Scope 3 Emissions Estimator
for Insurance

Scope 3 emissions estimation for Insurance

Insurance companies share the financial sector's fundamental Scope 3 characteristic: operational emissions are a rounding error compared to portfolio emissions. For a life insurer or composite insurer with a large investment portfolio, Category 15 (investments) typically represents 95% or more of total Scope 3. The PCAF Global GHG Accounting and Reporting Standard applies to insurers' investment portfolios in the same way it applies to banks. An insurer with EUR 50 billion in assets under management generates financed emissions measured in millions of tonnes of CO2e, while its offices and vehicle fleet produce perhaps 20,000 to 50,000 tonnes combined. ESRS E1 does not distinguish between banking and insurance when requiring Scope 3 disclosure, so insurers subject to CSRD must report financed emissions alongside the operational Scope 3 categories.

What makes insurance distinctive is the underwriting portfolio. The emissions associated with insured activities (the carbon footprint of the factories, vehicles, ships, and buildings that the insurer covers) are not currently captured within the GHG Protocol's 15 categories. The Net-Zero Insurance Alliance (NZIA, which largely dissolved in 2023 after antitrust concerns) had been developing an insured emissions methodology. The PCAF has since taken on this work, publishing its Insurance-Associated Emissions Standard in November 2022. This standard defines methods for attributing emissions to insurance contracts based on the insurer's share of the total insured value. However, the methodology is still maturing, and most regulators do not yet require insured emissions disclosure. Under ESRS E1, the focus remains on financed emissions from the investment portfolio. Insurers should track the evolution of insured emissions methodology and prepare data collection processes, but current mandatory disclosure centres on Category 15.

Assurance providers reviewing insurer Scope 3 disclosures encounter findings similar to those in banking: data quality scores skewing heavily toward PCAF Score 4 and Score 5 (estimated rather than reported data), inconsistent application of attribution factors across asset classes, gaps in coverage for alternative asset classes (private equity, infrastructure, real assets) where enterprise value data is not readily available, and unclear treatment of reinsurance cessions. On the last point, the question is whether ceded premiums reduce the insurer's attributed emissions, and if so, by how much. The PCAF Insurance-Associated Emissions Standard addresses this through a proportional attribution based on premium share, but implementation is inconsistent. For operational Scope 3 categories, insurers with large claims management operations may need to consider Category 1 emissions from repair and replacement services procured on behalf of policyholders (vehicle repair shops, building contractors, medical providers).

For insurers applying this estimator, begin with your investment portfolio. Apply the PCAF methodology by asset class, following the same approach as banking entities. Segment by listed equity, corporate bonds, sovereign bonds, real estate, and alternative investments. For your underwriting book, assess whether you want to report insured emissions on a voluntary basis using the PCAF Insurance-Associated Emissions Standard. If so, segment by line of business and apply the attribution methodology based on premium share or insured value share. For operational Scope 3, map your procurement spend (Category 1), extract business travel data from your travel management company (Category 6), and estimate employee commuting using staff headcount by office location and national commuting statistics (Category 7). Claims-related procurement (repair services, replacement goods) should be included in Category 1 unless you can demonstrate it is immaterial through documented screening.