerswishingtobemoretransparentabouttheirclimateimpactcanuseGHGaccountingtomeasureandreporttheinsurance-associatedemissionsassociatedwiththeirunderwritingactivities.Inresponsetodemandandtheconsensusthatclimatechangeposesaconsiderablethreattotheglobaleconomy,theFinancialStabilityBoard(FSB)launchedtheindustry-ledTaskForceonClimate-relatedFinancialDisclosures(TCFD)in2015.TheTCFDframework15hasexpandedsinceitsrecommendationswerelaunchedin2017toprovidefurtherguidanceonhowcompaniesmayreporttheirclimate-relatedrisksandopportunities.AtthetimeofthepublicationofthisStandard,TCFD-recommendeddisclosuresaremostlyvoluntary.Incertainjurisdictionstheyhavebecomemandatory.However,withstrongbackingfromcentralbanks,theSupervisors’NetworkforGreeningtheFinancialSystem(NGFS),andtheindustryitself,companieswilllikelybefacedwithnewregulatoryrequirementswithrespecttotransparency.Forre/insurers,akeyfacetofTCFDdisclosurerelatestotheirunderwritingactivities.ThisisrecognisedbytheCarbonDisclosureProject(CDP),which–inaligningwiththeTCFDframework–adaptedits2020climatequestionnaireforthefinancialsectortoincludeasectiononthereportingofscope3category15(Investment)emissions.Thisalsoincludesre/insurancecompaniesintheircapacityasassetmanagers.AsdiscussedinChapter2,insurance-associatedemissionsshouldthereforebereportedasasupplementarynotetoscope3category15(Investment)emissionsforaccountingpurposes.Theyshouldnotbeaggregatedwithfinancedemissions.AnotheremergingdisclosureframeworkistheExposureDraftofIFRSS2onClimate-relatedDisclosures(ClimateExposureDraft)oftheInternationalSustainabilityStandardsBoard(ISSB).16Creatingtransparencyforinternalstakeholderscanalsobeabusinessgoalpursuedbyre/insurers.Carryingoutanassessmentofinsurance-associatedemissionsgivesare/insurer’sboardandseniormanagementabetterpictureoftheirorganization’simpactontheclimate.Bymeasuringanddisclosinginsurance-associatedemissionsandtherebycreatingopportunitiesforclimatedisclosure,re/insurerscandefinetheirownroleandalsothatoftheindustrymorebroadlyincombattingclimatechange.BUSINESSGOAL2:MANAGECLIMATE-RELATEDTRANSITIONRISKSIncreasingly,re/insurersarebuildinganunderstandingoftheexposureoftheirunderwritingportfoliostorisksposedbyclimate-relatedpoliciesandregulations.GHGaccountinghelpstheseinstitutionsindependentlyidentifyareasoftheirunderwritingactivitiesthatfallundercarbon-intensivesectors.Suchunderwritingactivitiescouldbeimpactedinthefuture,forexample,bytheintroductionofcarbonpricesandpoliciesandregulationsthatareaimedatreducingemissions.Re/insurersthatdonotreporttheirclimate-relatedriskscouldpotentiallyfacereputationalrisk,especiallyifpeersareincreasinglydoingso.Measuringanddisclosinginsurance-associatedemissionsisawayforre/insurerstofurthermanagetheirclimate-relatedreputationalrisk.15(TCFD,2017),PublicationsTaskForceonClimate-RelatedFinancialDisclosures(fsb-tcfd.org)16Moreinformationcanbefoundat:IFRS-Climate-relatedDisclosures17PartC:Insurance-AssociatedEmissionsBUSINESSGOAL3:DEVELOPCLIMATE-FRIENDLYINSURANCEPRODUCTSTheTCFDframeworkincludesarecommendationfordisclosurerelatedtobusinessopportunitiesassociatedwiththetransitiontoalow-emissioneconomy.17Accordingtotheframework,opportunitiesarecategorisedasresourceefficiency,energysource,productsandservices,markets,andresilience.Forre/insurers,opportunitiesexistineachcategory,especiallyrelatingtosustainableinsuranceproducts.Withthetransitiontoalow-emissioneconomy,re/insurerscanindependentlydevelopinnovativeproductsandservicesthatenabletheirclientstodecarbonisetheirbusinessactivities.Bymeasuringinsurance-associatedemissionsandusingtheintensitymetricslistedinTable6-1,re/insurerscanseewhichsectorsandbusinessesintheirownportfoliosrequirethemosthelpintheirdecarbonizationeffortsandindependentlydeterminehowbesttosupportthemintheirtransition.BUSINESSGOAL4:ENSURINGRE/INSURANCEUNDERWRITINGPORTFOLIOSARECOMPATIBLEWITHTHECLIMATETARGETSItisuptoeveryre/insurerindividuallytoultimatelydetermine,onanindependentbasis,whattargetsandtransitionpathwaysaresuitable,ifany,fortheirbusinessstrategy,takingintoaccountjurisdictionallyspecificregulatoryandlegalrequirementsandotherpotentialconstraints.Toachieveanydecarbonizationgoalwithrespecttotheirunderwritingportfolios,includingbutnotlimitedtoalignmentwiththeParisAgreement,amethodologyformeasuringinsurance-associatedemissionsisrequired.PCAFhasbeenestablishedtofocussolelyonGHGaccountingoffinancialandunderwritingportfolios.ByundertakingGHGaccounting,re/insurersareequippedwithametricthatcanhelptrackabsoluteemissionsyearoveryear.TheexistingPCAFFinancedEmissionsStandardalignswiththeScienceBasedTargetsinitiative’s(SBTi)frameworkforsettingscience-basedemissionreductiontargets.SpecificSBTitarget-settingguidanceforre/insuranceunderwritingisstilltobedeveloped.17(TCFD,2017)18PartC:Insurance-AssociatedEmissions4.PrinciplesandrequirementsofGHGaccountingforre/insurersBuildingontheGHGaccountingprinciplesfromtheGHGProtocol,PCAFhasdevelopedadditionaloverarchingrequirementstoguideaccountingandreportingforinsurance-associatedemissions.4.1GHGaccountingrequirementsderivedfromtheGHGProtocol’sprinciplesLikefinancialaccountingandreporting,GHGaccountingandreportingfollowgenerallyacceptedprinciplestoensurethatanorganisation'sdisclosurerepresentsanaccurate,verifiableandfairaccountofitsGHGemissions.ThecoreprinciplesofGHGaccountingaresetoutinthe"GHGProtocolCorporateAccountingandReportingStandard"18andtheGHGProtocol"CorporateValueChain(Scope3)AccountingandReportingStandard".19TheGHGProtocol’sfivecoreprinciplesarecompleteness,consistency,relevance,accuracy,andtransparency.ThisStandardfollowsthesefivecoreprinciplesandprovidesfiveadditionalrequirementsfortheapplicationoftheseprinciplesthataredirectlyrelevantforre/insurerswishingtoassesstheirinsurance-associatedemissions(seeFigure4-1).18(WRIandWBCSD,2004)19(WRIandWBCSD,2011)19PartC:Insurance-AssociatedEmissionsFigure4-1.AdditionalPCAFrequirementsofGHGaccountingandreportingarederivedfromtheGHGProtocol’sfiveprinciplesGHGProtocolprinciplesforscope3inventories20AdditionalPCAFrequirementsforinsurance-associatedemissionsCompletenessAccountforandreportonallGHGemissionsourcesandactivitieswithintheinventoryboundary.Discloseandjustifyanyspecificexclusions.RecognitionRe/insurancecompaniesshallaccountfortheirinsurance-associatedemissionsseparatelyunderscope3category15,2122asdefinedbytheGHGProtocol"CorporateValueChain(Scope3)AccountingandReportingStandard".Anylimitationsorrestrictionsshallbedisclosed.ConsistencyUseconsistentmethodologiestoallowformeaningfulperformancetrackingofemissionsovertime.Transparentlydocumentanychangestothedata,inventoryboundary,methodsoranyotherrelevantfactorsinthetimeseries.MeasurementRe/insurancecompaniesshallmeasureandreporttheirinsurance-associatedemissionsforspecificinsuranceproductsandspecificsegmentsby“followingtherisk”andconsideringthePCAFmethodologiesandguidanceprovidedinthisStandard.Ifdataavailabilityandmethodologiesallow,avoidedandremovedemissionscanalsobemeasuredandreported.RelevanceEnsuretheGHGinventoryappropriatelyreflectstheGHGemissionsofthecompanyandservesthedecision-makingneedsofusers—bothinternalandexternaltothecompany.Animportantaspectofrelevanceistheselectionofanappropriateinventoryboundarythatreflectsthesubstanceandeconomicrealityofthecompany’sbusinessrelationships.AttributionThere/insurer’sshareofinsurance-associatedemissionsoftheinsuredriskshallbeproportionaltotheabsoluteemissionsofthecustomerorasset.AccuracyEnsurethatthequantificationofGHGemissionsissystematicallyneitherovernorunderactualemissions,asfarascanbejudged,andthatuncertaintiesarereducedasfaraspracticable.Achievesufficientaccuracytoenableuserstomakedecisionswithreasonableconfidenceastotheintegrityofthereportedinformation.DataqualityRe/insurersshallusehigh-qualitydatawhereavailableforspecificinsuranceproductsandtheunderlyingassets/companiesandshallimprovethequalityofthedataovertime.Wherenecessaryorappropriate,re/insurersmayuseapproximativekeyperformanceindicators(KPIs)whichbestreflectemissions.TransparencyAddressallrelevantissuesinafactualandcoherentmanner,basedonaclearaudittrail.Discloseanyrelevantassumptionsandmakeappropriatereferencestotheaccountingandcalculationmethodologiesanddatasourcesused.DisclosurePublicdisclosureoftheresultsofthePCAFassessmentisforexternalstakeholders,aswellasre/insurancecompaniesusingthemethodologytohaveaclear,comparableviewonhowinsuredriskscontributetotheParisclimategoals.20Moreinformationcanbefoundat:https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf,p.721Category15ofthe"TechnicalGuidanceforCalculatingScope3Emissions"doesnotexplicitlyrefertounderwritingactivitiesofre/insurers.Itsolelyfocuseson“investments”andprovidingsuch“financialservices”and“clientservices”.I.e.,thereportingofanykindofinsurance-associatedemissionsisconsideredtobeavoluntarybroadeningoftheinterpretationoftheTechnicalGuidanceduetothere/insurer’sownambitionsandgoals.22Asdescribed,thereportedfiguresinthecontextofinsurance-associatedemissionsmight,however,notbeatallcomparablewithemissionsbeingreportedforthere-/insurer’sownorfinancedemissions.Anyvoluntaryreportingmightdependonthefurtherspecificstobedefined.20PartC:Insurance-AssociatedEmissions4.2Additionalrequirementsforaccountingandreportinginsurance-associatedemissionsThischapterdescribestheadditionalrequirementsforGHGaccountingforre/insurers’underwritingportfolios,andhowtheserequirementsguideaccountingforandreportingofinsurance-associatedemissions.Thereafter,Chapter5includesdetailsformeasuringandaccountinginsurance-associatedemissions,andChapter6includesrequirementsandrecommendationsonreporting.RECOGNITIONRe/insurersshallaccountforemissionsthatareassociatedwiththeirinsurancecontractswherematerialandwheredataisavailable.Theyshallbereportedseparatelyunderscope3Category15,2324asdefinedbythe"GHGProtocolCorporateValueChain(Scope3)AccountingandReportingStandard".Theyshallbemeasuredandreportedasasupplementaryaccountingnoteandshallnotbeaggregatedwithfinancedemissions.Anylimitationsorrestrictionsshallbeexplainedanddisclosed.However,theydohavetheflexibilitytodecidewheretheywanttostartwithmeasuringanddisclosingtheirinsurance-associatedemissions—forinstance,ataspecificlineofbusinesslevelorbysector.Thecoredifferencebetweenfinancedandinsurance-associatedemissionsisthenatureoftherelationshipofthefinancialinstitutionwiththeclient.25Foradditionalinformationontherelationshipbetweeninsurersandtheinsured,pleaseseeBox4-1.Re/insurancecustomershaveavitalneedforre/insurancefortheirbusinesses,andthiscreatesleverageforre/insurancecompaniesindiscussingGHGemissionswithsuchcustomers.Thelackofownershipordirectcontrolovertheclientactivityisakeydifferentiationthatimpactstheapproachesthatanindividualre/insurermaytakewhenengagingclientsandsupportingtheiractionstoreduceemissions.Thedifferencesbetweeninsurance-associatedemissionsandfinancedemissionsrequiredistinctmethodologiesforaccountingthem,andthusalsoseparatereporting.23Category15ofthe"TechnicalGuidanceforCalculatingScope3Emissions"doesnotexplicitlyrefertounderwritingactivitiesofre/insurers.Itsolelyfocuseson“investments”andprovidingsuch“financialservices”and“clientservices”.I.e.,thereportingofanykindofinsurance-associatedemissionsisconsideredtobeavoluntarybroadeningoftheinterpretationoftheTechnicalGuidanceduetothere/insurer’sownambitionsandgoals.24Asdescribed,thereportedfiguresinthecontextofinsurance-associatedemissionsmight,however,notbeatallcomparablewithemissionsbeingreportedforthere-/insurer’sownorfinancedemissions.Anyvoluntaryreportingmightdependonthefurtherspecificstobedefined.25Creditre/insurersmighthavecomparablerightsunderspecificconstellations(e.g.,defaultofcorporateloan,whichisinsuredbythere/insurer).That’swhycreditre/insurancemightbeconsidereddifferently(seealsoTable5-1).21PartC:Insurance-AssociatedEmissionsBox4-1.Therelationshipbetweenre/insurersandtheinsuredsLivinglifeandrunningbusinessesinvolvesrisks.Tomitigatetheserisks,individualsandcompaniesbuyinsurance.Theytransferaportionoftherisktheyfacetoinsurersandpayapremium.Whentheinsuredeventoccurs,theinsurerpaysoutasdefinedinthetermsandconditionsoftheinsurancepolicy.Insurersthentoobuyinsurance(reinsurance)totransferpartoftherisksontheirbalancesheettoreinsurers.Severalcharacteristicsdifferentiatetherelationshipbetweenre/insurersandtheirinsuranceclientsfromtherelationshipbetweeninvestors/banksandtheirclients,includingthefollowing:•Claimspaymentscanbecharacterisedasamoneyflow.However,re/insuranceproceedsarenotaninvestmentorloan,astherighttoproceedsiscontingentontheoccurrenceofare/insuredevent.Whileare/insurancepolicycananddoessupporteconomicexpansionandgrowth,thespecificclaimspayments(themoney)areintendedforrecovery,andnotexpansionorenrichment.•There/insurancecontractrelationshipcreatesnoownershiportransferofequity/loanandresultsinnofinancialordirectoperationalcontrol.Re/insurancecontractsrepresentanexpressionofcommitmentandtrust–thatis,there/insurerwillprovidetheagreedcoverageshouldthetermsofthere/insurancecontractbefulfilled.Whilethiscoverageisoftenfinancial,itmayalsoincludeservicessuchaslegal,security,andclaimsremediationinthecaseof,forexample,environmentalandcyberclaims.•Are/insurer/insuredrelationshipisalsoformeddifferentlythantherelationshipbetweenaninvestor/investee.Thatis,investorschoosetheclientinwhichtomakeaninvestment.Theclientultimatelychoosesthere/insurer,oftenintroducedthroughanintermediarysuchasabroker/agent.•ThelengthofthecontractualrelationshipformostP&Cre/insurancelinesisusuallyoneyear.Re/insurersareenablersinthesensethattheyhavetheopportunitytodirectlyorindirectlyinfluenceorsupportanotheractor’scapacitytooperate/perform/own/disposeofacertaineconomicactivityorproduct/goodorservice.Theactionsthatare/insurermaytaketopossiblyinfluenceorsupportanotheractor,aresubjecttodifferentvariantsspecifictoeachsituation/transaction,including,butnotlimitedto,businessandlegalconsiderations.Forexample,iftheprovisionofinsuranceforcertainLoBismandatoryinagivenjurisdiction,aninsurermayonlybeabletoengagewithaclientbutnotchangeanythingabouttheprovisionofcoverwhichissetbylaw.Inthiscase,theactionsare/insurercantakearerelativelylimited.Moreover,severalprivatecompaniesandgovernmentactivitiescanbecharacterisedasenablers.Forexample,inthemotorvehiclevaluechainenablingactorscouldbethefollowing:thestateagencies,motorvehiclesmanufacturers,lendinginstitutions,re/insurancecompanies,dealers,maintenanceservices,gasstations,orrepairers.Allareplayersinthemotorvaluechain.Also,withintheinsuranceindustry,severalactorscanpotentiallyhaveinfluence,dependingontheirinvolvementineachsituation/transaction,includingprimaryinsurers,reinsurersandbrokers.22PartC:Insurance-AssociatedEmissionsMEASUREMENTAkeytenetforGHGaccountingoffinancialassetsisthe“followthemoney”principle.Itmeansthatthemoneyshouldbefollowedasfaraspossibletounderstandandaccountfortheclimateimpactthatfinancialassetshaveintherealeconomy.Duetothedifferentnatureoftherelationshipwiththeclientinre/insuranceunderwriting(seesectionon“Recognition”),PCAFreferstothe“followtherisk”ratherthan“followthemoney”principleinthecaseofinsurance-associatedemissions.The“followtherisk”principleimplieslookingattheinsuredwhoseriskistransferredtothere/insuranceindustry.The“followtherisk”principlelooksattherisktransfer,whilethe“followthemoney”principleapplicabletofinancedemissionslooksatmoneyflows.Incaseof“followtherisk”,theentitywhoseemissionsareinfocustypicallyistheinsured.Theinsuredpartyisnotnecessarilytheonereceivingtheinsurancepayout.Inthecaseofthird-partyliability,forinstance,theinsurancerecoverableultimatelyservestoindemnifythethirdpartythathasbeendamagedbythepolicyholder.Re/insurersthatintendtoconformtothisStandardshallmeasureandreporttheirinsurance-associatedemissionsusingthemethodologiessetoutinthisStandard,coveringthesevenGHGsrequiredundertheKyotoProtocol.Asaminimum,absoluteGHGinsurance-associatedemissionsresultingfromunderwritingactivities(scope3category15emissions)inthereportingyearshallbemeasuredandreportedasasupplementaryaccountingnoteandshallnotbeaggregatedwithfinancedemissions.Inaddition,andwhenrelevant,emissionremovalsandavoidedemissionsmaybemeasuredandshallbereportedseparately.AbsentspecificguidanceinthefirstversionofthisStandardonbothemissionremovalsandavoidedemissions,re/insurersshalldiscloseseparatelythemethodologicalformulaadoptedincalculatingemissionsremovedoravoidedinaccordancewiththeguidanceinChapter6.Asabasisforreportingemissions,re/insurersshallchooseafixedpointintimetodeterminetheirunderwritingpositionsandcalculateanattributionfactor.Thispointintimecouldbe,forinstance,thelastdayoftheirfiscalyear(e.g.,June30orDecember31).TheGHGaccountingperiodshallalignwiththefinancialaccountingperiod.ATTRIBUTIONAssessingtheattributionforfinancedemissionsofcommercialclientsisrelativelystraightforwardbecausethetotalcapitalofacompanyisknownfromtheliabilitysideofcompany’sbalancesheet.Conversely,thisismoredifficultforthere/insuranceindustrywhenassessingtheattributionofGHGemissionsofbothfirmsandhouseholds/individualcustomers.The"GHGProtocolCorporateValueChain(Scope3)AccountingandReportingStandard"providesguidanceforGHGemissionsfromloansandinvestments.Theyshouldbeallocatedtothereportingfinancialinstitutionsbasedontheproportionalshareoflendingorinvestmentintheborrowerorinvestee.26Asimilarlogicshouldbeappliedtoinsurance-associatedemissions,amendedtoreflectthedistinctrelationshipbetweenare/insurerandtheircustomer.26(WRIandWBCSD,2011)23PartC:Insurance-AssociatedEmissionsThemethodologiespresentedinthisStandardapplythesamegenerallogicacrossin-scopeLoBs(Figure4-2):•Insurance-associatedemissionsarealwayscalculatedbymultiplyinganattributionfactor(specifictotherespectivere/insuranceLoB/segment)bytheabsoluteGHGscope1and2emissionsofthere/insuredclientorasset(andscope3emissions,wheresignificantandwheredataallowsinaccordancewiththeguidanceinChapter5).•Theattributionfactorservestodeterminetheshareoftheabsoluteemissionsoftheinsuredcustomerorassetassociatedwiththere/insuranceunderwritingportfolio.Inaddition,theWorkingGrouphasdefinedfiveguidingprinciplesforanadequatemethodologyforinsurance-associatedemissions:robustnessandhighlevelofindependence,proportionality,comparability,feasibilityandreasonableness,andmateriality(seeAnnex4).Figure4-2.Thegeneralapproachtocalculateinsurance-associatedemissionsInsurance-associatedemissionsAttributionfactorx=(withi=insured)∑iShareoftheemissiontobeassociatedwiththere/insurer(seemethodologiesinChapters5.2and5.3)EmissionsAttributionisbasedonannualGHGemissionsoftheprimaryre/insuranceclients.Asaresult,GHGinsurance-associatedemissionsarereportedonanannualbasisatleast.Additionalinsurancesegments-specificinformationonattributioncanbefoundinChapter5.24PartC:Insurance-AssociatedEmissionsBox4-2.Insurance-associatedemissionsanddoublecountingDoublecounting,whichoccurswhenGHGemissionsarecountedmorethanonceintheinventoryofinsurance-associatedemissionsofoneormoreinsurancecompanies,shouldbeavoidedasmuchaspossible.Doublecountingofinsurance-associatedemissionscanoccurduetoseveralreasons:•DoublecountingbetweeninsuranceandassetmanagementactivitiesInsurancecompaniesperformbothunderwritingandassetmanagementactivities.Bothinsurance-associatedandfinancedemissionsareaformofvirtualaccountingforrealeconomyGHGemissions.Theyofferadifferentviewonthecubeof“real”GHGemissions(seeFigure5-1).Wheninvestinginandinsuringthesamecompany,theemissionsofthiscompanyaredoublecountedbytheinsurancecompany.Thiscanbeavoidedbyseparatelyreportingfinancedemissionsforinvestmentsandinsurance-associatedemissionsforinsuranceunderwriting•DoublecountingacrossemissionscopesInsurersmayoffercovertoseveralcompaniesalongavaluechain.Thiscanleadtodoublecountingoftheinsured’semissionswithintheinsurance-associatedemissions.Thiseffectcanbelimitedbyreportinginsured’scope3emissionsseparatelyfromscope1and2emissionsofinsuredclientsasrequiredbythisStandard.However,theremaystillbedoublecountingwithrespecttoscope1and2ofinsuredclientswheninsuringbothpower-generatingcompaniesandtheirclients.•DoublecountingbetweendifferentinsurersofthesameclientorbetweentheprimaryinsurersandreinsurersAscertainrisksaretoolargetobebornebyanindividualre/insurer,theseriskscanbespreadinacomplexrisk-sharingsystemcomprisingmanyplayers,includinginsurance,reinsurance(“insuranceofaninsurancepolicy/portfolio”),andretrocession(“reinsuranceofareinsurancepolicy/portfolio”).Theconsequentriskofdoublecountingofemissionsbetweenthoseplayerscouldbeaddressedbyreportingnetinsurance-associatedemissions(i.e.,calculatedbasedonnetre/insurancepremium).DoublecountingisafrequentandinherentaspectofGHGaccounting.Itdoesnotneedtobeseenproblematic,if:•doublecountingdoesnotinterferewithstateddecarbonizationgoalsofgettingaclearviewonwhereportfoliosareconnectedtotheircustomer’sandinvestee’semissions;and•methodologiesandlimitationsarestatedtransparentlyaspartofthedisclosure.PCAF’sobjectivewillnotbetoeradicatedoublecountingandtocreateaglobalbalancesheetofabsoluteGHGemissions.Theambitionwillbe,tominimisedoublecountingconcernswheretheyimpactstatedprinciplesandthedeliveryofatransparentandconsistentapproachtotrackandreportinsurance-associatedemissionsandtheirchangesovertime.Re/insurancecompaniesusingthemethodologiesofthisStandardwillbesubjecttothesameexposuretodoublecountingandwillnotbemoresignificantlyaffectedthanothers.25PartC:Insurance-AssociatedEmissionsFigure4‑3.IllustrativeviewofGHGemissionsRealeconomyviewUnderwritingviewRealeconomyemissionsFinancedemissionsRe/insuraceassociatedemissionsCapitalviewIllustrationnotdrawntoscaleDATAQUALITYRe/insurersshallensuretheirGHGaccountingappropriatelyreflectstheGHGemissionsassociatedwiththeirunderwritingportfolios.Tosafeguardtheseoutcomes,re/insurersshallusethehighest-qualitydatathatisreasonablyavailableforeachLoBforcalculations,and,whererelevant,improvethequalityofthedataovertime.PCAFrecognisesthathigh-qualitydatacanbedifficulttoobtainwhencalculatinginsurance-associatedemissions,particularlyforcertaininsureds,LoBorinsuredactivities.However,datalimitationsshouldnotdeterre/insurersfromtakingthefirststepstowardpreparingtheirinventories.EvenestimatedorproxydatacanhelpthemidentifyGHG-intensivehotspotsintheirportfolios,whichinturncanhelptodeterminetheirclimatestrategies.Wheredataqualityislow,re/insurerscandesignapproachestoimproveitovertime.Formeasuringinsurance-associatedemissionsineachlineofbusiness,variousdatainputsareneededtocalculatethere/insurer’sattributionfactorandtheclient’stotalemissions.Thedataneededtocalculateanattributionfactorcantypicallycomefromthere/insureranditsclients,althoughthedatarequiredtocalculatetheclient’semissionsmightnotbereadilyavailableandmustbesoughtoutbythere/insurer.Foremissionsassociatedwithcommerciallinesportfolios,asimpletemplatehasbeencreatedforthepurposeofcapturingatsourcethecoredatarequiredbyre/insurersforcalculatingemissionsassociatedwithcommerciallinesportfolios(seeAppendix5).Thequalityofthisdatacanvarydependingonassumptionsrelatingtoitsassuredness,specificity,andothervariables.26PartC:Insurance-AssociatedEmissionsHigh-qualitydataisoftennotavailabletothere/insurerforallinsureds,LoBandcoveragetypes.Intheseinstances,there/insurershouldusethebestavailabledatareasonablyavailableinaccordancewiththedatahierarchyshowninFigure4-4.Figure4-4.GeneraldataqualityscorecardPCAFrecognisesthatthereisoftenalagbetweenfinancialreportingandrequireddatabecomingavailable,suchasemissionsdataforaninsuredclient.Intheseinstances,re/insurersshouldusethemostrecentdataavailable,evenifitrepresentsdifferentyears.Forexample,itwouldbeexpectedandappropriatethatare/insurer’sreportingin2022forits2021financialyearwoulduse2021financialdataalongside2020(orothermostrecent)emissionsdata.Alsowhereaninsurerhasenteredjointventureswithotherentitiesinwhichitdoesnothaveacontrollingstake,itmightbenotpossibletoacquiresufficientlygranularcustomerinformation.Insurersshouldstrivetoalsoaccountfortheirshareofjointventurebusiness.However,wheretheirstakeislessthan50%andtheyarenotabletoaccesstherequiredinformationtocalculateattributionfactors,theyarealsonotablenorrequiredtoreportemissions.Dataqualityisspecifictoeachlineofbusiness.MoreinformationonissuesrelatedtodataqualityandhowtoemploythehierarchyforeachlineofbusinesscanbefoundinChapter5andinAnnex2.DISCLOSUREThepublicdisclosureofaggregatedabsoluteinsurance-associatedemissionsisimportantforexternalstakeholdersandre/insurersusingthemethodologytohaveananalogousviewoftheclimateimpactofre/insurers.Tothisend,re/insurersthatintendtoconformtotheStandardshallreportaggregatedabsoluteinsurance-associatedemissions.Tosupporttheirdisclosures,re/insurersshallfollowtherequirementsandrecommendationslistedinChapter6onhowtoreportinformationrelatingtomethodology,calculations,timeframesanddataquality(asscoredusingthehierarchiesprovidedinChapter5).Score1Score2Score3Score4Score5CertainUncertainDataQualityScore12345GHGEmissions27PartC:Insurance-AssociatedEmissions5.Methodologytomeasureinsurance-associatedemissionsThischapterdescribesthemethodstocalculateinsurance-associatedemissionsfortwosegments:Eachsegmenthasitsownsectioncoveringmethodologyincludingguidanceonthefollowingelements:•Emissionscopescovered•Attributionofemissions•Formulastocalculateinsurance-associatedemissions•Datarequired•LimitationsThisisaninitiallistofsegmentscoveredbyPCAF.Theinitiativeintendstobothupdatethemethodologiesovertimeandaddadditionalones.Developinganaccurate,comparable,feasibleandbroad-basedstandardcoveringnumeroussegmentswillbeaniterativeprocess.5.1GeneralconsiderationsThisStandarddefinesattributionfactorsthatreflectanadequateshareofemissionsforinsurance.Itiscalculatedbasedondatathatisreadilyavailable,suchaspremiumsandthecosts/revenuesofacompanyoraspecificinsuredasset.Theapproachesforcommercialandpersonalmotorinsuranceportfoliosarebasedonaconceptuallysimilaridea:theattributionfactorisdeterminedbasedontheimportanceofinsuranceasproductionfactorfortheinsuredassetorcompany.However,thisdoesnotmeanthetwoapproachesdelivercomparableabsolutevaluesandhence,theemissionsforcommerciallinesandpersonalmotorshouldbereportedseparately.Forcommercialportfolios,theratioofpremiumsandrevenuesofacompanyisusedtodetermineattribution.Formotor,theattributioniscalculatedbasedontheshareofinsuranceinthetotalcostofownershipofrunningavehicle.Thereareseveralotherapproachestodefinemeaningfulattributionfactorsforre/insurancewhichhavebeendiscussedintheWorkingGroup(seealsotheProgressReportforfulldetails).27Ifaninsurancecoverismandatory,itcouldbearguedthatallemissionsofacompanyoranassetneedtobeallocatedtotheinsurer,becauseacompanycouldnotoperatewithouttheinsurancecover.Problemscouldarise,forexample,incircumstanceswhereacompanyneedstotakeoutmultiplemandatoryinsurancecovers.Inadditiontomandatorycoverage,otherprerequisitesfortheactivityoftenneedtobefulfilled.Forexample,forvehiclesnotonlyinsuranceisrequiredtodrivethecar,butalsothevehicle’sregistrationorfuel.Ultimately,therecanbemultiplecontributorsthatenabletheactivitytotakeplace.Theadequatesharesofallcontributorsmustthereforebeconsidered.27Moreinformationcanbefoundat:https://carbonaccountingfinancials.com/files/2022-07/2207-insurancestandard-03.pdf?899cf30b3c.pdfCommerciallinesPersonalmotorlines28PartC:Insurance-AssociatedEmissionsAnotheroptionforanadequateattributionfactorcouldbetoallocateemissionsofacompanyorahousehold/individualaccordingtothestructureofitstotalcostofrisk(i.e.,measurestoavoid,mitigate,retainorinsurevariousrisks).Thisoptionisnotpractical,particularlyforhouseholds/individuals,duetolackofdata.Itwouldshowthatonlyafractionofemissionsofacompany,household/individual,oranassetwouldbeallocatedtoaninsurancecompanyorthewholeinsuranceindustry.Figure5-1:TotalcostofriskofacompanyRiskidentificationRiskassessmentRiskavoidanceRiskmitigationRiskmanagementcostsRetainedlossesLossadjustmentsCapitalcostsComplianceRiskretentioncostsPremiumsTaxesBrokerageRisktransfercostsRiskmanagementSelf-insuranceInsuranceSource:SwissReInstitutesigmaNo05/2012Anotheroptionisthatacompany’sbalancesheetcouldbeexpandedtoincludetheadditionalequityordebtthattheoreticallywouldberequiredtosubstitutefortheinsuranceproductspurchased.Basedonthiscalculation,theinsurer’sshareofacompany’semissionscouldbecalculatedinthesamewayasfinancedemissions.Theshareofdebtandequityholder’sfinancedemissionswouldbereducedrespectively,whiletheinsurerwilltakeitsfractionofthecompany’sfinancedemissions.Whilethisapproachwouldbeconsistentwiththeapproachforfinancedemissionsitisnotfeasibletoimplement.Mostofthesetheoreticalreflections,thoughnotfeasibletobeimplemented,showthatitisadequatethatonlyafractionoftotalemissionsareallocatedtotheinsurancesector.Thisisalsoreflectedbytheapproachesdefined.Forexample,asglobalcommercialinsurancepremiumsaccountforanestimated0.5%ofglobalgrossrevenuesofalleconomicsectors,28thisshareofemissionswouldroughlybeallocatedtotheinsurancesector.However,theimportanceofpersonalmotorinsuranceversusthetotalcostofownershipforavehicleishigher,intherangeof10%to26%globally.2928BasedonSwissResigmaandOxfordEconomicsdata.29BasedonPCAFresearch.29PartC:Insurance-AssociatedEmissionsSCOPEOFTHISSTANDARDThere/insuranceindustrycanbeclassifiedbytheLoBthatprovidecoverageforthedifferentrisksacustomerfacesandneedstoseekprotectionagainst.Thefocusisoncommerciallinesinsurance(i.e.,alltypesofinsurancepurchasedbycompanies)andpersonalmotorinsurance(theinsuranceofvehiclespurchasedbyprivateindividualsorhouseholds).Insurancecontractspurchasedbypublicentities(e.g.,governmentagencies,municipalities,etc.)arenotinscopeforthisversionoftheStandard.Whiletheproductspurchasedbythoseentitiesarebroadlyidenticaltoproductsavailabletobusinessentities,definingtheboundariesfortheemissionstobeassociatedforpublicentitiesrequiresadditionalmethodologicalwork.ThesewillbecoveredinfutureversionsoftheStandard,potentiallyleveragingongoingworkforfinancedemissionsfromsovereignbonds.Forthetimebeing,thisStandarddoesnotconsiderotherpersonallines(e.g.,homeownerinsurance),anylifeorhealthinsurance(includingcorporatelifeandpensions)andpersonalaccident.Theapproachforcommercialinsuranceportfoliosshallbeappliedtofacultativereinsurance.However,thisStandarddoesnotcovertreatyreinsuranceandothertreaty-likereinsuranceprogramsincommerciallinesandpersonalmotor(e.g.,facultative-obligatorytreaties,facultativefacilities),mostlyduetodataavailabilityconstraints,buttheboxbelowpresentsinitialthoughts.Box5-1.WhyistreatyreinsuranceexcludedfromthefirstversionoftheStandard?Facultativereinsurancecontractstypicallycoverasingleriskorblockofrisksofoneinsuredentityorcompany.FacultativecoversthereforehavesimilarcharacteristicsasdirectinsurancepoliciesandhencefallintothescopeofthisStandard.Thisdoesnotapplytoreinsurancetreaties.Thesecantakemanyformsandstructures,buttypicallyprovidecoverforcontractuallydefinedrisksassociatedwithaportfolioofbusinesswithinaspecificclassofinsuranceassumedbyinsurersandcededtoreinsurersinbulk.Forreinsurancetreatieswhichfollowaper-riskapproach(therisktypicallybeingtheoriginalinsuredassetorcompanyratherthanaspecificperil),abottom-upcalculationoftheattributionfactoris(theoretically)stillfeasible.However,therequireddatatocalculateinsurance-associatedemissionsisinpracticenotavailabletothereinsurer.Thesituationisevenmorecomplexforeventoraggregate-covertreaties,whereabottom-upcalculationisnotpossible,noteventheoretically.ThesecondversionoftheStandardaimstoaddresstheissueofdataavailabilityandconsistencyacrosstheentirere/insurancevaluechain,anddefineanattributionmethodologyforreinsuranceassociatedwithtreatyreinsurancealignedwithPCAFprinciples.Asub-workinggroupcontinuingtheworkonthisimportanttopichasalreadybeenestablished.30PartC:Insurance-AssociatedEmissionsTable5-1providesamoredetailedlistofthetypesofinsurancecovered.Chapters5.2and5.3presentthemethodologiesforcommerciallinesandpersonalmotorinsurance.Table5-1.BusinesssegmentsandlinesofbusinesscoveredbythisStandard.Thislistmaylookdifferentforeachre/insurancecompany.SegmentLoBCoveredinCommercialinsurance(directlyinsuredandfacultativereinsurancecovers)•Property(e.g.,fire,multi-peril)5.2Emissionsassociatedwithcommerciallinesportfolios•Liability/Casualty(e.g.,GeneralLiability,ProductLiability,ProductRecall,EnvironmentalLiability)5.2EmissionsassociatedwithcommerciallinesportfoliosCommercialmotor(alllines)5.2EmissionsassociatedwithcommerciallinesportfoliosMarine(liabilityandhull)5.2EmissionsassociatedwithcommerciallinesportfoliosAviation(liabilityandhull)5.2EmissionsassociatedwithcommerciallinesportfoliosAgriculture(excludinggovernmentschemes,arrangements)5.2EmissionsassociatedwithcommerciallinesportfoliosTradecredit(insuranceofcreditriskforsoldgoods)andpoliticalrisk–primaryinsuranceonly305.2EmissionsassociatedwithcommerciallinesportfoliosStructuredtradecredit(insuranceofcreditriskforbankloans,mortgages,orotherfinancialinstruments)OutofscopeofcurrentversionoftheStandard31SuretyOutofscopeofcurrentversionoftheStandard32Engineeringlines:Constructionall-risk,erectionall-riskonlyOutofscopeofcurrentversionoftheStandard33Allotherengineeringlines(e.g.,machinerybreakdownandelectronicequipment)5.2Emissionsassociatedwithcommerciallinesportfoliostobecontinuedonnextpage>30Forthefacultativereinsurer,look-throughinformationontheoriginalinsuredusuallynotavailable.31OutofscopeofcurrentversionoftheStandard,duetodirectlinktoproductscoveredunderFinancedEmissionsStandard.AsoutlinedinChapter4.2creditre/insurersmighthavecomparablerightstofinancinginstitutionsunderspecificconstellations.That’swhycredit&suretyre/insurancemightbeconsidereddifferently.32OutofscopeofcurrentversionoftheStandard,as3-wayrelationshipismateriallydifferenttootherP&Cproductscovered.AsoutlinedinChapter4.2creditre/insurersmighthavecomparablerightstofinancinginstitutionsunderspecificconstellations.That’swhycredit&suretyre/insurancemightbeconsidereddifferently.33OutofscopeofcurrentversionoftheStandard.Reasoningincludesthatthosecoversareveryproject-specific.TheycoverprojectswhichemitGHGemissionsovertheirentirelife-cycle.Dataontheselife-cycleemissionsaremostofthetimenotavailable.Inaddition,constructioncoversmaybecharacterizedbyanon-lineardevelopmentoftheexposuresovertheyearsthatfurthercomplicatetherelevantallocationofemissions.AdditionalguidancecanbeexpectedinfutureversionsofthisStandard.31PartC:Insurance-AssociatedEmissionsSegmentLoBCoveredinCommercialinsurance(directlyinsuredandfacultativereinsurancecovers)Corporatelifeandpensions,personalaccidentOutofscopeofcurrentversionoftheStandardOther/Speciallines(e.g.,FinancialLines[e.g.,ProfessionalIndemnity,D&O],workerscompensation)5.2EmissionsassociatedwithcommerciallinesportfoliosStatutorylinesofbusiness5.2EmissionsassociatedwithcommerciallinesportfoliosPublicentitiesPersonallinesInsurancecontractspurchasedbypublicentities(e.g.,governmentagencies,municipalities,etc.)Motor(alllines)OutofscopeofcurrentversionoftheStandard5.3EmissionsassociatedwithpersonalmotorportfoliosLiabilityOutofscopeofcurrentversionoftheStandardPropertyOutofscopeofcurrentversionoftheStandardOther/Speciallines(e.g.,Travelassistance,legalassistance,pet)OutofscopeofcurrentversionoftheStandardLifeandHealthOutofscopeofcurrentversionoftheStandardTreatyreinsurance(incl.treaty-likefacultativereinsurancestructures)AllLoBsOutofscopeofcurrentversionoftheStandard32PartC:Insurance-AssociatedEmissions5.2EmissionsassociatedwithcommerciallinesportfoliosPleaserefertotheImportantNoteonpage3,especiallywithrespecttosolicitationofcommentaryandthattheuseoftheproposedmethodologyissubjecttothelaws,rulesandregulationsapplicabletoeachreportingre/insurancecompany.EMISSIONSCOPESCOVEREDWhiletheabilityforacustomertoengageinaspecificbusinessactivityislimitedwithoutriskprotectioncover,PCAFacknowledgesthatre/insurersarenotinapositiontodirectlyinfluencetheircustomers’emissions.However,re/insurersmaybeabletoengagewithcustomerstobetterunderstandtheirplanstoreducetheirscope1,2,and3emissionsandoverallGHGintensitiesovertime,inlinewithapplicablegovernmentpoliciesasperjurisdiction.Re/insurersshalltakeintoaccountcustomers’absolutescope1andscope2emissionsacrossallsectors,andshouldalsotakeintoaccountabsolutescope3emissionstotheextentthatsuchnumbersareavailableandrepresentreasonableandverifiableestimates.Ifre/insurersdonotreportcustomers’scope3emissions,PCAFrecommendsthattheyexplainwhy.Furtherrecommendationsonhowcustomers’scope1,2,and3emissionsshouldbereportedwithininsurance-associatedemissionsareprovidedinChapter6.Box5-2.PCAFacknowledgessignificantlimitationsaroundscope3emissionsPCAFacknowledgesthat,todate,therearesignificantlimitationsaroundtheprovisionofdata.Inparticular,thecomparability,coverage,transparency,andreliabilityofscope3datavariesgreatlypersectoranddatasource.Furthermore,scope3datawillbecollectedbyamixtureofsourcesthatvaryperre/insurer.Thebasisofcollating,processingandpublishingthesefigureswillalsovarybyre/insurer,andmethodologiesmustbedevelopedinawaythatbestsuitstheinternalcapabilitiesofeachre/insurer.PCAFalsorecognisesthateachre/insurerneedstoindependentlydetermineatimetablebywhichtoappropriatelyconsidertheircustomers’scope3emissionsacrossdifferentsectorswithininsurance-associatedemissions,inaccordancewithguidingprinciples,applicablelegislation,andreportingstandards.PCAFalsorecognisesthatre/insurershavedifferentcompositionsofcustomersandLoBswithintheirunderwritingportfoliosandthattheymayprovidecoverageacrossthevaluechain.Therefore,byrecommendingtheinclusionofcustomers’scope3emissionsatthistime,PCAFmayinadvertentlyintensifytheissueofdouble-countingemissions.Equallymono-lineinsurersareunlikelytobeinapositiontoinfluenceareductiondirectlyorindirectlyincustomers’scope3emissions.PCAFrecognisesthatthetaskofreportingallcustomers’emissionsrepresentsalong-termchallengewhichisreliantonincreasingcustomerengagementsanddisclosure.Thistaskisintendedtosupportthedevelopmentbyeachindividualre/insurerofasetofmeaningfulandappropriatestrategieswhichwillsupportthemeasurementofinsurance-associated33PartC:Insurance-AssociatedEmissionsemissionsovertime.Suchmeasurementsandreductionsshouldinturnreflectthebest-qualitydataavailable.Theexpectationisthatwithimproveddatacaptureandcomparability,themeasurementstoowillimproveovertime.PCAFsupportseffortsbyre/insurerstoimprovethelevelsofdatacaptureandintegrityofcustomers’emissionsovertime,withtheobjectiveofincreasingthelevelofconsistency,qualityandcomparabilitythroughouttheindustry.InalignmentwiththeGHGProtocol,PCAFdoesnotsetathresholdabovewhichscope3emissionsshouldbeincluded.Instead,reportingcompaniesshoulddevelopanddisclosetheirownsignificancescope3thresholdbasedontheirbusinessgoals.Environmentallyextendedinput-output(EEIO)datacanbeusedtoquicklyestimatetherelativesizeofscope3emissionscomparedtoscope1andscope2emissionsforanysector.ATTRIBUTIONOFEMISSIONSForcommercialportfolios,there/insureraccountsforaportionoftheannualemissionsofthecustomer.Thisportionisdeterminedbytheratiobetweenre/insurancepremiumforthatcustomer(numerator)andrevenuesgeneratedbythecustomer(denominator).Thisratioiscalledtheattributionfactor.Insuranceproductsmayoffercoverforspecificactivities,locationsorprojects.Oftentheseaccountforjustapartofacompany’semissions,nottheoverallclimateimpactoftheinsured.34Forcommerciallines,assetbaseddatagranularityshallnotbeusedforanyaccountingandreportingunderthisversionoftheStandard.Instead,dataattheentitylevel(parentorsubsidiary)shallbeused.ThisrequirementisbasedonmajorassetspecificLoBs(e.g.,constructionallrisk&erectionallrisk)beingoutofscopeofthecurrentversionoftheStandard,thechosencommercialattributionfactorandthelackofaninsuranceindustrywidedefinitionofthetermassetinthecontextofassetbasedinsurancecoverage.ThesetopicswillneedtobeaddressedinafutureversionoftheStandard.Incaseswherepoliciescoverspecificsubsidiariesofacompany,theinsurance-associatedemissionscanbecalculatedtoaccountsolelyforthese.However,thismayonlybedoneiftherelevantrevenueandemissiondataareavailableatanadequatelevelofgranularity.Datacanbeavailableonareportedorestimatedbasis.Theuseofestimateddatawillimpactthequalityscoreoftheresultingattributedemissions.Amismatchoftheorganizationalscopeintheattributionfactorandtheemissionssideoftheequationmustbeavoided.SeeTable5-2onthenextpageforexamples.34Thisisparticularlyrelevantforproject-specificinsurancesuchascoverfortheconstructionofaspecificasset.Forinstance,ifinsuringtheconstructionofasolarpowerplantbyadiversifiedenergycompanythatalsoownsfossilgeneratingplants,emissionsfromthosefossilplantswouldfactorintotheattributionaswell,eventhoughtheyarenotcoveredbytheinsurancepolicy.34PartC:Insurance-AssociatedEmissionsTable5-2.ExampleofparentandsubsidiarycompanieslevelcoveragesCompanyRevenues(USD)Emissions(t)ParentA900m400mSubsidiaryA1250m50mSubsidiaryA2300m170mSubsidiaryA3100mN/ASubsidiaryA4N/AN/AExamples:•WheninsuringSubsidiaryA1andA2–usereportedrevenueandemissionsdataforSubsidiaryA1andA2respectively.•WheninsuringSubsidiaryA3orA4wheresubsidiary-specificrevenueandemissiondataisnotfullyavailable–useparent-levelinformationforrevenueandemissions,orproceedwithanestimationofsubsidiaryemissionstousealongsidereportedsubsidiaryrevenue.Theuseofparent-leveldataand/orestimatedemissionsdatashouldbeproperlyreflectedinthedataqualityscoreoftheresultingattributedemissions.Formulatocalculateinsurance-associatedemissionsInsurance-associatedemissionsAttributionfactori×Emissionsi=𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓!=𝑅𝑅𝑅𝑅/𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝!𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟!Definitions:1.Re/Insurancepremiumi(numerator):Forthepurposeofthisstandard,re/insurancepremiumisdefinedasgrosswrittenpremium(thetotalamounttobepaidbytheinsuredtothere/insurerforthepolicywrittenintheperiod)minusexternalacquisitioncosts(e.g.,externalbrokeragefees).Formulti-yearcontracts,anannualisedpremiumvalueshallbeused.GrosspremiumshallbealsousedforFrontingPolicies.2.Customerrevenuei(denominator):Totalamountofincomegeneratedbythecustomerthroughthesaleofgoodsorservices.CustomerrevenuesareautomaticallycapturedaspartofthesubmissionprocessforsomeLoBs.However,thisisnotthecaseforallLoBs,andinsurerswillneedtodevelopprocessestocapturethisdatawheremissing.Aswithemissions,usingcompanyreportedrevenuedatadirectlyfromtheclientorviaathird-partydataprovideristhepreferredapproach.However,whereclientsdonotreportrevenueoritisnotreasonabletogetaccesstothatdata,estimatedrevenuedatabasedonproxydatasuchasindustryandcountryornumberofemployeescanalsobeused.Suchestimationscanuseinternally-developedmodels.Manythird-partydataprovidersalsoofferestimatedrevenuesforawiderangeofglobalcompanies.35PartC:Insurance-AssociatedEmissionsSpecialconsiderationsarerequiredforstatutoryproductsifinsurersdonothavetheoptiontodeclinecustomers(e.g.,insomecountriesthismayincludecompulsory-thirdpartymotor/mandatorythird-partyliability,workerscompensation,environmentalliability,andgovernment-basedinsuranceschemesincertaincountries).Whiletheattributionfactorisapplicabletothislineaswell,itmaybereportedseparately.AggregationapproachWheninsuringcommercialclients,insurersarelikelytowritemorethanoneLoB,orparticipateonseverallayersofaninsured’sre/insuranceprogram.Togettoanoverallcustomerviewofattributedemissions,thepremiumsfromeachcontractcanbeeasilyaggregated,asoutlinedinBox5-3:Box5-3.Exampleforcalculatingthecustomerattributionfactorinasituationwhereonere/insurerwritesmorethanoneLoBwiththesameinsuredCustomerwithmultipleLoBs35LoBRe/insurancepremiumRevenueInsurance-associatedemissionsattributionfactorThird-partyliability500.005Property1000.01Total15010,0000.015𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓=𝑅𝑅𝑅𝑅𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝"+⋯+𝑅𝑅𝑅𝑅𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝#𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅=50+10010,000OPTIONSTOCALCULATEINSURANCE-ASSOCIATEDEMISSIONSTheinsurance-associatedemissionsfromcommerciallinesportfolioscanbecalculatedindifferentways,dependingontheavailabilityoftheinsured’sfinancialandemissionsdata.Overall,PCAFdistinguishes–inlinewiththefinancedemissionsfromlistedequityandbonds–threedifferentcalculationoptionsdependingontheemissionsdataused:•Option1:reportedemissions,whereverified36orunverified37emissionsarecollectedbythereportingre/insurerfromtheinsuredcompanydirectly(e.g.,companysustainabilityreport)orindirectlyviaverifiedthird-partydataproviders(e.g.,CDP).Theseemissionsarethenallocatedtothereportingre/insurerusingtheattributionfactor.•Option2:physicalactivity-basedemissions,whereemissionsareestimatedbythereportingre/insurerbasedonprimaryphysicalactivitydatacollectedfromtheinsuredcompany(e.g.,megawatt-hoursofnaturalgasconsumedortonsofsteelproduced).These35Thefigurespresentedinthisexamplearenotrepresentativeofanactualattributionfactor.Thefactorcanbemuchsmallerasaproportionofrevenue.36ThisreferstoreportedemissionsbeingcalculatedinlinewiththeGHGProtocolandverifiedbyathird-partyauditor.37ThisreferstoreportedemissionsbeingcalculatedinlinewiththeGHGProtocolwithoutverificationbyathird-partyauditor.36PartC:Insurance-AssociatedEmissionsemissionsarethenallocatedtothereportingre/insurerusingtheattributionfactor.Theemissionsdatashouldbeestimatedusinganappropriatecalculationmethodologyortoolwithverifiedemissionfactorsexpressedperphysicalactivity(e.g.,tCO2e/MWhortCO2e/tofsteel)issuedorapprovedbyacredibleindependentbody.•Option3:economicactivity-basedemissions,whereemissionsareestimatedbythereportingre/insurerbasedoneconomicactivitydatacollectedfromtheinsuredcompany(e.g.,euroofrevenuesoreuroofassets).Theseemissionsarethenallocatedtothereportingre/insurerusingtheattributionfactor.Theemissionsdatashouldbeestimatedusingofficialstatisticaldataoracknowledgedenvironmentallyextendedinput-output(EEIO)tablesprovidingregion-orsector-specificaverageemissionfactorsexpressedpereconomicactivity38(e.g.,tCO2e/€ofrevenueortCO2e/€ofasset).DATAREQUIREDPCAFdistinguishesthreeoptionstocalculatetheinsurance-associatedemissionsforcommerciallinesportfolios,dependingontheemissionsdataused:•Option1:reportedemissions•Option2:physicalactivity-basedemissions•Option3:economicactivity-basedemissionsOptions1and2arebasedoncompany-specificreportedemissionsorprimaryphysicalactivitydataprovidedbythecustomerorthird-partydataproviders.Option3isbasedonregion-orsector-specificaverageemissionsorfinancialdata,usingstatisticsordatafrompublicsourcesorthird-partyproviders.Options1and2arepreferredoverOption3fromadataqualityperspective,becausetheyprovidemoreaccurateresultsofinsurance-associatedemissions.Duetodatalimitations,re/insurersmightuseOptions1or2forcertaincompaniesandOption3forothers.Thedataqualitymixshallbereflectedintheaveragedataqualityscore,asChapter6illustrates.Table5-3providesdataqualityscoresforeachofthedescribedoptionsandsub-options(ifapplicable)thatcanbeusedtocalculatetheinsurance-associatedemissionsforcommerciallinesportfolios.38SamplingtestsbasedonactualdataonthecompanylevelextrapolatedtotheportfoliolevelcanhelptotesttheaccuracyofcalculationsbasedonthisdatafromstatisticsorEEIOtables.Thismayalsobeusedtorefinethedataforspecificsectorsorregionsifthereportingfinancialinstitutionhasastrongpresenceinandspecificknowledgeoftherespectivesectororregion.Nationalagenciesandregionaldataprovidersorstatisticalofficesinindividualregionsmayassistreportingre/insurersinvariousregionsinfindingregionalandmorerelevantfinancialoremissionsdatainformation.37PartC:Insurance-AssociatedEmissionsTable5-3.Generaldescriptionofthedataqualityscoretableforcommerciallinesinsurance(score1=highestdataquality;score5=lowestdataquality)DataqualityOptionstoestimateinsurance-associatedemissionsWhentouseeachoption(whatdatashouldbeavailable)AttributionfactorEmissionsScope1Scope2Score1Option1:ReportedEmissions1aRe/insurancePremium/CustomerRevenueReported-VerifiedReportedMarketBased-VerifiedScore21bReported-UnverifiedReportedMarketBased-UnverifiedReportedLocationBased-UnverifiedReportedLocationBased-VerifiedOption2:Reportedorphysicalactivity-basedemissions2aEnergyConsumptionxEF(IntensityperMWhofElectricity)Score32bProductionOutputxEF(AverageSectorEmissionIntensitypertofProduction[output])Score4Option3:Economic-activitybasedemissions3aRe/InsurancePremium/CustomerRevenuenotalignedwithinsuredentitiesReportedEmissions/EnergyConsumption/ProductionOutputDatanotalignedwithinsuredentitiesScore53bRe/insurancePremium/AverageSectorRevenueAverageSectorRevenuexEF(AverageSectorEmissionIntensityperRevenue)Adetailedsummaryofthedataqualityscoretable,includingdataneedsandformulastocalculateinsurance-associatedemissions,isprovidedinAnnex2(Table10-1).DataforallthreeoptionsinTable5-3canbederivedfromdifferentdatasources.Reportedemissions(Option1)Whereavailable,PCAFrecommendsOption1,usingemissionsdatareportedbycompaniesinofficialfilingsandenvironmentalreports.Themostrecentavailabledatashouldbeusedwithmentionofdatasource,reportingperiodorpublicationdate.PCAFacknowledgesthatcommercialinsuranceportfoliosincludelistedandnon-listedcompanies,andthatavailabilityofreporteddatacanbelimited,especiallyfornon-listedclients.PCAFalsorecognisesthatemissionsdatamaynotbepubliclyreportedatanentitylevel.Dataproviders(Option1)ForOption1(reportedemissions),PCAFrecommendseithercollectingemissionsfromthecustomerdirectly(e.g.,companysustainabilityreport)orusingthird-partydataproviders,includingbutnotlimitedtoCDP,Bloomberg,MSCI,Sustainalytics,S&P/Trucost,andISSESG.Dataproviderstypicallymakescope1and2emissionsdataavailableforlargercommercialcompanies.Scope3datamaybeavailablethroughthesedataproviders,butperhapsnotforall15categoriesofscope3emissions.38PartC:Insurance-AssociatedEmissionsThird-partydataproviderscollectemissionsdataasreportedbythecompaniesthemselves,eitherthroughastandardisedframeworksuchasCDPorthroughacompany’sowndisclosuresinofficialfilingsandenvironmentalreports.Theyoftenhavetheirownmethodologiestoestimate/calculatecompanies’emissions,especiallyifthisdataisnotreportedordoesnotreflect100%oftheemissionsboundaries.Incaseswheredataprovidersestimateemissionsthemselves,thecalculationwouldbeinlinewithOptions2or3,conditionaltothemethodologyusedbeinginlinewiththeGHGProtocol.Re/insurersshouldaskdataproviderstobetransparent,disclosethecalculationmethodtheyuse,andconfirmalignmentwiththeGHGProtocol.Thiswillenablere/insurerstoapplytheappropriatedataqualityscoretotheestimate.PCAFalsoencouragesdataproviderstoapplythePCAFdataqualityscoringmethodtotheirowndata,whichwouldallowthemtosharethedataqualityscoresdirectlywiththeirclients.PCAFdoesnotrecommendapreferreddataprovider,butitrecommendsusingdataprovidersthatusethestandardisedCDPframework.PCAFhasobservedinconsistenciesacrossdataprovidersforcompanyreportedscope1and2emissions.Forre/insurersusingdataproviders,PCAFthereforeencouragesusingthesameproviderforallinsuredclients,wherepossible,andusingthemostrecentlyavailabledata.PCAFalsoencouragesre/insurerstomentionthedatasource,reportingperiodorpublicationdateofdata.AlistofquestionstoprovideguidancewhenengagingwithdataprovidersaroundmethodologyandcalculationmethodsisavailableinAnnex1.Estimationmodels(Option2and3)Notallcompaniesdisclosetheiremissionsdatainofficialfilingsorthroughdataproviders.Reportinginemergingmarketsoftenlagsthatofdevelopedmarkets.Tomaximisethecoverageofemissionsdata,theremaininggapsareoftenfilledwithestimates.Ifnodataisavailable,estimationmodelsconsistentwiththeemissionsfromtheprimarybusinessactivitymaybeused.Emissionfactorsfromproduction-basedmodels(i.e.,emissionintensityperphysicalactivity)arepreferredoverthosefromrevenue-basedmodels(i.e.,emissionintensityperrevenue)becausetheyarelesssensitivetoexchangerateorcommoditypricefluctuations.Emissionfactorsfromproduction-basedmodelsinlinewithOption2areespeciallyusefulforGHG-intensiveindustrieslikeutilities,materials,energyandindustrials.Emissionfactorsfromrevenue-basedmodelsinlinewithOption3(e.g.,intensity-basedorenvironmentalinput-outputmodels)havetheadvantageofrequiringlessdetaileddatafromthere/insurer.ForOption2(physicalactivity-basedemissions),PCAFrecommendsusingactualenergyconsumption(e.g.,megawatt-hoursofnaturalgasconsumed)orproduction(e.g.,tonsofsteelproduced)datareportedbycompanies,giventhatthedatafullycoversthecompany’semissions-generatingactivities.Theemissionfactorsexpressedperphysicalactivityusedshouldbebasedonappropriateandverifiedcalculationmethodologiesortoolsissuedorapprovedbyacredibleindependentinstitution.Exampledatasourcesforretrievingemissionfactorsincludebutarenot39PartC:Insurance-AssociatedEmissionslimitedtoecoinvent,39Defra,40theIntergovernmentalPanelonClimateChange(IPCC),41GEMIS(GlobalEmissionsModelforintegratedSystems),42andtheFoodandAgricultureOrganizationoftheUnitedNations(FAO).43Again,themostrecentlyavailabledatashouldbeused,includingamentionofthedatasource,reportingperiodorpublicationdate.ForOption3(economicactivity-basedemissions),PCAFrecommendsusingofficialstatisticaldataoracknowledgedEEIOtablesprovidingregion-orsector-specificaverageemissionfactorsexpressedpereconomicactivity(e.g.,tCO2e/€ofrevenueortCO2e/€ofasset).Re/insurersshoulduseemissionfactorsasconsistentlyaspossiblewiththeprimarybusinessactivity,insofarasthisisknown,44butinawaythatremainsfeasiblegiventhelargesizeofcommerciallinesportfolioscoveringmultiple(granular)businessactivities.Forexample,foraninsurancepolicytoapaddyricefarmer,there/insurershouldseektofindanduseasector-specificaverageemissionfactorforthepaddyricesector,notageneralemissionfactorfortheagriculturalsectoroverall.ExamplesofEEIOdatabasesthatcanbeusedtoobtainsuchemissionfactorsareEXIOBASE,45theGlobalTradeAnalysisProject(GTAP),46ortheWorldInput-OutputDatabase(WIOD).47Sector-specificemissionfactorscanalsobereplacedwithvaluesfromlinearregressionmodelsfromdatabasescontainingcompanyrevenueandemissions,bysectorandgeographicalregion.PCAF’sweb-basedemissionfactordatabaseprovidesalargesetofemissionfactorsforOptions2and3.Thiscanhelpre/insurersgetstartedwithestimatingtheinsurance-associatedemissionsoftheircommerciallinesportfolios.PCAFexpectsthattheinsurance-associatedemissionsformostcommerciallinesportfolioscanbederivedthrougheitherreportedemissions(Option1),physicalactivitydata(Option2),oreconomicactivitydata(Option3).However,itallowstheuseofalternativeoptionstocalculateemissionsifnoneofthethreecanbeusedorinthecasethatnewoptionsaredeveloped.Thereportingre/insurershallalwaysexplainthereasonsforusinganalternativeoptionifitdeviatesfromthethreeoptionsdefinedabove.DatagranularityPCAFrecognisesthatitcanbemorechallengingtosourceproject-level,asset-levelorsubsidiaryleveldatacomparedtoparent-company-leveldata.ForCommercialLines,assetbaseddatagranularityshallnotbeusedforanyaccountingandreportingunderthisversionoftheStandard.Instead,dataattheentitylevelshallbeused.Emissionandrevenuedatashallalwaysbyonthesamelevel(i.e.,companyorsubsidiarylevel).ThisrequirementisbasedonmajorassetspecificLoBs,likeconstructionallrisk&erectionallrisk,beingoutofscopeofcurrentversionoftheStandard,thechosencommercialattributionfactorandthelackofaninsuranceindustrywide39Moreinformationcanbefoundat:https://www.ecoinvent.org40Moreinformationcanbefoundat:https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-202241Moreinformationcanbefoundat:https://www.ipcc-nggip.iges.or.jp/EFDB/find_ef.php42Moreinformationcanbefoundat:https://iinas.org/en/43Moreinformationcanbefoundat:http://www.fao.org/partnerships/leap/database/ghg-crops/en44Forbusinesswrittenthroughamanaginggeneralagent,exactsplitsofsectoralinformationmaynotbeavailable.Incaseswherethesectoralsplitisnotavailable,re/insurerscouldresorttoproxiessuchasmarketaverages.45Moreinformationcanbefoundat:https://www.exiobase.eu46Moreinformationcanbefoundat:https://www.gtap.agecon.purdue.edu/47Moreinformationcanbefoundat:http://www.wiod.org40PartC:Insurance-AssociatedEmissionsdefinitionofthetermassetinthecontextofassetbasedinsurancecoverage.ThesetopicswillneedtobeaddressedinafutureversionoftheStandard.PCAFacknowledgesthatusingdataatanentitylevel(parentorsubsidiary)tomeasuretheinsurance-associatedemissionsofspecificinsuredactivities,locations,orprojectsmayleadtoalessaccurateorspecificmeasurementofemissions.Inordertoreflectthis,wheneverusingparent-company-leveldataordatarelatedtoahigherentityrelativetotheinsuredproject,assetorsubsidiary,theresultinginsurance-associatedemissionswillbeassignedalowerqualityscore.Anexampleofthisisusingparentcompany-reportedverifiedemissionsdataandrevenueinordertoestimateemissionsassociatedwithaninsuredprojectorasset:thiswillbeawardedscore4insteadofscore1.Similarly,ifcompanyverifiedemissionsandproductionoutputisknownandusedtoestimatetheemissionsassociatedwiththeinsuredassetorproject,thiswillbeawardedscore4insteadofscore3.QualityscoringPCAFdistinguishesthreeoptionswithsixsub-optionstocalculatetheinsurance-associatedemissionsfromcommercialpoliciesdependingonthedataused.Ifare/insurerusesamixofoptionstocalculatetheemissionsofaninsuredentity(e.g.,actualverifiedemissionisknownandonlyanaveragerevenue/proxyisusedtocalculateattributionfactor,whichmeansthatOption1aandOption3baremixed),thedatascoreforthelower-ratedoptionshouldbeassumedforthisinsured(i.e.,score5fromOption3b).Asscope1and2emissionswillbereportedcombined,dataqualityscoringwillbeappliedtobothscopesjointly.Dataqualityscoringwillbeappliedseparatelytoscope3emissionsdataifreported.Sincescope1and2emissionscanhavedifferentmethodsofestimation,thecombineddataqualityscoretobereportedshallbethelowestofthetwomethods.LIMITATIONSExposuretomarketvolatilityBothre/insurancepremiumandcustomerrevenueareexposedtovolatilityduetoinsurancemarketcyclesandgeneralmacroeconomicmarketmovements,whichcanbedecoupledfromchangesinrealworldGHGemissions.Forexample,asurgeinenergypriceswouldleadtolowerinsurance-associatedemissions,andanincreaseinlossactivityfactoredintore/insurancepremiumsovertimecouldleadtoincreasedinsurance-associatedemissions,evenifneithertheinsured’semissionsnortheprovidedinsurancecoverhaschanged.Thiscouldleadtocounterintuitivedevelopmentsofinsurance-associatedemissions,requiringextraeffortsforare/insurertounderstandandappropriatelyexplainthosedynamicsintheirreporting.GeneralisednatureofOption3OnelimitationofOption3isthegeneralisednatureandnecessaryassumptionsmadeinapplyingregion-orsector-specificaveragevalues,bothforemissionsandfinancialdata.Thismakescalculationslessrobustandmoreuncertainthanthosebasedonclient-specificdatabecausethedataislargelybasedonregion/sectorassumptionsandapproximationaverages.Inaddition,statisticaldataoracknowledgedEEIOtablesforagivenregionneedtobecriticallymappedto41PartC:Insurance-AssociatedEmissionsthesectorclassificationusedbythereportingre/insurer,asthesectorsmaynotmapone-to-oneandmaycauseemissionstobeover-orunderstated.MeasurementinconsistenciesInconsistenciescanarisefrommeasuringpartoftheportfoliowithcustomer-specificemissionsdata(whichmayencompassscopes1,2,and3)andfrommeasuringanotherpartwithregion-orsector-specificaverageemissionsdata(whichoftenencompassesonlyscope1and2emissions).Onemitigatingfactoristhatusingcustomer-specificemissiondatacouldimprovetheaccuracyoftheregion-orsector-specificaveragedata,providedthatthere/insurerhasenoughclient-specificdatapointsrelativetothesizeoftheportfolioinagivensector.Forexample,ifamajorityoftheclientsinaninsurer’stextilemanufacturingpropertyportfolioprovidespecificemissionsdata,theseaveragescouldbeapplied(insteadofindustry-widesectoraverages)totheotherclientsinthesectorthatdonotprovidespecificemissionsdata.5.3EmissionsassociatedwithpersonalmotorportfoliosPleaserefertotheImportantNoteonpage3,especiallywithrespecttosolicitationofcommentaryandthattheuseoftheproposedmethodologyissubjecttothelaws,rulesandregulationsapplicabletoeachreportingre/insurancecompany.Theterm“personalmotorportfolios”referstoinsurancecontractsmadetoreimburseownersofdifferenttypesofpersonalmotorvehiclesinthecasetheownerincurslossesrelatedtothevehicle.Insurancecompaniesprovidefinancialprotectionfrompotentialriskslikedamages,theftandvandalism,aswellasfromnaturalcausessuchasfloodsandearthquake.Insurancecompaniesprovidethisprotectionforvarioustypesofmotorvehicles.Therefore,oneinsurancecompanymayoffercoveragetomotorcyclesandpassengercars,whileanothermayoffercoverfortrucksandbuses.Re/insurersshallreportonallvehicletypeswithinthesegment.Ifspecificvehicletypesareexcludedfromreporting,anexplanationshouldbeprovided.Itistheresponsibilityofeachinsurertodefinethevehicletypesthattheyincludeintheirrespectiveinventoriesofinsurance-associatedemissions.42PartC:Insurance-AssociatedEmissionsThefollowingliststhevehicletypesthatmayfallunderthesegmentofmotorvehicleinsuranceproducts.Thelistisnotexhaustive.Thissegmentdoesnotcoveranyvehiclesusedforcommercialpurposesandcoveredunderacommercialinsurancepolicy.Onlyprivate-usevehiclesarewithinscope.•Passengercar•Motorcycle/Motorbike/Moped•Passengervan•Passengertruck•MotorhomeForassistanceinidentifyingorclarifyingthisscopewithinariskcarrier’sspecificportfolio,Annex6providesguidanceforafewmarkets.Thisshowsthedefinedin-scopevehicletypesbasedonthetypicalclassificationofaxlenumberfortheUSandontheEUclassificationofvehicletypes.EMISSIONSCOPESCOVEREDRiskcarriersshallcalculateandreporttheinsurance-associatedemissionsoftheannualscope1andscope2emissionsofthevehiclesbeinginsured:•Scope1:Directemissionsfromfuelcombustioninvehicles•Scope2:Indirectemissionsfromelectricitygenerationconsumedinplug-inhybridvehiclesandelectricvehiclesATTRIBUTIONOFEMISSIONSOnephilosophybehindcalculatinginsurance-associatedemissionsforpersonalmotoristhatofan“enabler”.Re/Insurersarenotaloneinmakingitpossibleforvehiclestobeontheroad,buttheyareasignificantstakeholder.Thedifferenceinphilosophycomparedtofinancedemissionsexplainsthedifferenceincalculatingtheattributionfactor.Lendinginstitutions(withthephilosophyofan“owner”)willusethevaluesoftheoutstandingloanamountdividedbythevalueofthevehicleatoriginationtocalculatetheattributionfactor.Incortrast,re/insurersneedvaluesthatrelatetothevehicle’susethroughoutitsoperationallifewhilebeinginsured.The“enabler”philosophyismoreencompassingthanthe“followtherisk”principle.Byadequatelyabatingtherisksfortheinsured,theinsuredactivitiesarealsoenabled—thatis,theabilitytooperatethevehicle.Thereareotheractivitiesofre/insurerswhichenabletheinsuredclienttocontinuethecoveredactivity,suchasriskengineeringservices,claimsservices,etc.Thesearenotrelevantperseforpersonalmotorandnotin-scopeinthisStandard.PCAFacknowledgesthatinsurancecompaniesarenotaloneinthisroleofenabler.Severalprivatecompanies’andgovernments’activitieseithercontributetotheexistenceanduseofeachmotorvehicle,suchasthroughtransportationpoliciesandinfrastructure,orgovernmentsubsidies.Examplesofenablingactorsincludethefollowing:motorvehiclesmanufacturers,dealers,maintenanceservices,gasstationsandrepairers.Allareplayerswithinthevaluechainofmotorvehicles.43PartC:Insurance-AssociatedEmissionsAccountingofGHGemissionsassociatedwithinsuranceactivitiesshouldthereforeentailtheusageofaproperattributionfactorthatassociatesanappropriatesharetore/insurers,whilealsorecognizingtheroleoftheothersmentioned.Thisisrelatedtotheeconomicparticipationofre/insurancewithintheentirevaluechainofmotorvehicles(seeFigure5-2).Figure5-2:MotorvehiclevaluechainDealersRoadsManufacturersTowservicesGaragesPWreckersOthersRepairersMaintenanceservicesGasstationsMotorvehiclesvaluechainInsurers$...CO2Thisparticipationisreflectedmoreconcretelyastheamountofpremiumpaidbyavehicleownerascomparedtoallothercostsassociatedwithowningthatvehicle.Themostcommonlycitedelementsforvehicletotalcostofownershipinclude:•Vehicledepreciationcosts–thecarowner,manufacturersanddealersmayberepresentedbythesecosts•Fuelcosts–gasstationsmayberepresentedbythesecosts•Maintenance–towservices,wreckers,repairshops,etc.mayberepresentedbythesecosts•Registrations/taxes–roadsandgovernmentinfrastructuremayberepresentedbythesecosts•Parking,tolls,etc.–morerelevantinsomejurisdictionsversusothersTheentirerangeofperilsconsideredwithinpersonalmotorinsurancecontractsmaybeusedtocalculatetheemissionattributionfactor.PerilsincludecompulsoryperilsinsomejurisdictionssuchasMTPL(mandatorythird-partyliability)andnon-compulsoryperilssuchasMOD(motorown-damage),roadassistanceordriveraccident.Usingthefullrangeofperilsfordefiningtheattributionfactorsimplifiesandfacilitatesthedatacollectionprocess.ApotentialuseoftheattributionfactoristoencourageactionsbyvehicleownerstoreduceGHGemissions.Thereareseveralwaysthatpolicyholderscanlowertheirvehicle-associatedemissions,forexamplethroughchoiceofvehicle,drivinghabits(notspeeding)ordrivingdistance.Anattributionfactorwhichrecognisesindividualpolicyholderactionswouldbeideal.4848PCAFrecognisesthatthereareotherconsiderationsbeyondemissionsthatalsoinfluenceordictatepolicyholderactions,suchastheavailabilityand/oraffordabilityofvehiclestoaspecificpolicyholder,infrastructuresuchaspublictransportationoravailablevehiclechargingstations,andgovernmentalpoliciesthateithersupportorlimitvehiclechoices,fueloptions,etc.44PartC:Insurance-AssociatedEmissionsFormulatocalculateinsurance-associatedemissionsAsanattributionprinciple,theinsurance-associatedemissionsaredeterminedbytheratiooftheinsurer’srevenuereceivedfromtheinsured(i.e.,theinsurancepremium)totherevenuesofallotherfactorsthatarepartofavehicle’sownership.Forsimplificationofcalculation,thisvalueisapproximatedbythecostofinsurancerelatedtotheannualrunningcostsofapassengervehicle.Theformulaforthecalculationofthismethodforemissionsassociatedwithpersonalmotorportfoliosis:Insurance-associatedemissionsAttributionfactorofportfolio×EmissionsofinsuredvehicleswithinportfolioP=or(forcaseswhereriskcarriersareunabletousetheindustryattributionfactorabove)Definitions1.(Industry)AttributionfactorP:AttributionfactorofportfolioP,whichwillbecalculatedandprovidedbyPCAFusingpubliclyavailableinformationandopen-sourceresearchfrommarketsglobally.2.(Individual)AttributionfactorP:Individualinsurer’sattributionfactorofportfolioP.3.Insuranceindustry’stotalpremiumfromthemotorlineofbusiness(numerator):representstheinsuranceindustry’stotalpremiumfromthemotorlineofbusinessforallinsurancecovers(monetaryamount).4.Totalcostsassociatedwithvehicleownership(denominator):includesinsuranceaswellasdepreciation,fuelexpenses,maintenance,repairs,taxes,registrations,tolls,parkingexpensesandpotentiallyothers(monetaryamount).5.EmissionsofinsuredvehicleswithinportfolioP:canbecalculatedinavarietyofwaysdependingonavailabledataregardingtheinsuredvehicles.Furtherdetailsoncalculatingthisvaluecanbefoundinthesectionson“DataQuality”and“DataRequired”.TheindustryattributionfactorasexplainedabovewillbecalculatedandprovidedbyPCAFusingpubliclyavailableinformationandopen-sourceresearchfrommarketsglobally.PCAFwillthenvalidateandpublishavalueatthehighestlevelofgranularitypossible,citingallsourcesofinformation.Ifdataandresearchallow,theattributionfactorshallbecalculatedatthestate/provinciallevelorcountrylevel.Wheredataisunavailable,aregionaland/orglobalvaluewillbeavailableforthosemarketswherethegreaterlevelofgranularityisnotpossible.Theshareofinsurancecostonagloballevelrangesfrom10%to26%oftotalcostsassociatedwithvehicleownership.4949BasedonPCAFresearch.45PartC:Insurance-AssociatedEmissionsThePCAF-providedvaluewillthenbeusedbyallpersonalmotorriskcarriersinthosemarkets,withPCAFupdatingtheattributionfactoratleastonceeveryfiveyears.Riskcarriersmaypresentupdatesand/ormoregranularlevelattributionfactorstoPCAFforvalidationandinclusioninthedatabase,tobeusedbyallriskcarriersinfuturereporting.Riskcarriersshallusethehighestlevelofgranularityavailableatthetimeofreporting.Ininstanceswheredatachallengespreventariskcarrierfromreportingthehighestlevelofgranularityavailable,adifferentlevelmaybeusedwithexplanation.InmarketswhereriskcarriersareunabletousethePCAFprovidedtotalcostofownershipattributionfactor,re/insurersareabletofollowthemethodologybelowtocalculatetheirownattributionfactorvaluebasedonthetotalcostofownershipapproach.TheywillprovidePCAFwithdetailsofsourcesusedforthecalculation.50METHODOLOGYFORRE/INSURERCALCULATIONOFTOTALCOSTOFOWNERSHIPATTRIBUTIONFACTORInitialresearch51intothisattributionfactorrevealsthefivemainelementswhichmakeupthetotalcostofownership,alongwithasixthcategoryforotheritems:•Depreciation•Fuelcosts•Insurancepremiums•Maintenance•Registrations/taxes•Others–parkingfees,tolls,etc.Forthepurposeofthisstandard,re/insurancepremiumisdefinedasgrosswrittenpremium(thetotalamounttobepaidbytheinsuredtothere/insurerforthepolicywrittenintheperiod)minusexternalacquisitioncosts(e.g.,agentfees).Formulti-yearcontracts,anannualisedpremiumvalueshallbeused.Wherere/insurersdonothavetheexternalacquisitioncosts,grosswrittenpremiummaybeused.ThePCAFdatabasewillprovideriskcarriersthatperformthecalculationindividuallywiththeinformationand/orsourceforeachelementincludedintheindustryattributionfactorprovidedbyPCAF.WhenusingPCAForotherfullmarket-basedinformation,ariskcarrierwillneedtoadjustvaluestorepresentthesameportionasitsownshareofthemarket.Thatis,ifariskcarrierhasa20%marketshare,thefullmarket-basedvaluewillneedtobeadjustedto20%.Ininstanceswherethereisinsufficientdataforariskcarriertoincludetheirindividuallyperformedcalculation,thelackofinclusionofanelementwillbedisclosed.Theabsenceofanyelementcategorywillresultinahighervaluefortheinsurancerelatedportionofthetotalcostofownership.Thisapproachisin-linewithexistingprecautionaryprinciplesofPCAF.50PleaserefertotheImportantNoteatthebeginningofthisdocument,especiallywithrespecttosolicitationofcommentaryandthattheuseoftheproposedmethodologyissubjecttoregulationsorgovernmentalorsupervisorypracticeorfinaljudicialdecisioninthejurisdictionsinwhichthatcompanyoperates.51Countriesintheinitialresearch:USA,Australia,Germany,Japan,UK,Brazil,andSouthKorea.46PartC:Insurance-AssociatedEmissionsWhereriskcarriersperformtheirowncalculation,thesixelementsaboveshallbeincludedtoensureconsistencywiththetotalcostofownershipapproachbeingappliedbyotherriskcarriersusingtheStandard.Foreachelementaclearreferenceshallbeprovidedtothedataand/orsourceusedforthevalue.Andadetaileddescriptionofthecalculationperformedshallbeprovided,toenablethird-partyvalidation.Whenreportingtheinsurance-associatedemissions,fulldisclosurebytheriskcarriershallbeprovidedspecifyingwhetherthePCAFprovidedorarisk-carriercalculatedattributionfactorwasused.Whenariskcarriercalculatedattributionfactorisused,thedisclosureshallincludereferencestosources,anyassumptionsordeviationsinthecalculation,andtheresultingattributionfactor.Carrier-specificconfidentialorsensitiveinformationshouldneverbeprovidedaspartofthedisclosure.DATAQUALITYTheinsurance-associatedemissionsfrommotorvehiclepoliciescanbecalculatedinseveralwaysdependingontheavailabilityofdatatoderivetheemissionsoftheinsuredvehicle.Overall,PCAFdistinguishesthreeoptionstocalculatetheinsurance-associatedemissionsfrommotorvehiclepolicies:52•Option1:actualvehicle-specificemissions,53whereemissionsarecalculatedbasedonactualvehiclefuelconsumptionoractualvehicledistancetravelled,andontheemissionintensityoftheactualvehicleoremissionintensityderivedfromthevehicle’smakeandmodel.-Option1a:Vehicleemissionsarecalculatedbasedonactualvehicle.-Option1b:Vehicleemissionsarecalculatedbasedontheactualvehicle’semissionintensity54oremissionintensityderivedfromthevehicle’smakeandmodel,55andactualvehicledistancetravelled.•Option2:estimatedvehicle-specificemissionsandlocaldistancedrivenaverages,whereemissionsarecalculatedbasedonestimatedvehicledistancetravelledfromprovince/state/country-levelofficialstatisticsandontheemissionintensityoftheactualvehicleoremissionintensityderivedfromthevehicle’smakeandmodel.-Option2a:Vehicleemissionsarecalculatedbasedontheemissionintensityoftheactualvehicleoremissionintensityderivedfromthevehicle’smakeandmodel,andestimateddistancetravelledofanaveragevehicletype(e.g.,cars,vans,motorcycles)fromprovince/state/country-levelstatisticaldata.-Option2b:Vehicleemissionsarecalculatedbasedontheemissionintensityoftheactualvehicleoremissionintensityderivedfromthevehicle’smakeandmodel,and52Foralloptionstheattributionfactoriscalculatedinthesameway;theonlythingchangingisthewayvehicleemissionsarecalculated.53Formotorvehicleinsurancetoconsumers,thisapproachseemsratherunrealisticasconsumersareunlikelytoreporttheiractualfuelconsumptionordistancetravelledtoare/insurer.However,formotorvehicleinsurancetobusinesses(inparticularforinsuranceofcompany-ownedstaffcars),companiesoftencollectinformationonactualfuelconsumptionordistancetravelledandcouldsharesuchinformationwithre/insurers.54Emissionintensityofavehicleiseitherdeclared/collectedfromthecustomerormatchedinacountry-specificvehicleemissiondatabaseusingavehicleidentificationnumber(VIN)oracountryvehicleregistration/identifier.55Vehiclemakeandmodelreferstothenameofthecompanythatmanufacturesthevehicleandtheproductnameofthevehicle.Forexample,ToyotaPrius.47PartC:Insurance-AssociatedEmissionsestimateddistancetravelledofanaveragevehiclefromprovince/state/country-levelstatisticaldata.•Option3:estimatedvehicle-unspecificemissionsandcontinentaldistancedrivenaverages,whereemissionsarecalculatedbasedonestimatedvehicledistancetravelledfromcontinental-level56officialstatisticsandontheemissionintensityofanunspecifiedvehicle(emissionintensityfortheactualvehicleorvehicle’smakeandmodelisunknown).-Option3a:Vehicleemissionsarecalculatedbasedontheemissionintensityofanaveragevehicletypeand/orfueltype57(e.g.,plug-inhybridpassengercar,dieselvan,motorcycle)andestimatedvehicledistancetravelledfromcontinental-levelstatisticaldata.-Option3b:Vehicleemissionsarecalculatedbasedontheemissionintensityofanaveragevehicle(wheretheemissionintensityforthevehicletypeisunknown)andestimatedvehicledistancetravelledfromcontinental-levelstatisticaldata.DatarequiredOptions1b,Option2a,andOption2babovearedependentontheavailabilityofemissiondataoftheactualvehicleorderivedfromthemakeandmodelofthevehicle.However,thedatausedforvehicledistancetravelledisofhigherqualityforOption1bthanitisforOption2a,anditisofhigherqualityforOption2athanitisforOption2b.Hence,thereareseveraloptionstocalculateinsurance-associatedemissionsbutthequalityoftheresultsisnotthesameforeach.Forthisreason,PCAFgivesahigherscoretoresultsobtainedwithhigher-leveldataqualityandalowerscoretoresultsobtainedwithlowerdataquality(score1=highestdataquality;score5=lowestdataquality).Ifare/insurerusesamixofoptionstocalculatetheemissionsofaninsuredvehicle(e.g.,mixingOptions1band3a,wherebyactualdistancetravelledandvehicletypeisknown,butvehiclemakeandmodelisunknown),thedatascoreforthelower-ratedoptionshouldbeassumedforthisinsured(i.e.,score4fromOption3a).Table5-4providesdataqualityscoresforeachofthedescribedoptionsthatcanbeusedtocalculatetheinsurance-associatedemissionsformotorvehiclepolicies.56Statisticsorproxyscopeisbiggeroroutsidethecountry.57Fueltypegranularityisoptionalbuthighlyrecommended.Otherattributesthatcanrefinethevehicletypeemissionintensitysuchascubiccapacity/sizeformotorcycles,canbeusedtoreplacefueltype.48PartC:Insurance-AssociatedEmissionsTable5-4.Generaldescriptionofthedataqualityscoretableformotorvehicleinsurance(score1=highestdataquality;score5=lowestdataquality)DataqualityOptionstoestimateinsurance-associatedemissionsWhentouseeachoption(whatdatashouldbeavailable)Emissiondata/CalculationVehicleusagedataEmissionintensityScore1Score2Option1:actualvehicle-specificemissionsOption2:estimatedvehicle-specificemissionsandlocaldistancedrivenaverages1aActualfuelconsumptionActualdistancetraveledEmissionintensityofthefueltypeEmissionintensityoftheactualvehicleorofthevehicle’smakeandmodel1b2aEstimateddistancetraveledofanaveragevehicletype(cars,vans,motorcycles)ontheprovince/state/countryScore32bEstimateddistancetraveledofanaveragevehicleonthefortheprovince/state/countryScore4Option3:estimatedvehicle-unspecificemissionsandcontinentaldistancedrivenaverages3aEstimateddistancetraveledofanaveragevehicleonthesubcontinent/continentEmissionintensityofanaveragevehicletype(cars,vans,motorcycles)and/orfueltype(fossilfuel,hybrid,electric)Score53bEmissionintensityofanaveragevehicleAdetailedsummaryofthedataqualityscoretable,includingdataneedsandformulastocalculateinsurance-associatedemissions,isprovidedinAnnex2(Table10-2).Dataforallthreeoptionscanbederivedfromdifferentdatasources.Emissionintensitydataofaparticularvehicleisusuallysourcedfromalocal(country)dataproviderusingavehicleidentificationnumber(VIN)oranequivalentuniquekey.EmissionintensityderivedfromvehiclemakeandmodelcanbesourcedfromofficialstatisticaldatasourcessuchastheUSEPA’sFederalTestProcedure58andtheEuropeanEnergyAgency’s(EEA)WorldwideHarmonised58TheUSEPA’sFederalTestProcedureisaseriesofdrivecycleteststomeasurethetailpipeemissionsandfuelefficiencyofpassengercars.BecausethesetestsareusedtoverifythatcarssoldintheUSmeetEPAregulatorystandards,theirresultsreflecttheroadperformanceofpassengercarsintheUS.Theresultsformorethan4,000makesandmodelsarepubliclyavailableonfueleconomy.gov,downloadablein.csvformat.49PartC:Insurance-AssociatedEmissionsLightVehiclesTestProcedure(WLTP).59Toachievebettercomparability,re/insurersshouldaimtoreportbasedonasingletestingstandardpergeographicalarea,byapplyingconversionfactorbetweendifferenttestingstandards,wheneveravailable.Bothdatasourcesprovidevehicleemissionintensitybymakeandmodel.Option1b,Option2a,andOption2brequiresuchinformation.Ifmakeandmodelareunknowntothereportingre/insurer(Option3),vehicleemissionintensitycanbeestimatedonthevehicletypeleveland/orfueltypelevelusingaveragesderivedfromthesourcesmentionedabove,orusingtheInternationalCouncilonCleanTransportation’s(ICCT’s)TransportationRoadmap,ortheInternationalTransportForumattheOrganizationforEconomicCo-operationandDevelopment(ITFOECD).Ifnoactualdistancetravelledisknowntothereportingre/insurer,dataonvehicledistancetravelledcanbeestimatedbasedondatasourcessuchastheICCTTransportationRoadmaportheITFOECD.Severallocalstatisticaldatasourcesprovidegeography-specificvehicledistancestravelled.FortheUSandCanada,state-orprovince-leveldistancetravelledperyearcanberetrievedfromcarinsurance.comandtheCanadianOfficeofEnergyEfficiency.PCAF’sweb-basedemissionfactordatabaseprovidesemissionfactorspervehicletype(e.g.,passengercar)andpervehiclemakeandmodelforalargesetofgeographies.Thesemotorvehicleemissionfactorsarewidelybasedonthesourcesmentionedabove.PCAFexpectsthattheinsurance-associatedemissionsformotorvehicleinsurancecanbederivedthrougheitheractualvehicle-specificemissions(Option1),estimatedvehicle-specificemissionsandlocaldistancedrivenaverages(Option2),orestimatedvehicle-unspecificemissionsandcontinentaldistancedrivenaverages(Option3).However,PCAFallowstheuseofalternativeapproachestocalculateemissionsifnoneofthespecifiedoptionscanbeusedorinthecasethatnewapproachesaredeveloped.Thereportingre/insurershallalwaysexplainthereasonsforusinganalternativeapproach.DATALIMITATIONSDataavailabilityInformationregardingactualvehicledistancetravelledmaynotbeeasilyavailableorreliable.Actualdata(fuelconsumptionordistancetravelled)isrecommendedtobesourcedfromtelematicsorshouldbesubstantiated,suchasthroughuseofodometerphoto/reading.Self-declareddistancetravelledcanalsobeusedasactualdistancetravelledifself-declareddataissubjecttofraudchecksor/andusedforpricing/claimspurposes.Applyingcalibrationfactorsmaybeusedtomakedatamoreaccurate.Ifactualdataisunavailable,PCAFproposesusinggeographicalaveragesonvehicledistancetravelledbystate,province,countryorregion.Re/insurersshouldexplainthebasisforobtainingand/orcalculatingrelevantdata.59TheWLTPisaglobal,harmonisedstandardofdrivecycleteststodeterminethetailpipeemissionsandfuelefficiencyofpassengercars.ItwasdevelopedbytheUnitedNationsEconomicCommissionforEuropetoreplacetheoldNewEuropeanDrivingCycle(NEDC)astheEuropeanvehiclehomologationprocedure.TheNEDCwasshowntobeflawed,enablingmanufacturerstomeetEUenvironmentalstandardsduringlabtestsbutnotontheroad(Dieselgate).TheWLTPwasconceivedtorectifythis.TheWLTPfinalversionwaspublishedin2015.Hence,eventhoughitwillbecomeatrulyinternationalstandardintime,itisonlyusedintheEUfornow,anditsresultsonlyreflecttheperformanceofcarssoldwithintheEU.TheseresultsarepublishedbytheEEAin.csvformatandcanbedownloadedathttps://www.eea.europa.eu/data-and-maps/data/co2-cars-emission-2150PartC:Insurance-AssociatedEmissionsPubliclyavailablevehicleemissionfactordatabasesusuallyusethemakeandmodelofavehicleasaproxytoderivetheemissionsofaparticularvehicle.Asthereisnoindustrystandardonnamingvehicles,vehiclematchingusingmakeandmodelasaproxycangiverisetoinconsistencies.Hence,PCAFrecommendsthatre/insurerscollecttheactualvehiclemakeandmodelandothervehicleinformationsuchasenginetypeandefficiencytodeterminetheexactvehicletomatchinemissionfactordatabase.Ifthere/insurerdoesnottrackthevehiclemakeandmodel,PCAFrecommendsthatthere/insurerfallsbacktoagenericvehicletype(e.g.,passengercar,motorcycle,lightcommercialtruck)ortoanaveragevehicleasalastresort(whereemissionintensityisdeterminedbytheweightedaveragevehicleefficiencyintherespectivegeography).ElectricvehiclesandelectricitygridestimatesForelectricvehicles,emissionintensitycanbederivedusingtheelectricityconsumptionintensity(usingthesamedatasourcingmethodsasemissionintensity)andtheelectricitygridemissionfactor.Exactelectricitysourcedatawillnotbeknownforeachvehicleinare/insurer’sportfolioasitisnotpossibletoascertainhoweachre/insuredsourcestheirelectricity.Wherepossible,themostcommonlocalorregionalelectricitygridmixemissionfactorfortheinsured’slocationshouldbeused.Ifunavailable,themostcommonelectricitygridmixemissionfactorintherespectiveregionforthere/insurer’sbranchshouldbeused(i.e.,locationofthere/insurerwherethepolicywasissued).Ifalsounavailable,country-levelelectricitygridmixemissionsdatashouldbeused.Dual-fuelvehiclesFordual-fuelvehicles,thepercentageofusageperfuel(e.g.,gasolinevs.electricity)maybeunknown.Ifthevehiclemakeandmodelisknown,PCAFrecommendsassuminganaverageusagesplitfortherespectivehybridvehiclebasedoninformationfromnationalagenciesorthevehiclemanufacturer.Ifsuchinformationisnotavailable,PCAFrecommendseitherapplyinganaveragegeography-specificusagesplit.Ifthatisalsonotavailable,PCAFrecommendsapplyingtheconservativeassumptionthatthecombustionengine(e.g.,gasoline)isused100%ofthetime.51PartC:Insurance-AssociatedEmissions6.Reportingrequirements,recommendations,andmetricsAglobal,standardisedmethodologytomeasureanddisclosetheGHGemissionsassociatedwithinsuranceandreinsuranceunderwritingportfoliosisintendedtocreateconsistencyandcomparabilityinreporting.Ratherthancreatinganewframework,PCAFhasdevelopedthesereportingrequirementsandrecommendationstocomplementexistingframeworkssuchasTCFD,GlobalReportingInitiative(GRI),theSustainabilityAccountingStandardsBoard(SASB),generallyacceptedaccountingprinciples(GAAP),andtheInternationalSustainabilityStandardsBoard(ISSB).Therequirementsandrecommendationsaresupplementarytoandbuilduponthereportingrequirementssetoutbythe"GHGProtocolCorporateValueChain(Scope3)AccountingandReportingStandard".Allre/insurersthatdecidetoadoptandusethisStandardshallfollowtherequirementsthereinwhenpubliclydisclosingtheirinsurance-associatedemissions.Theyhavetheflexibilitytodecidewheretheywanttostartwithmeasuringanddisclosingtheirinsurance-associatedemissions—forinstance,ataspecificlineofbusinesslevelorbysector.Flexibilityinreportingisallowedlargelyasaconsequenceoflimitationsindataavailabilityandquality.PCAFrecognisesthatdataformanyinsuredsmaynotbeavailabletore/insurersandthatinsuredsmaynotconsistentlydisclosetheiremissionsoremissionsarisingfromaninsuredactivity.Therequirementsfordisclosureofinsurance-associatedemissionsdescribeaminimumdisclosurelevelwithflexibilityforre/insurerstoreportmore.Anyrequirementsnotfulfilledmustbeexplained.Minimumreportingrequirementsaredescribedinthischapterusingtheword“shall”.Wherecertainaspectsofreportingarenotrequiredbutencouragedasbestpractice,theword“should”isused.Anallowedoptionisindicatedusingtheword“may”.Thepublicdisclosurestobemadebyre/insurersconcerningcommerciallineportfoliosislimitedtotheinformationincludedinTables11-1and11-2inAnnex3only.Inparticular,thedatausedintheemissionscalculations,theassociatedworkingsandtherelevantattributionfactorswillnotbepubliclydisclosednordisclosedamongstre/insurers.52PartC:Insurance-AssociatedEmissionsINSURANCE-ASSOCIATEDEMISSIONSVERSUSFINANCEDEMISSIONSBackgroundPCAF’sflagshipGHGAccountingandReportingStandardcoversmethodologiesformeasuringtheGHGemissionsassociatedwithloansandinvestments,knownasfinancedemissions.However,thereisnoequivalentglobalstandardformeasuringemissionsassociatedwithinsuranceandreinsuranceunderwritingportfolios,asinsurancebusinessdiffersfrombankingandinvestingactivities.ToappropriatelydifferentiatetheGHGaccountingandreportingassociatedwithre/insuranceunderwritingfromthatoffinancedemissions,PCAFproposescallingtheseinsurance-associatedemissions.PCAFexplainsthedifferencesandsimilaritiesbetweenfinancedemissionsandinsurance-associatedemissionsinChapter4.Fortheavoidanceofdoubt,insurance-associatedemissionsandfinancedemissionsarenot,andarenotintendedtobe,directlycomparable.Insurance-associatedemissionsandfinancedemissionsshallbereportedseparatelyandnot,underanycircumstance,aggregatedundertheGHGProtocolscope3category15(Investments).Insurance-associatedemissionsareasupplementaryaccountingnotetotheGHGProtocolscope3category15(Investments).ThisisfurtherconsideredintheillustrativeexamplebelowinBox6-1.53PartC:Insurance-AssociatedEmissionsBox6-1.Illustrativeexampleoftheincompatibilityofaggregatingfinancedemissionsandinsurance-associatedemissionsRe/insurancecompaniesareexposedtotheemissionsassociatedwiththeirinvestmentportfolios(asassetmanagers),andemissionsassociatedwiththeirre/insuranceportfolios(asre/insurers).Therelationshipbetweenare/insurerandtheirclientisfundamentallydifferentfromtherelationshipbetweenaninvestorandtheirinvestee.Insurerslackownershipof,ordirectcontrolover,theactivitiesofinsureds.Theattributionfactorsappliedacrossthefinancedemissionsandinsurance-associatedemissionsworkstreamsthereforenecessarilydiffertoreflectthedifferenceintheunderlyingrelationship.AlthoughforthepurposesoftheirGHGinventories,bothfinancedemissionsandinsurance-associatedemissionsare“downstream”scope3emissionsofare/insurancecompany,theoutputoffinancedemissionsandinsurance-associatedemissionscalculationsarenotalignedandwilldivergesignificantly.Thereisarealriskthat,inaggregatingtheoutputoffinancedemissionsandinsurance-associatedemissions,re/insurersrisk:(i)doublecountingtheirattributedemissionsimpact;and(ii)misleadingtheend-useroftheirreporting.Wherereportedseparately,thisdistinctioncanbeclearlydrawnandthedisclosuresappropriatelycaveated.Itisthereforerecommendedthatinsurance-associatedemissionsbereportedasasupplementaryaccountingnotetoscope3category15(Investments).Thefollowingexamplesdemonstratethedifferencebetweenthe“Followthemoney”and“Followtherisk”principlesforare/insurerwhenseparatelyconsideringtheemissionsassociatedwithitsinvestmentandre/insurancerelationships:“Followthemoney”:1.InsuredApayspremiumtoinsurer2.InsurerissuesapolicyofinsurancetoInsuredA3.InsurerinvestsaproportionofpremiuminCompanyB4.CompanyBhasdirectscope1andindirectscope2GHGemissions5.InsurerisrequiredtoaccountforthefinancedScope1andScope2emissionsofCompanyBinitsscope3category15emissionsbyapplyinganattributionfactor6.Theattributionfactordependsonthefinancingtypeandsource,butrepresentstheprinciplethattheinsurerhasthepotentialtobenefiteconomicallyfromtheactivitiesofCompanyB“Followtherisk”:1.InsuredApayspremiumtoinsurer2.InsurerissuesapolicyofinsurancetoInsuredA3.InsurerreservesaproportionofpremiumtopayvalidclaimsmadebyInsuredA4.InsuredAhasdirectscope1andindirectscope2emissions5.Insurerisrequiredtoaccountfortheinsurance-associatedscope1andscope2emissionsofInsuredAasasupplementarynotetoitsscope3category15emissionsbyapplyinganattributionfactorgiventhatthereserveshavebeeninvestedbytheinsurer6.Theattributionfactordependsontheinsurancebeingoffered,butrepresentsthe“enablingeffect”thattheprovisionofcontingentcapital(claimspayment)mayhaveonInsuredA’soperationsintheeventofaclaimunderthepolicyofinsurance54PartC:Insurance-AssociatedEmissionsThefollowingexampledemonstratesthepotentialscaleofthedifferenceinoutputbetweenfinancedemissionscalculationsandinsurance-associatedemissionscalculations.Scenario:Are/insurerbothinvestsin,andprovidesinsurancecoveragetoCompanyA.•EquityinvestmentinCompanyAis[$1m]•CompanyA’sEnterpriseValueIncludingCash(EVIC)is[$900m]andithasannualrevenuesof[$300m]•Totalpremium(GWP)earnedbythere/insurerfromtheprovisionofinsurancetoCompanyAis[$1m]forthepolicyperiod.Thepolicycarriesa[$70m]limitofliability.•CompanyA’stotalscope1and2emissionsare[20,000tCO2e].Itdoesnotcurrentlyreportscope3emissions.Forbothcalculations,theformulaisasfollows(with‘c’beingtheinvesteeorborrowerforfinancedemissions,andtheinsuredforinsurance-associatedemissions):!𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓!×!𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒!Theattributionfactorwillvarybetweenthefinancedemissionsandinsurance-associatedemissions(commercialinsurance)calculations.Bywayofexample:Financedemissionscalculation:!𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶ℎ×𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒![1,000,000][900,000,000]×[20,000]=[22.22tCO2e]Insurance-associatedemissionscalculation:!𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅×𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒![1,000,000][300,000,000]×[20,000]=[66.67tCO2e]Asdemonstratedabove,theattributionfactorsforfinancedandinsurance-associatedemissionsattributiondiffermaterially.Evenwherethenumeratorsremainconstant(unlikely).Thereportingofinsurance-associatedemissionsremainsasupplementarynotetothefinancedemissions.55PartC:Insurance-AssociatedEmissionsGHGEMISSIONSCOPECOVEREDFollowingthelogicoftheGHGProtocol,theGHGaccountingmethodologyforinsurance-associatedemissionsshouldatleastfocusonthescope1andscope2emissionsoftheclientsofre/insurers.Forintegratingclients’Scope3emissions,PCAFacknowledgesthat,todate,thecomparability,coverage,transparency,andreliabilityofcustomers’Scope3datastillvariesgreatlypersectoranddatasource.BysupportingthedisclosureofScope3emissionsofclientsovertime,PCAFseekstomakethereportingofScope3emissionsmorecommonbyimprovingdataavailabilityandquality.Toavoiddoublecounting,theinsurance-associatedemissionsrelatingtoclientscope1and2emissionsshallbedisclosedseparatelyfromthecustomers’Scope3emissions;wherethedataallowsforanaccurateandfairaccountofinsurance-associatedemissionsovertime,andwherereportinginthismannerisnotunreasonablyburdensome.Ifre/insurersdonotreportScope3emissionsoftheircustomers,PCAFrecommendsthatre/insurersshouldexplainwhy.PCAFacknowledgesthechallengesandlimitationsofGHGaccountingmetrics,includingthatsuchmetricsshouldnotnecessarilybeinterpretedasriskmetrics.Nevertheless,PCAFviewsthereportingofabsoluteinsurance-associatedemissionsandweightedaveragecarbonintensity(WACI)asafirststep.PCAFtriestobealignedwiththeISSBandTCFDinthatitexpectsdisclosureofthisinformationtopromptimportantadvancementsinthedevelopmentofdecision-useful,climate-relatedmetrics.PCAFrecognizesthatsomere/insurersmaybeabletoreportthemetricsononlyaportionoftheirportfoliogivendataavailabilityandmethodologicalissues.Nonetheless,increasingthenumberoforganizationsreportingthistypeofinformationshouldhelpspeedthedevelopmentofbetterclimate-relatedmetrics.Intheyearstocome,PCAFwillmonitorthedataavailabilityandwillprovideadditionalguidanceontheassociatedreportingrequirements.OverallReportingRequirementsandRecommendations•Principles:GHGaccountingandreportingofinsurance-associatedemissionsofre/insurersshallbebasedonthefollowingprinciples:relevance,completeness,consistency,transparency,andaccuracy.•Purpose:Are/insurers’reportingshouldalignwithitsspecificbusinessgoals;forinstance,foridentifyingandassessingclimate-relatedtransitionrisksandopportunities.•Frequency:Re/insurersshalldiscloseatleastannuallyandatafixedpointintimeinlinewiththefinancialaccountingcycle.Re/insurersshallensurethatthechosenpointintimeprovidesarepresentativeviewontheemissionsforthatreportingyearandshalltransparentlydiscloseiflargechangescloseto(before/after)thereportingdateaffectedtheresults.•Recalculationandsignificancethreshold:Re/insurersshall,inlinewiththe"GHGProtocolCorporateValueChain(Scope3)AccountingandReportingStandard"56PartC:Insurance-AssociatedEmissionsrequirement(page10460),establishabaselinerecalculationpolicy.Thisinordertodefineunderwhichcircumstancesarecalculatingof(baseyear)insurance-associatedemissionsisnecessarytoensuretheconsistency,comparability,andrelevanceofthereportedGHGemissionsdataovertime.Aspartofthebaseyearemissionsrecalculationpolicy,re/insurersshallestablishanddisclosethesignificancethreshold61thattriggersbaseyearemissionsrecalculations.GuidancefromtheGHGProtocolnotesthatcompaniesarerequiredtorecalculatebaseyearemissionswhenthefollowingchangesoccurandsignificantlyimpacttheinventory:-Structuralchangesinthereportingre/insurer,suchasmergers,acquisitions,divestments,outsourcingandinsourcing;-Changesincalculationmethodologies,improvementsindataaccuracy,ordiscoveryofsignificanterrors;and-Changesinthecategoriesoractivities(i.e.,LoB)includedinthescope3inventory.Wherearecalculationoccursasaresultofachangediscussedabove,whicharenotanticipatedtobearegularoccurrence,re/insurersshouldprovidequalitativenarrativetoaccompanytherecalculation.Re/insurersshouldestablishsignificancethresholdsinlinewithapplicablefinancialreportingrequirements.•Formofreporting:Re/insurersshalldiscloseinpubliclyavailablereportssuchas(semi)annualreports,websitearticlesorotherpubliclyavailablesourcesasdeemedappropriatebythere/insurer.Table11-1inAnnex3providesanexampletemplateforhowre/insurerscandisclosetheirinsurance-associatedemissions.•Pastperformance:Whereappropriateandrelevantfortheirbusinessgoals,re/insurersshoulddisclosetheirinsurance-associatedemissionsformultiplecomparabletimeperiods(e.g.,years),withanexceptionforthefirstyearofdisclosure.Table11-2inAnnex3providesanexampletemplateforhowre/insurerscoulddisclosecurrentyearrelativeinsurance-associatedemissionsasagainsttherelativeinsurance-associatedemissionsinthebaselineyear.60(WRIandWBCSD,2011)61DefinitionaccordingtotheGHGProtocol:“Asignificancethresholdisaqualitativeand/orquantitativecriterionusedtodefineanysignificantchangetothedata,inventoryboundaries,methods,oranyotherrelevantfactors.“57PartC:Insurance-AssociatedEmissionsEMISSIONSMETRICSFORTHECONTEXTOFINSURANCE-ASSOCIATEDEMISSIONSDifferentemissionsmetricscanbeusedfordifferentpurposesandsomekeyinsurance-associatedemissionsmetricsandtheirmeritsarediscussedinTable6-1.Thislistisnotexhaustive.Table6-1Emissionmetricsforthecontextofinsurance-associatedemissions62MetricPurposeDescription63KeybenefitAbsoluteinsurance-associatedemissionsTounderstandtheclimateimpactofunderwritingandsetabaselineforclimateactionTheshareofaninsured’sabsoluteemissionsthatisassociatedwiththere/insurer'sunderwritingportfolio,expressedintCO2eUsefulforGHGaccountingandforsettingscience-basedtargets(SBTs)Relativeinsurance-associatedemissionsTounderstandtheeffectgrowth/declineofaninsurer’sbusinesssizevianormalizationoftheabsoluteinsurance-associatedemissionsattheportfolioorsub-portfoliolevelAbsoluteinsurance-associatedemissionsdividedbyamonetaryunitreflectingtheinsurer’ssizeofbusiness,expressedintCO2e/€Mofre/insurer’srevenue,ortotalgrosswrittenpremium,orotherre/insuranceexposuremeasureUsefulforGHGaccountingandforcomparingdifferentportfoliosorpartsofportfoliosandformanagingclimatetransitionrisksbynormalizingtheabsoluteemissions(seeBox6-2)EconomicemissionsintensityTounderstandtheefficiencyofinsureds(orportfolios/sub-portfolios)intermsoftotalGHGemissionspercommonmonetaryunit,reflectingtheinsured’ssizeofbusinessorassetvalueRe/insured’sabsoluteemissionsdividedbyamonetaryunitreflectingtheinsured’ssizeofbusiness,expressedintCO2e/€Mofinsured’srevenueorassetvalueUsefulforinternalcomparisonandqualitativeunderstandingofchangeswithinorbetweendifferentportfoliosorpartsofportfoliosbetweensectorswhereacommoneconomicindicatorisappliedUsedpredominatelytoestimateaninsured’sabsoluteemissionswhereself-reportedemissionsdataismissing62AdaptedfromCROForum,2020;pleasenotethatnotalloftheemissionmetricsmaybereadilyapplicabletoemissionsassociatedwithpersonalmotorportfolios.63Whereapplicableapplyingcurrencyasalignedtothere/insurer’sannualfinancialstatementsreporting.58PartC:Insurance-AssociatedEmissionsPhysicalemissionsintensityTounderstandtheefficiencyofaportfolio(orpartsofaportfolio)intermsoftotalGHGemissionsperunitofacommonoutputRe/insured’sabsoluteemissionsdividedbyaphysicaloutputvalue,expressedintCO2e/MWh,ortCO2e/tonproductproducedUsefulforinternalcomparisonandqualitativeunderstandingofchangeswithinorbetweendifferentportfoliosorpartsofportfolioswhereacommonoutputunitisappliedUsedpredominatelytoestimateaninsured’sabsoluteemissionswhereself-reportedemissionsdataismissingWeightedaveragecarbonintensity(WACI)64Tounderstandexposuretocarbon-intensiveinsureds(commercialclients/companies65)attheportfolioorsub-portfoliolevelAverageeconomicemissionintensity,weightedbypremium,expressedintCO2e/€Mofre/insured’srevenueAphysicalWACIcouldalsobecalculatedUsefulforGHGaccountingandtounderstandaportfolio’sexposuretocarbon-intensivecommercialcompanies•Inadditiontoreportingonabsoluteinsurance-associatedemissions,re/insurancecompaniesshouldconsiderreportingemissionintensities,inparticularweightedaveragecarbonintensity(WACI),ifthesevaluesarerelevanttotheirbusinessgoals(seechapter3).•Economicemissionintensitiesmaybeexpressedonanyportfolio,sub-segmentorsectorlevelinmetrictonnesofCO2epermillioneuro,dollarorequivalentofrevenue(aligningtothereportingcurrencyinthere/insurer’sfinancialstatement):tCO2e/M€ortCO2e/M$.•Whenrelevanttotheirbusinessgoals,re/insurancecompaniesshouldconsiderreportingphysicalemissionintensitiespersectorusingsector-specificactivity(e.g.,tCO2e/m2forrealestate,tCO2e/MWhforpowerutilities,tCO2e/tonneofsteelproducedforsteelcompanies).64(TCFD,2017)65Thewordcompanyreferstothere/insurer’scustomers.59PartC:Insurance-AssociatedEmissionsBox6-2.Illustrativeexampleonthebenefitsofreportingrelativetogetherwithabsoluteinsurance-associatedemissions”Absoluteinsurance-associatedemissions”refertothevolumeofGHGemissionsofaninsuredthataresubsequentlyassociatedwithare/insurancecompanyforthepurposesofGHGaccounting.Calculationofabsoluteemissionsprovidesre/insurerswithanecessarybaselinefromwhichtheycansettheirdecarbonizationtrajectories.Absoluteemissionsareindependentofdilutingbusinessmetrics,andreflectreal-worldchangesinemissions.Thereisanexpectationthatabsoluteemissionsdatawillbecomemorereadilyavailableovertimeasreportingrequirementsincreasinglyrequireitsdisclosure.Thisshouldhelpimprovedataqualityovertime.“Relativeinsurance-associatedemissions”refertoabsoluteemissionsthathavebeennormalised(i.e.,divided)byanothervariable,suchasrevenue.Theprimarybenefitofrelativeemissionsisthattheymoreeffectivelyenablecomparisonbetweentwoormorere/insurers,linesofbusiness,sectorsportfoliosorregions,whereabsoluteemissionswouldnototherwisetakeintoaccountrelevantvariablessuchavalueofoutputorrelativesize.Thereportingofrelativeemissionsmayalsohelpend-usersofreportsdisclosingGHGemissionsunderstandrelativechangeagainstbaselineemissions–seeTable11-2forfurtherinformation.Belowisanexampletodemonstratethebenefitsofreportingrelativeinsurance-associatedemissionsinadditiontoabsoluteemissions.Thefiguresquotedareillustrativeonly.Example:•Re/InsurerAandRe/InsurerBbothreportabsoluteinsurance-associatedemissionsof20MtCO2e/yinbothyearoneandyeartwo.•Re/InsurerA’srevenueforyearonewasUS$10bnandUS$11bninyeartwo.•Re/InsurerB’srevenueforyearonewasUS$10bnandUS$9bninyeartwo.Onan“absoluteinsurance-associatedemissions”basis:•Therearenomaterialchangesinemissions,whichcouldleadanend-useroftheemissionsreporttodeducethatbothRe/InsurerAandRe/InsurerBhavemadenoefforttoreducetheirGHGemissionsacrosstheportfolio.However,ona“relativeinsurance-associatedemissions”basis:•Re/InsurerAhasgrownitsbusinessby10%,whilstretainingthesameinsurance-associatedemissions.Perdollarofrevenue,there/insurerhasbecomelessGHGintensive,whichindicatesthattheircustomers(takenasanaverage)aredecarbonizing(assumingthatthebusinessmixassuchhasremainedunchanged);Year1:2tCO2eper$1ofrevenueYear2:1.81tCO2eper$1ofrevenuewhereas,•Re/InsurerBhasshrunkitsbusinessby10%,whilstretainingthesameinsurance-associatedemissions.Perdollarofrevenue,there/insurerhasbecomemoreGHGintensive,whichindicatesthattheircustomers(takenasanaverage)arereleasingmoreemissionsintotheatmosphere.•Year1:2tCO2eper$1ofrevenue•Year2:2.22tCO2eper$1ofrevenueYear2:2.22tCO2eper$1ofrevenue60PartC:Insurance-AssociatedEmissionsTheaboveexampledemonstratesthattheunderlyingprinciplesofrelevance,completeness,consistency,transparencyandaccuracymaybebetterreflectedthoughthereportingofrelativeemissionsinadditiontoabsoluteemissions.Todosowouldalsobeintheinterestsofre/insurersthatmaybegrowingtheirbusinesswhilststillreducingtheunderlyingemissionsassociatedwiththeirunderwritingportfolio(s).COVERAGE•Re/insurersshalldiscloseaggregatedabsoluteinsurance-associatedemissionsforalloftherelevantLoBsorsectors66coveredinChapter5andjustifyanyexclusions.Potentialjustificationcriteriaforexclusioncouldinclude,bywayofexample:-Businessgoalsandstrategyofthere/insuranceadoptingtheproposedmethodology.-Applicablelegalandregulatoryrequirements.-Dataavailability:requireddataisnotavailabletore/insurers.-Methodology:thereisnorecognisedmethodologytoquantifytheinsurance-associatedemissionsofspecificactivities(i.e.,LoBsnotcurrentlycoveredinthisStandard).•Re/insurersmaydisclosetheabsoluteemissionsforstatutoryorcompulsoryclassesofre/insuranceseparatelyfromnon-statutoryclassesofbusinessintheirinsurance-associatedemissionsinventories.•Re/insurersshoulddisclosetheabsoluteemissionsforpersonallines67ofmotorvehiclesintheirinsurance-associatedemissionsinventories,separatelyfromcommerciallinesreportedinsurance-associatedemissions.•Re/insurersshouldseparateoutthedisclosureofaggregatedabsoluteinsurance-associatedemissionsbyrelevantlinesofbusiness,wherethere/insurerisunabletonegotiatespecifictermsand/orratesasaresultofgovernment-basedinsuranceschemesinplace.•Re/insurersshalldisclosethepercentageoftheirtotalre/insuranceportfolioscoveredintheirinsurance-associatedemissionsinventoriesfortheLoBsorsectorscoveredinChapter5.•Re/insurersshouldseparateoutthedisclosureofinsurance-associatedemissionsbypublicandprivatecompanies,wherethereisaperceivedbenefitindoingso.•Re/insurersshouldseparateoutthedisclosureofinsurance-associatedemissionsbyclient-reportedandre/insurerestimatedorproxyemissions,wherethereisaperceivedbenefitindoingso.•Re/Insurersshouldseparateoutthedisclosureofinsurance-associatedemissionsbydirectinsuranceandfacultativereinsurance,wherethereisaperceivedbenefitindoingso.GASESANDUNITS•Re/insurersshallaccountforthesevengasesundertheKyotoProtocolthatarealsomandatedundertheUNFCCCtobeincludedinnationalinventoriesiftheyareemittedinthevaluechain.Thesearecarbondioxide(CO2),methane(CH4),nitrousoxide(N2O),66Re/insurerscanchoosetoreportbysectorratherthanbylineofbusiness,howeverinbothcasesre/insurersshallonlydisclosetheaggregatedabsoluteinsurance-associatedemissionsperlineofbusinessorsectorandshallnotdisclosedetailsoftheunderlyingcalculations.67Re/insurerslookingtosetbusinessgoalsincludingtargetsagainsttheinsurance-associatedemissionsshouldconsiderdoingsowhereitdoesnotexposethere/insurertofines,penalties,enforcementaction,orotherlegalliabilityunderapplicablelaws.Thismaybethecaseforpersonallinesorcompulsoryinsuranceorgovernment-basedinsuranceschemes/arrangements.61PartC:Insurance-AssociatedEmissionshydrofluorocarbons(HFCs),perfluorocarbons(PFCs),sulphurhexafluoride(SF6)andnitrogentrifluoride(NF3).•Thesesevengasesshallbeconvertedtocarbondioxideequivalents(CO2e)usingthe100-yeartimehorizonglobalwarmingpotentialspublishedbytheIPCC;eithertheAR5valuespublishedbytheGHGProtocol68ortheIPCC’smostrecentlypublishedassessmentreport.69•Re/insurersshallexpresstheirinsurance-associatedemissionsinmetrictonnesofcarbondioxideequivalents(tCO2e)oranotherappropriatemetricconversion—e.g.,kilotonnes(ktCO2e),megatonnes(MtCO2e).WhenemissionsfromaspecificGHG(e.g.,methaneemissions)arematerialandrelevant,re/insurersshouldconsideraseparatedisclosureoftheseemissions.ABSOLUTEEMISSIONS•Re/Insurersshalldisclosetheabsoluteemissions(scope1and2combined)associatedwiththeirre/insuranceportfolios.Ifitservesthere/insurers’businessgoals,theabsolutescope1andscope2emissionsassociatedwiththeirre/insuranceportfoliosshouldbereportedseparatelyfromeachother.•Re/insurersshallalsomeasureandreporttheirownscope1and2emissionsandshouldreportanyotherrelevantscope3emissionscategoriesinlinewiththeGHGProtocol"CorporateValueChain(Scope3)AccountingandReportingStandard".•Re/insurersreportingtheabsolutescope3emissionsoftheircustomersshoulddothisseparatelyfromtheirclient’sreportedscope1andscope2emissions,andinlinewiththeconsiderationscoveredinChapter5.2.DISCLAIMERSFurthertoguidanceissuedbytheUKClimateFinancialRiskForumonmanaginglegalrisk70,anydisclaimerappliedbyare/insurershouldaccuratelyreflecttheareaofconcernandshouldbetestedbyre/insurerstoensurethatitisneithertoonarrownortoowide.Thelocation,fontsizeandformattingofthedisclaimershouldalsobeconsideredcarefullysothatitisnotpresentedintheformoflegalboilerplate.Thedisclaimershouldbereviewedinthecontextofthedisclosureasawhole.Informationastomethodologyormetricsmaybeaneffectivepartoflimitingtheriskofstakeholdersmisunderstandingtheinformationorrelyingoninformationwithoutaclearappreciationofitspurpose,gapsandlimitations.DOUBLECOUNTINGInsurancedemandsforcorporateentitiesandindividualsarestructuredinvariousdifferentinsurancelines.Becausecertainrisksaretoolargetobebornebyanindividualre/insurer,theyarespreadinacomplexrisk-sharingsystemcomprisingmanyplayers,includinginsurance,reinsurance(“insuranceofaninsurance”),andretrocession(“reinsuranceofareinsurance”).Thissetuppotentiallycausesdoublecountingindifferentareas:68(GHGProtocol,2014)69TheIPCCreportscanbefoundat:https://www.ipcc.ch/70Seepage18on:https://www.fca.org.uk/publication/corporate/climate-financial-risk-forum-guide-2021-disclosures-legal-risk.pdf62PartC:Insurance-AssociatedEmissions•Doublecountingofinsurance-associatedemissionswithinare/insurer,acrossdifferentlinesofbusinessorbetweeninsuranceandriskmanagementservices.•Doublecountingbetweendifferentre/insurersofthesameclient.•Doublecountingcouldoccuracrossscopes.Thiseffectcanbelimitedbyreportingscope3separatefromscope1and2.•Associatingthesameemissionstotheprimaryinsurersandreinsurers.Withinvestors/assetownersalsoaccountingforthefullscope1,2and,whereapplicable,scope3emissionsofacompanyastheirfinancedemissions,itisclearthatthesameemissionsaredoublecountedbetweeninsurance-associatedandfinancedemissions.Withre/insurerssometimesinsuringandinvestinginthesamecompanies,thistranslatesintodoublecountingacrosstheinvestmentandinsuranceportfoliosofare/insurancecompanyaswell.DoublecountingisafrequentandinherentaspectofGHGaccountinganddoesnotneedtobeseenproblematic,aslongas:•Doublecountingdoesnotinterferewiththegoalofgettingaclearviewonwhereportfoliosareconnectedtotheircustomer’sandinvestee’semissions,inordertofacilitatemanagementstowardstateddecarbonizationgoals.•Methodologiesandlimitationsaremadetransparentaspartofthedisclosure.PCAF’sobjectivewillnotbetoeradicateanydoublecountingandtocreateaglobalbalancesheetofabsoluteGHGemissions,buttominimisedoublecountingconcernswheretheyimpactstatedprinciples,andthedeliveryofatransparentandconsistentapproachtotrackandreportinsurance-associatedemissionsandtheirchangesovertime.INTERPRETATIONANDCOMMUNICATIONOFINSURANCE-ASSOCIATEDEMISSIONSWiththesyntheticnatureofanyinsurance-associatedemissionsmethodologyandinherentdoublecounting,correctlycommunicatinginsurance-associatedemissionswillbecriticaltoavoidmisinterpretationofdisclosuresbystakeholders.Characteristicsthatarerelevantforthecorrectinterpretationofabsoluteemissionfiguresare:•Insurance-associatedemissionscannotbecomparedoraddedupwithfinancedemissions,evenwithinthesamecompany.Theyneedtobereportedseparately.•Doublecountingorundercountingofemissionsamongre/insurerspreventsameaningfulindustrytotalfrombeingcalculated.•Abasenumberis,assuch,notnecessarilyimportantasinsurance-associatedemissionsorfinancedemissionswillnotadduptoaglobalGHGbalancesheet.Itismoreimportantthatreportingprovidesabaseline,onwhichrelativeParis-aligneddecarbonizationtrajectoriescanbereportedovertime.63PartC:Insurance-AssociatedEmissionsINSURANCE-ASSOCIATEDEMISSIONREMOVALSANDAVOIDEDEMISSIONS•Inadditiontoabsoluteemissions,re/insurers:-Mayreportemissionremovalswhererelevanttotheirre/insuranceportfolioswhenappropriatemethodologiesbecomeavailable.-Mayreportavoidedemissions,forexampleemissionsavoidedasaresultofre/insurersupportforrenewablepowerprojects.•Whereare/insurerreportsonemissionremovalsand/oravoidedemissions,itshalldisclosethemethodologicalformulaadoptedincalculatingsuchemissions.Themethodologicalformulaadopted,andanyaccompanyingnarrative,shouldreflecttheprinciplesofrelevance,completeness,consistency,transparencyandaccuracy.Whereare/insurerdisclosesdetailsofamethodologicalformulathathasnotbeendevelopedandpublished,orendorsedbyPCAF,there/insurershallaloneberesponsibleforsatisfyingitselfthattheapproachandanyassociateddisclosurescomplywithapplicablelaws.•Ifare/insurerchoosestoreportemissionremovalsoravoidedemissions,itshallreportabsoluteemissionremovalsoravoidedemissionsseparatelyfromitsscope1,scope2,andscope3inventories.DATAANDDATAQUALITY•Re/insurersshallusethemostrecentorotherwiseappropriatedatareasonablyavailabletothem.PCAFrecognisesthereisoftenalagbetweenfinancialreportingandrequiredemissionsdata.Intheseinstances,itisacceptablethatthedatarepresentsdifferentyears.•Re/insurersshouldprovideadescriptionofthetypesandsourcesofdata,includingactivitydata,assumptions,emissionsfactors,andallrelevantpublicationdates,usedtocalculateemissions.Thedescriptionsshouldbewrittentocreatetransparency.•Re/insurersshouldpublishaweightedscorebyoutstandingpremiumofthedataqualityofreportedemissionsdataorshouldexplainwhytheyareunabletodoso.AnexampleisprovidedinBox6-3.•Wherere/insurersreportscope3emissions,theweighteddataqualityscoreshallbereportedseparatelyfromscopes1and2.•ThedatahierarchytablesprovidedinChapter5shouldbeusedasaguidefordisclosingdataquality.Re/insurersshouldexplainhowdataqualityisassessed.•Re/insurersshouldbeabletodemonstratethatdataqualityhasimprovedovertime(withanexceptionforthefirstyearofdisclosure).Wherere/insurersareunabletoevidenceanimprovementindataquality,theyshouldexplainwhytheyareunabletodoso.•Re/insurersshouldreconcilethepremiumfiguresintheinsurance-associatedemissionsreportingwiththepremiumfigurescitedintheannualaccounts.Re/insurersshouldconsiderwhethertoreconcilefiguresonanabsolutebasisorasapercentage.Wherere/insurersareunabletoreconcilethepremiumsreportedintheinsurance-associatedemissionsdisclosureandannualaccounts,theyshouldexplainwhytheyareunabletodoso.•Therearenumerousfactorsextraneoustoemissionsthatmaydrivevolatilityintheinsurance-associatedemissionsreportedonayear-by-yearbasis.Whereafactorisdeemedtobematerial,re/insurersshouldprovideaclarificationofhowthefactorhasinfluencedthereportedinsurance-associatedemissions.Itshouldalsoprovideanindicationoftherelativestrengthofinfluencethatthefactorhashadonthereportedinsurance-associatedemissionsfigures.64PartC:Insurance-AssociatedEmissionsBox6-3.AnillustrativeexampleforcalculatingweighteddataqualityscoresItislikelythatdataqualitywilldifferacrosslinesofbusiness,sectors,companiesandemissionscopes.Todisclosethebestrepresentationofdataquality,theStandardrequiresthatre/insurersnormalisethedataqualityscoresforeachlineofbusinessorsectortothetotalpremium.Theformulaforcalculatingweightedaveragesforalineofbusinessorsectoris:=∑[𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃]!×𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠!"!#$∑[𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃]!"!#$𝑤𝑤𝑤𝑤𝑤𝑤ℎ𝑖𝑖=𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖Anillustrativeexampleofare/insurersprovisionofinsuranceisprovidedbelow:LineofBusinessSectorCompany[Premium]AttributedScope1/2absoluteemissions(tCO2e)Dataqualityscore(1=High,5=Low)PropertyOilandGasCompanyAX1Y1Z1PropertyPowerCompanyBX2Y2Z2PropertyTransportCompanyCX3Y3Z3CasualtyOilandGasCompanyDX4Y4Z4CasualtyPowerCompanyEX5Y5Z5CasualtyTransportCompanyFX6Y6Z6WeighteddatascoreforthePropertyandCasualtylinesofbusinessScope1and2emissions:=(X1×Z1)+(X2×Z2)+(X3×Z3)+(X4×Z4)+(X5×Z5)+(X6×Z6)(X1+X2+X3+X4+X5+X6)WeighteddatascorefortheOilandGassectorScope1and2emissions:=(X1×Z1)+(X4×Z4)(X1+X4)65PartC:Insurance-AssociatedEmissions7.GlossaryAbsoluteemissions:Volumeofgreenhousegas(GHG)emissionsexpressedintonnesCO2e.Attributionfactor:ShareofthetotalannualGHGemissionsfrominsuredassets,activities,andcompaniesthatcanbeassociatedwithre/insuranceunderwritingportfolios.Carbondioxide-equivalent(CO2e)emissions:TheamountofCO2thatwouldcausethesameintegratedradiativeforcing(ameasureforthestrengthofclimatechangedrivers)overagiventimehorizonasanemittedamountofanotherGHGsormixtureofGHGs.Conversionfactorsvarybasedontheunderlyingassumptionsandasthescienceadvances.Asabaseline,PCAFrecommendsusing100-yearglobalwarmingpotentialswithoutclimate-carbonfeedbackfromthemostrecentIPCCAssessmentreport.Commerciallines:Commerciallinesinsuranceincludespropertyandcasualtyinsuranceproducts/coveragesforbusinessesthatcoverpotentiallossesfromcertainrisksEnabler:Aninstitutionthathavetheopportunitytodirectlyorindirectlyinfluenceorsupportanotheractor’scapacitytooperate/perform/own/disposeofacertaineconomicactivityorproduct/goodorservice.Theactionsthatare/insurer’maytaketopossiblyinfluenceorsupportanotheractor,aresubjecttodifferentvariantsspecifictoeachsituation/transaction,including,butnotlimitedto,businessandlegalconsiderations.Forexample,iftheprovisionofinsuranceforcertainLoBismandatoryinagivenjurisdiction,aninsurermayonlybeabletoengagewithaclientbutnotchangeanythingabouttheprovisionofcoverwhichissetbylaw.Inthiscase,theactionsare/insurercantakearerelativelylimited.EmissionFactor:TheaveragemassofCO2emittedbyanentityinoneyearusuallyexpressedintCO2/year.EmissionIntensity(ofavehicle):TheaveragemassofGHGofCO2emittedbyavehiclewhenitdrivesoneunitofmeasure,usuallyexpressedingCO2/km.Insurance-associatedemissions:GHGemissionsintherealeconomy,whichareassociatedwithspecificre/insurancepoliciesaggregatedinthere/insuranceportfolio.Thisdefinitionisforaccountingpurposesonly.Itisnotintended,andshouldnotbeinterpretedas,anadmissionofliabilitybyanyre/insurerforanyemissionscaused,orcontributedto,byaninsuredoraninsuredactivity.Insurance-associatedemissionremoval:RemovedGHGemissionsintherealeconomy,i.e.,emissionsthatarecapturedfromtheairandstoreddurably,whichareassociatedwithspecificre/insurancepoliciesaggregatedinthere/insuranceportfolio.Insurance-associatedavoidedemissions:AvoidedGHGemissionsintherealeconomy,i.e.,thedifferencebetweenprojectandbaselineemissions,whichareassociatedwithspecificre/insurancepoliciesaggregatedinthere/insuranceportfolio.66PartC:Insurance-AssociatedEmissionsFinancedemissions:Absoluteemissionsthatbanksandinvestorsfinancethroughtheirloansandinvestments.GHGemissionsaccounting:GHGemissionsaccountingreferstotheprocessesrequiredtoconsistentlymeasuretheamountofGHGsgenerated,avoided,orremovedbyanentity,allowingittotrackandreporttheseemissionsovertime.TheemissionsmeasuredarethesevengasesmandatedundertheKyotoProtocolandtobeincludedinnationalinventoriesundertheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)–carbondioxide(CO2),methane(CH4),nitrousoxide(N2O),hydrofluorocarbons(HFCs),perfluorocarbons(PFCs),sulphurhexafluoride(SF6)andnitrogentrifluoride(NF3).Foreaseofaccounting,thesegasesareusuallyconvertedtoandexpressedascarbondioxideequivalents(CO2e).Greenhousegas(GHG)emissions:ThesevengasesmandatedundertheKyotoProtocolandtobeincludedinnationalinventoriesundertheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)—carbondioxide(CO2),methane(CH4),nitrousoxide(N2O),hydrofluorocarbons(HFCs),perfluorocarbons(PFCs),sulphurhexafluoride(SF6),andnitrogentrifluoride(NF3).Thesetypicallyrefertotheunderlyingemissionsproducedbytheclientorassetsintherealeconomythatarecoveredbyaninsurancecontract.Insurance:Insuranceisacontract,representedbyapolicy,inwhichanindividualorentityreceivesfinancialprotectionorreimbursementagainstlossesfromaninsurancecompany.Layers:Insurersoftenspecialiseinunderwritingtodifferentexposureattachmentandexitlevels,somepreferringtoinsurewherethereisahigherprobabilityofclaimsbutacommensuratelyhigherlevelofpremium(primarylayer)andotherswherethereisalowerprobabilityofclaimsforalowerpremium(excesslayers).Layeringofinsurancescanaffectpricing.Personallines:Personallinesinsurancereferstoanykindofinsurancethatcoversindividualsagainstlossthatresultsfromdeath,injury,orlossofproperty.Reinsurance:Insuranceforinsurancecompanies.Relativeemissions:Absolute(GHG)emissionsnormalised(i.e.,divided)byanothervariablesuchasrevenue,orenterprisevalue,orm2forexample.Scope1emissions:DirectGHGemissionsthatoccurfromsourcesownedorcontrolledbythereportingcompany—i.e.,emissionsfromcombustioninownedorcontrolledboilers,furnaces,vehicles,etc.Scope2emissions:IndirectGHGemissionsfromthegenerationofpurchasedoracquiredelectricity,steam,heating,orcoolingconsumedbythereportingcompany.Scope2emissionsphysicallyoccuratthefacilitywheretheelectricity,steam,heating,orcoolingisgenerated.67PartC:Insurance-AssociatedEmissionsScope3emissions:AllotherindirectGHGemissions(notincludedinscope2)thatoccurinthevaluechainofthereportingcompany.Scope3canbebrokendownintoupstreamemissionsthatoccurinthesupplychain(forexample,fromproductionorextractionofpurchasedmaterials)anddownstreamemissionsthatoccurasaconsequenceofusingtheorganization’sproductsorservices.Underwriting:Themeansbywhichinsurersevaluatetherisksposedbytheindividual,company,events,ortransactiontodecidewhethertocovertheriskandifsotosetthecontracttermsandafairpricefortheinsurertoacceptthisrisk;alsoknownastheinsuredliability..68PartC:Insurance-AssociatedEmissions8.AcronymsCDPCarbonDisclosureProjectCH4MethaneCO2CarbondioxideCO2eCarbondioxideequivalentCREEEACommercialrealestateEuropeanEnvironmentAgenyEEIOEnvironmentallyextendedinput-outputEUEuropeanUnionEUTEGEuropeanCommissionTechnicalExpertGrouponSustainableFinanceEVElectricvehicleEVICEnterprisevalueincludingcashFAOFoodandAgricultureOrganizationoftheUnitedNationsFSBFinancialStabilityBoardGAAPGenerallyacceptedaccountingprinciplesGEMISGlobalEmissionsModelforintegratedSystemsGHGGRIGreenhousegasGlobalReportingInititiveGTAPGlobalTradeAnalysisProjectHFCHydrofluorocarbonICCTInternationalCouncilonCleanTransportationIEAInternationalEnergyAgencyIFIInternalFinancialInstitutionIFRSInternationalFinancialReportingStandardsIPCCIntergovernmentalPanelonClimateChangeIPOInitialpublicofferingISICISSBIndustrialClassificationofAllEconomicActivitiesInternationalSustainabilityStandardsBoardITFOECDInternationalTransportForumattheOrganisationforEconomicCo-operationandDevelopmentktCO2eKilotonnesofcarbondioxideequivalentL2Level2(NACE)MtCO2eMegatonnesofcarbondioxideequivalentMWhMegawatt-hourN2ONitrousoxideNACEStatisticalClassificationofEconomicActivitiesintheEuropeanCommunityNDCNationallydeterminedcontributionNEDCNewEuropeanDrivingCycleNF3NitrogentrifluorideNGONZIANongovernmentalorganizationUN-convenedNetZeroInsuranceAlliance69PartC:Insurance-AssociatedEmissionsPCAFPartnershipforCarbonAccountingFinancialsPFCPerfluorocarbonSASBSustainabilityAccountingStandardsBoardSBTScience-basedtargetsSBTi-FIScienceBasedTargetsinitiativeforFinancialInstitutionsSDASectoralDecarbonizationApproachSF6SulphurhexafluorideTCFDTaskForceonClimate-relatedFinancialDisclosurestCO2eMetrictonnesofcarbondioxideequivalentUNEPFIUnitedNationsEnvironmentProgrammeFinanceInitiativeUNFCCCUnitedNationsFrameworkConventiononClimateChangeUSUnitedStatesWACIWeightedAverageCarbonIntensityWBCSDWorldBusinessCouncilforSustainableDevelopmentWIODWorldInput-OutputDatabaseWLTPWorldwideHarmonizedLightVehiclesTestProcedure70PartC:Insurance-AssociatedEmissions9.Annex1:Duediligenceforthird-partydataprovidersDatacollection•Isthemethodologyadoptedtocollectdatatransparent?•DoesthedataproviderreportthenumberofdedicatedstaffcollectingandprocessingGHGdata?data?Doesthedataprovideruseautomateddatacollectiontools,web-scrappingorartificialintelligence?•Iscollecteddatareviewedandcross-checked?Areplausibilitychecksperformedtoensurecomparability,consistencyandcompletenessofdata?•Ifacompanyreportsbothlocation-andmarket-basedscope2emissions,whichiscollected?Isthisdifferenceclearlylabelledinthedatabase?•Ifanysources(e.g.,facilities,specificGHGs,activities,geographies,etc.)ofscope1and2emissionsthatarewithinthereportingboundaryselectedbythecompanyarenotincludedinthereporteddata,isthisclearlylabelledinthedatabase?Andisthereanestimatedpercentageoftotalscope1and2emissionsthisexcludedsourcerepresents?•Howoftenisthedataupdated(updatefrequency)?•Howsoonafternewdataisreportedbythecompanyisitupdatedintheprovider’sdatabase(datatimeliness)?•Doesthedataproviderindicatetheassurance/verificationstatusofreportedemissions?•Doesthedataprovidercompareyear-on-yeartrends,usingthistohighlightwherestep-changeshaveoccurred,potentiallyindicatingdataqualityissues?•Doesthedataproviderupdateitsdatabasetoaccountfordatacorrectionsreportedbythecompany?Ifso,isthisdoneonlyforthelastreportingyear?•Doesthedataproviderhaveaprocessinplaceforcompaniestoverifytheirdataandsubmitdatacorrectionrequests?•Doesthedataproviderhaveadataqualityassuranceprocessinplaceforidentifyingandcorrectingdataerrors?Isthequalityassuranceprocesscertified?•Doesthedataprovidermakethereportingboundariesclear?I.e.,FinancialControl,OperationalControl,EquityShare•Isitclearwhichscope3emissioncategoriesareincluded?Datacoverage•WhatisthecoverageoftheGHGdata?•Doesthiscoveragevaryintermsofemissionscopes?Datacoverage•Doesthedataproviderprovideestimateddataifreporteddataisnotavailable?•Doesthedataproviderindicatewhetherdataisreportedorestimated?•Doesthedataproviderdeliveradataqualityscoreforestimateddata?•Istheestimationmethodologyclearandtransparent?•Howoftenareestimationmodelsfine-tunedandupdated?•Ifthedataproviderusessectoralproxieswherespecificreporteddataisnotavailable,doesacleartaxonomyofsectorclassificationexisttoreducetheriskofoverlaps?•Howdoestheestimationforcompaniesdiffertothatfor“projects”,e.g.,openinganewminingsite?PartC:Insurance-AssociatedEmissions7110.Annex2:DetaileddataqualityscoretablesperlineofbusinessCOMMERCIALLINESINSURANCE–DETAILEDSUMMARYOFDATANEEDSANDFORMULASTOCALCULATEINSURANCE-ASSOCIATEDEMISSIONSTable10‑1.Detaileddescriptionofthedataqualityscoretableforcommerciallinesinsuranc7171Wherec=companyorassetinsured;s=sectorofthecompanyinsured;r=region(province/state/country).Ifthedatausedisnotonthesameentitylevelastheinsured(e.g.,companyrevenueisusedforaninsuredasset),thedataqualityscoregivenwillbescore5regardlessoftheequationused.OptionDescriptionDataqualityAttributionEmissionfactorInsurance-associatedemissionscalculationsHighesttolowestFinancialdataEmissiondataEquationsOption1aRe/insurancepremiumRevenueVerifiedGHGemissionsdatafromthecompany/assetinaccordancewiththeGHGProtocolScope1:C𝑅𝑅𝑅𝑅/𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅"𝑥𝑥𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸""Scope2:C𝑅𝑅𝑅𝑅/𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅"𝑥𝑥𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸""Score1PartC:Insurance-AssociatedEmissions72Option1bUnverifiedGHGemissionsdatafromthecompany/assetinaccordancewiththeGHGProtocolScope1:C𝑅𝑅𝑅𝑅/𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅"𝑥𝑥𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸""Scope2:C𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅"𝑥𝑥𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸""orC𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅"𝑥𝑥𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸""Score2Option2aPrimaryphysicalactivitydataforthecompany’senergyconsumptionbyenergysource(e.g.,megawatthoursofelectricity)plusanyprocessemissionsEmissionfactorsspecifictothatprimarydata(e.g.,energysource-specificemissionfactors)C𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅"",$𝑥𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶"𝑥𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠F𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑟𝑟$Score2Option2bPrimaryphysicalactivitydataforthecompany’sproduction(e.g.,tonsofriceproduced)Emissionfactorsspecifictothatprimarydata(e.g.,emissionfactorpertonofrice)C𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅"𝑥𝑥𝑥𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃"𝑥𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸F𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑟𝑟&,$",&,$Score3Option2cScore4Option3AveragesectorrevenueAveragesectorrevenueGHGemissionspersectorC𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅&,$",&,$𝑥𝑥𝑥𝑥𝑥𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑅𝑅𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒&,$𝑥𝑥𝑥𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚F𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑟𝑟&,$Score5Anyoptiondescribedabove(options1a-2b)butwithdatanotalignedwithinsuredentity(e.g.,usingcompanyemissionsinanassetinsurancecoverage)PartC:Insurance-AssociatedEmissions73PERSONALMOTORVEHICLEINSURANCE–DETAILEDSUMMARYOFDATANEEDSANDFORMULASTOCALCULATEINSURANCE-ASSOCIATEDEMISSIONSTable10‑2.Detaileddescriptionofthedataqualityscoretableformotorvehicleinsurance7272Wherev=actual/insuredvehicle;r=region(province/state/country/continent);f=fueland/orpropulsiontype(e.g.,petrol,HEV,PHEV);vt=vehicletype(e.g.,passengercar)va=averagevehicle.OptionDescriptionDataqualityAttributionHighesttolowestEquationsHighesttolowestVehicleusage(FuelConsumptionorDistanceDriven)EmissionintensityOption1aTBDbyPCAFActualfuelconsumptionEmissionintensityofthefueltypeC𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹$𝑥𝑥𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶'𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼(',$Score1Option1bActualdistancetravelledEmissionintensityoftheactualvehicleorofthevehicle'smake&modelC𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹$𝑥𝑥𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇'𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼'',$Option2aEstimateddistancetraveledofanaveragevehicletype(cars,vans,motorcycles)ontheprovince/state/countryC𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹$𝑥𝑥𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇'),$𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼'','),$Score2Option2bEstimateddistancetraveledofanaveragevehicleonthefortheprovince/state/countryC𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹$𝑥𝑥𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇',$𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼'',',$Score3PartC:Insurance-AssociatedEmissions74Option3aEstimateddistancetraveledofanaveragevehicleonthesubcontinent/continentEmissionintensityofanaveragevehicletype(cars,vans,motorcycles)and/orfueltype(fossilfuel,hybrid,electric)C𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐹𝐹𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑟𝑟$𝑥𝑥𝑥𝑥𝑥𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑇𝑇𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟'),$𝑥𝑥𝑥𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝐼𝐼𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛'),(,$'),(,$Score4Option3bEmissionintensityofanaveragevehicleScore5',',$C𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹$𝑥𝑥𝑥𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇',$𝑥𝑥𝑥𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼',$PartC:Insurance-AssociatedEmissions7511.Annex3:SampletabletemplatesdisplayingreportedemissionsforagivenfiscalyearTable11-1.ExamplereportingofInsurance-AssociatedEmissionsNote1ActivityTotalgrosswrittenpremium(x€1,000)Scope1+Scope2emissions(tCO2e)absoluteScope3emissions(tCO2e)absoluteNote4Emissionintensity(e.g.,weightedaveragecarbonintensity(WACI)-tCOe/€Mofre/insured'srevenue)Relativeinsurance-associatedemission(tCO2e/€MperGWP)Note5Weighteddataqualityscore(highquality=1,lowquality=5)Emissionsperlineofbusiness(ifreportingbyLoB)Note2Property-Sector1,e.g.,Oil&Gas-Sector2,e.g.,Power&Utilities-Sector3e.g.,Mining...Liability-Product1,e.g.,GeneralLiability-Product2,e.g.,Directors&Officers-Product3,e.g.,ProductLiability...TotalEmissionspersector(ifreportingbysector)Note3AluminiumApparelandfootwearAviationBuildings2ProgressReportforConsultation-GlobalGHGAccountingandReportingStandardfortheInsuranceIndustry76Note1:Insurance-associatedemissionsarereportedasasub-categoryoftheGHGProtocolscope3category15(Investments).Theyaredistinctanddifferentfromfinancedemissions.Insurance-associatedemissionsandfinancedemissionsshallnotbeaggregated.Theinsurance-associatedemissionswouldbeasupplementaryaccountingnotetoscope3category15(Investments).Note2:Wherere/insurersreportbylineofbusiness,theyshouldaligntheirdisclosuresoninsurance-associatedemissionstothefinancialaccountingregime(s)thatis/areapplicabletothem,forconsistency.Note3:ThesectorsabovecorrelatewiththosesectorsadoptedbytheScienceBasedTargetsinitiative(SBTi).Thelistofsectorsisnotintendedtoberestrictive,andmaychangeovertime.Whereare/insurerchoosestoadoptdifferentsectorgroupingsforthepurposesoftheirreportingthatdivergefromtheSBTisectors,itisrecommendedthatthere/insurerprovidesdefinitionsthatwillallowusersofthereporttounderstandthesectorcompositions.Note4:Forintegratingclients’scope3emissions,PCAFacknowledgesthat,todate,thecomparability,coverage,transparency,andreliabilityofclients’scope3datastillvariesgreatlypersectoranddatasource.Bysupportingthedisclosureofclientscope3reportingovertime,PCAFseekstomakescope3emissionsreportingmorecommonbyimprovingdataavailabilityandquality.Toavoiddoublecounting,theinsurance-associatedemissionsrelatingtoclientscope1and2emissionsshallbereportedseparatelyfromtheclients’scope3emissions;wherethedataallowsforanaccurateandfairaccountofinsurance-associatedemissionsovertime.Note5:Policiesinforcecanbeusedinplaceofgrosswrittenpremiuminthecalculationofrelativeinsurance-associatedemissionsandtheunitwouldthereforereflectappropriately.ChemicalsCementFinancialInstitutionsForest,LandandAgricultureInformationandCommunicationTechnologyOilandGasPowerSteelTransport[Others]TotalPartC:Insurance-AssociatedEmissions77Table11-2.Examplereportingofinsurance-associatedemissions(scope1and2)asanintensitymetricforthecurrentyearasagainstthebaselineyeariBaselineyearemissions/[denominator](i.e.,tCO2e/£m)Currentyearemissions/[denominator](i.e.,tCO2e/£m)%Changeinrelativeemissionsbetweenthebaselineyearandcurrentyear(±%)[Lineofbusiness][Sector][Total]78PartC:Insurance-AssociatedEmissions•Robustnessandhighlevelofindependence:-TheGHGaccountingmethodologyshouldbeasrobustandagnosticaspossibleofanyotherchangesnotbeingassociatedwithchangesinactualemissionsandre/insurancestructure.Thishelpstofairlyapplymeasurementsandlimit/avoidvolatilityontheoutcomes.Themethodologyshouldavoidrandomnessandarbitrage,wheneverpossible.•Proportionality:Assumingallotherrelevant(insurance-related)parametersareequal."Insurance-associatedemissions"versus"actualemissions"ofdifferentinsuranceclients:-Thecalculationmethodofinsurance-associatedemissionsbasedonactualemissionsofoneinsuranceclientshouldbeconsistentlyappliedacrossaportfoliosegment.Thisfollowsthelogicofhigh"actualemissions"leadingtohighinsurance-associatedemissions.Changesofinsurance-associatedemissionsversuschangesof"actualemissions":-Changesofinsurance-associatedemissionsshouldproportionallyreflectthechangesinactualemissionsofaninsuranceclient.I.e.,iftheactualemissionsarereducedbyx%,theinsurance-associatedemissionsshouldbereducedbythesamepercentage.-Theextentofaninsurer’slevelofinvolvementshouldbeadequatelyreflectedintheresultinginsurance-associatedemissions.I.e.,a20%insuranceparticipationshoulddoubletheinsurance-associatedemissionsrelativetoa10%shareofthesameinsuranceclient.•Comparability:-Between(i)insuranceclientswithinaportfolio;(ii)insuranceportfolioswithinacompany;(iii)companiesofasamegroup;and(iv)independentcompaniesbasedonpubliclyavailableinformation:Givensimilaractualoriginalemissionsandatthesametimeassumingsimilarinsurancecoverages,theGHGaccountingmethodologyshouldleadtosimilarinsurance-associatedemissions.Detailsregardingtheapplicationtodifferentlinesofbusinessneedtobefurtherdiscussed.Duetodiversebusinessmodels,careshouldbegivenwhenmakingapeer-to-peercomparisonofinsurance-associatedemissions.12.Annex4:GuidingprinciplesfordevelopingtheGHGaccountingmethodologyforre/insuranceunderwriting79PartC:Insurance-AssociatedEmissions-Overtimeandbetweentheperiodsbeingreported,i.e.,oncethereportingstandardshavebeenestablished,insurance-associatedemissionsoutputshouldbecomparableovertimeifimprovedorchangingunderlyingdatadoesnotdistortsuchaneffort.•Feasibilityandreasonableness:-Simplicity:TheGHGaccountingmethodologyshouldbesimpleenoughtobemanageableandatthesametimepreciseandtechnicallysoundenoughtoprovideaccurateoutputovertime.-Communicable:Itshallbeasunderstandableaspossibletoserveasabasisforengagementwithclientsandinternalstakeholdersandtoavoidmisperceptionbyexternalstakeholdersandthepublic.-Dataavailability:GHGaccountingmethodologiesshalltakeintoconsiderationdatalimitations(includingthelackofavailabilityofemissionsdata)anddatadependencies(includingthecostsassociatedwithobtainingthirdpartydata).Forsuchcaseswheretherequireddataisnotreadilyavailableandcannotbeobtainedwithreasonableeffort,afeasiblefallbackcalculationmethodologyshouldbeallowedtobeused.•Materiality:-Asastartingpoint,itisproposedthattheaccountingmethodologyshouldbeappliedtothemostsignificantemissionspersectorinthere/insurer’sportfolio.Furtherguidanceonhowthisprincipleistobeinterpretedisunderdevelopment.80PartC:Insurance-AssociatedEmissions13.Annex5:Commercialinsurance–TemplatetocaptureattributiondataatthesourceThetemplateisintendedtosupportcustomerengagementondisclosure,toenhancecaptureofthemostaccurateandtimelydata,toreducetheriskofattributingemissionsinappropriatelyandreducetheneedtorelyonproxiesandestimates(e.g.,sectororcountryintensitydata).Today,therequireddataisnotseldomroutinelycaptured(revenue)oravailabilityisstilllimited(e.g.,emissionsdata).Thetemplateisthereforeencouragedtobeusedatthepointofunderwritingtohelpprocurethedatacomponentsneeded.Thetemplatedoesnotincludeproxiesthatwouldberequiredfrominsuredsincaseactualdatapointsfortheinsuredarenotavailable.Basedontheactualdataprovidedbycustomersaswellasotherdatasources,eachinsurerwillusecalculations,approximationsandestimationmethodologiesthatcouldleadtodifferentvaluesofthedatapointsrequiredtocalculateinsurance-associatedemissions(anddifferentdataqualityscores).Asimilartemplateformotorpersonallineshasnotyetbeencreated,duetotheassumptionthatsomekeyattributiondatarequirementsarepubliclyavailableand/oralreadycaptured,forexampleaspartofroutinesubmissions.CompanynameNameofthecompany/assetLevelofreportingGrouplevel,subsidiarylevel,assetlevelReportingyearYearthedatarefersto(alldataneedstobefromsamereportingyear)Scope1absoluteemissionsIntonnes,basedonreportedfiguresScope2absoluteemissionsSeeScope1Scope3absoluteemissionsbycategorySeeScope1,shallberequestedifmaterialRevenueInmillionsCurrencyISOcodeIsabsoluteemissionsdatathirdpartyverified?Yes/NoMandatoryfield81PartC:Insurance-AssociatedEmissions14.Annex6:SampleclassificationsforvehicletypesintheEUandUSEUCLASSIFICATIONOFVEHICLETYPES/EUROPEANALTERNATIVEFUELSOBSERVATORY(EUROPA.EU)Table14-1.GuidingprinciplesfordevelopingtheGHGaccountingmethodologyforre/insuranceunderwritingCategoryExamples/CommonnameDefinitionWave1ScopeproposalCategoryMMotorvehicleshavingatleastfourwheelsandforthecarriageofpassengers.M1Cars/VansVehiclesusedforthecarriageofpassengersandcomprisingnotmorethaneightseatsinadditiontothedriver’sseat.YesM2MinibussesVehiclesusedforthecarriageofpassengers,comprisingmorethaneightseatsinadditiontothedriver’sseat,andhavingamaximummassnotexceeding5tonnesNo,sinceithas>8seatsandisthereforeprobablyusedmainlyforcommercialpurposesCategoryNPower-drivenvehicleshavingatleastfourwheelsandforthecarriageofgoodsN1VansVehiclesforthecarriageofgoodsandhavingamaximummassnotexceeding3.5tonnes.YesCategoryLMopeds,Motorcycles,MotorTricyclesandQuadricyclesMotorvehicleswithlessthanfourwheelsandsomelightweightfour-wheelers.L1Mopeds,ElectricbicycleAtwo-wheeledvehiclewithanenginecylindercapacityinthecaseofathermicenginenotexceeding50cm3andwhateverthemeansofpropulsionamaximumdesignspeednotexceeding50km/h.YesL2AutoRickshawAthree-wheeledvehicleofanywheelarrangementwithanenginecylindercapacityinthecaseofathermicenginenotexceeding50cm3andwhateverthemeansofpropulsionamaximumdesignspeednotexceeding50km/h.YesL3MotorcyclesAtwo-wheeledvehiclewithanenginecylindercapacityinthecaseofathermicengineexceeding50cm3orwhateverthemeansofpropulsionamaximumdesignspeedexceeding50km/h.YesL4MotorcycleswithsidecarAvehiclewiththreewheelsasymmetricallyarrangedinrelationtothelongitudinalmedianplanewithanenginecylindercapacityinthecaseofathermicengineexceeding50cm3orwhateverthemeansofpropulsionamaximumdesignspeedexceeding50km/h(motorcycleswithsidecars).YesUSVEHICLECLASSIFICATIONCODEhttps://www.fhwa.dot.gov/publications/research/infrastructure/pavements/ltpp/13091/002.cfm

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