Insurance-associated GHG emissions: The PCAF measurement standard

Read Moody's Analytics latest whitepaper to learn more about what the new standards mean for commercial lines insurers



Steven Morrison, Sr. Director - Research

Partnered content

November 2022 saw the Partnership for Carbon Accounting Financials (PCAF) launch the first global measurement standard for insurance-associated Greenhouse Gas (GHG) emissions. Insurance-Associated Emissions (IAEs) are a type of Scope 3 emissions associated with an insurer or reinsurer's underwriting activities. For many insurers making the commitment to transition to net-zero, IAEs can be a significant source of overall emissions. Yet their measurement, and disclosure are far less well developed than other sources such as investments and business operations. PCAF has already developed a widely adopted standard for financed emissions (emissions associated with lending and investments). They have since set up an Insurance-Associated Emissions Working Group to develop equivalent standards for emissions associated with underwriting. The first PCAF Insurance-Associated Emissions Standard follows a period of public consultation where feedback was sought on various methodology options proposed by the Working Group.

Many insurance companies have acknowledged the urgent need to account for underwriting activities in the transition to net-zero. A growing number are joining the Net Zero Insurance Alliance (NZIA); a group of insurers who have made the commitment to transition their underwriting portfolios to net-zero GHG emissions by 2050. The NZIA was formed in July 2021 by eight large European insurance groups: AXA, Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re, and Zurich Insurance Group. It has grown rapidly since, with 29 members (at November 2022) and increasing diversity in company location and size.

The NZIA set itself an ambitious objective to publish a target-setting protocol by January 2023, with members committed to individually making intermediate targets public within six months of that date. Version 1.0 of the NZIA's Target-Setting Protocol was published on 31 October 2022 for a period of public consultation. On emissions accounting, this document specifies that "NZIA members shall use a recognized and consistent IAE accounting approach (e.g. PCAF Insurance-Associated Emissions Standard) for setting and tracking progress towards their targets." The publication of the PCAF IAE Standard thus represents a key milestone in meeting insurers' broader efforts to set emissions targets and transition their underwriting portfolios to net-zero.

Download the full paper