ISSB proposes to remove insurance-associated emissions from reporting standard

By Rebecca Delaney

May 2 - (The Insurer) - The International Sustainability Standards Board (ISSB) proposed an amendment on Monday that would remove insurance-associated emissions from Scope 3 emissions reporting requirements.

The amendment relates to the International Financial Reporting Standards’ second climate-related disclosure standard (IFRS S2).

The exposure draft, published on Monday, proposes granting financial institutions relief from measuring and disclosing Scope 3 emissions associated with derivatives, investment banking and (re)insurance underwriting.

These activities fall under the GHG Protocol’s Category 15 of Scope 3 emissions, which also includes financed emissions and emissions from equity investments.

The ISSB has proposed to add paragraph 29A(a), which would permit an entity to limit its disclosure of Scope 3 Category 15 greenhouse gas emissions to financed emissions (those attributed to loans and investments made by an entity to an investee or counterparty).

The proposed amendment would not prevent an organisation from disclosing greenhouse gas emissions associated with insurance-associated emissions if it chose to do so.

The (re)insurance industry has previously been vocal on the lack of data around disclosure of insurance-associated emissions.

Most recently, Swiss Re’s latest annual sustainability report underlined the infeasibility of steering commercial lines portfolios to net zero based solely on insurance-associated emissions, due to a lack of data transparency and relevant methodologies.

These limitations are most pronounced in treaty reinsurance as reinsurers have little information on a portfolio's original insureds.

The latest review of ClimateWise members, a global environmental initiative for the insurance industry, in February also noted that several members had begun to explore the implications of calculating insurance-associated emissions, and were seeking to address the associated data challenges.

"Progressing in understanding the carbon footprint of their portfolios will depend on the judicious use of proxy and third-party data to move from analysis to decision-making," said the ClimateWise review.

The ISSB first published IFRS S2 in June 2023. The exposure draft is open for comment until June 27.