ICMIF partner organisation A4S has produced “top tips” guidance for the finance teams of insurers and reinsurers for calculating their emissions baseline.
A4S says the climate crisis risks creating an uninsurable world, but the insurance industry has a pivotal role in avoiding the worst outcomes. Insurance-associated emissions – the scope 3 emissions associated with their insurance policies – is where their environmental impact is typically most significant. However, insurers and reinsurers have been slower off the mark compared to other financial sectors and institutions in tackling climate change, as guidance on doing so has only recently become available.
In response, A4S says this new guidance it has published aims to support finance teams in the insurance industry to operationalise current guidance and understand their impact. The guidance also includes a case study and other resources produced to support finance teams.
By acting now on insurance associated emissions, A4S believes insurers and reinsurers will be able to stay ahead of the regulatory mandates and have the advantage of refining their approaches over time. By being able to measure their scope 3 insurance-associated emissions, finance teams at insurers and reinsurers can establish a baseline that can allow them to make decisions that are better and more aligned to a net-zero insurable economy.
The top tips include:
Consider the PCAF Standard Insurance Associated Emissions (Part C)
In applying this methodology, insurers and reinsurers can develop an understanding of the standard that will be helpful as it continues to develop beyond personal, motor and commercial into more business lines. Using a consistent methodology for calculating a baseline can help prevent divergence in approach between different re/insurers.
Refine your approach
Consider focusing on specific operating entities or lines of business that have high emissions and where the quality of data is good. Focusing on a smaller subset of your portfolio to start with can enable you to establish and strengthen your processes, governance and controls before expanding to cover other operating entities or lines of business.
Draw on the right expertise
For a more effective process, make sure that the responsibility for calculating and measuring insurance-associated emissions is allocated to those with the right skills – which can mean setting up a cross-functional team.
Your existing processes, controls and governance for financial information can be used as a robust starting point for insurance-associated emissions information, to strengthen data management.
Embrace the data challenge
Data availability presents a key challenge for calculating both insurance- associated and financed emissions. The PCAF Standard includes different approaches to measuring emissions depending on the type of data available, identifies potential sources of external data and provides guidance on data quality scoring.
Build capacity
Measuring insurance-associated emissions is a new approach, and not all employees will understand its importance. Regular knowledge-sharing and upskilling can help to address the gap.
Iterate and improve your baseline
Begin looking at the data and trying to calculate a baseline now. Your first attempt will not be perfect, but it does represent a crucial initial step – and provides a platform from which you can identify challenges and improve your approach.
Expand and develop your approach
This is an evolving area. Methodology, including the PCAF methodology, are expanding and the quality of data is likely to improve. Stay aware of changing practices so that you can adapt your own insurance-associated emissions calculation as needed.
Clearly communicate your approach
It is unlikely that you will be able to report your full baseline and have absolute certainty over the accuracy of all the numbers. When reporting your baseline, communicate clearly – both internally and externally – what is in and out of scope, as well as any challenges relating to the quality of the data.
Commenting on the publication of the guidance, Helen Slinger, Executive Director of A4S said, “Climate change risks creating an uninsurable world. Insurers and reinsurers are acutely impacted by climate change, but they also have a pivotal role to play in decarbonising the economy. Calculating and reporting emissions – across all scopes – are vital steps we must take towards reducing and ultimately eliminating emissions, and this is no different in the insurance industry. There are challenges, but finance teams are well positioned and appropriately skilled to lead the way, such as through helping re/insurers to get started in calculating an emissions baseline”.
Shaun Tarbuck, Chief Executive, ICMIF added: “If we don’t make significant headway in the next few years, there may not be an insurance industry left by 2050”.
The Guidance and Top Tips can be downloaded here.
ICMIF hosts regular virtual forums for sustainability leaders at member companies on the topics of sustainability and environmental, social, and governance (ESG) concerns. The next session will take place on Tuesday 30 April 2024 (2pm-4pm BST) and this will include a case study presentation on the emissions top tips guidance as published by A4S.
These roundtables generally include case study presentations from ICMIF’s global network of members who will share details of their sustainability/ESG journey and best-practice in terms of embedding sustainability into their business strategies to create value across their organisations.
These sessions are aimed at all sustainability leaders/professionals as well as CEOs, C-suite executives and any other interested senior leaders from ICMIF member organisations. For more information or to register to join the next session, please contact Liam Carter, SVP Sustainability, ICMIF. Alternatively, please visit the website for more info.
