Short answer
The answer, before the reasoning
An insurer should keep two connected but distinct climate-information lenses. For investment assets, IFRS S2 contains specific financed-emissions requirements covering absolute gross Scope 1, Scope 2 and Scope 3 emissions, industry and asset-class disaggregation, gross exposure, coverage, exclusions and methodology.
For underwriting, IFRS S2 does not require a financed-emissions metric for underwriting-associated emissions. Instead, material underwriting exposure is explained through physical and transition risks, scenario analysis, risk selection and pricing, claims and catastrophe experience, capital and reinsurance decisions, products, strategy and relevant industry-based metrics.
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PUBLIC ARTICLE
In practice
FORMAT
| FORMAT | LANGUAGE | VERSION |
|---|---|---|
| Sector deep guide and disclosure-control tool | British English | 1.0 • 1 August 2026 |
Rule
WHO THIS IS FOR
Insurance sustainability, finance, investments, underwriting, actuarial, catastrophe-modelling, risk, capital, claims, data, investor-relations, internal-audit and assurance-readiness teams.
Technical status
STANDARD STATUS
The original IFRS S2 requirements apply for annual reporting periods beginning on or after 1 January 2024. The December 2025 greenhouse-gas amendments, including paragraphs 29A-29C and B63A, apply for periods beginning on or after 1 January 2027, with earlier application permitted. The first-year Scope 3 relief can include financed-emissions information. Local adoption and assurance requirements should be checked separately.
Use two portfolio lenses and one connected disclosure story
An insurer can be affected by climate change through the assets it owns and through the risks it underwrites. The investment portfolio can be exposed to transition and physical effects on issuers, counterparties and asset values. The underwriting portfolio can be affected through hazard frequency and severity, accumulation, claims inflation, legal change, customer behaviour, coverage affordability, product design and reinsurance capacity.
The two portfolios share data, scenarios, governance and strategy, but their metrics are not interchangeable. Financed emissions relate to loans and investments. Underwriting-associated emissions are a different type of Category 15 information and are not the financed-emissions disclosure required for insurance activities. A robust article and report therefore avoid presenting one investment metric as if it described the whole insurance business.
Figure 1. Investment financed emissions and underwriting climate exposure require different datasets and controls but should connect to one strategy, risk and governance narrative.
Rule
CORE DISTINCTION
Investment financed emissions show emissions attributed to the insurer's loans and investments. Underwriting exposure is explained through the insurer's risk selection, pricing, aggregation, claims, reinsurance, capital and product decisions. Do not label underwriting-associated emissions as financed emissions.
What IFRS S2 requires for insurance-related financed emissions
These requirements are additional to the general IFRS S2 greenhouse-gas disclosures. The insurer also explains the measurement approach, inputs, assumptions and changes, the Scope 3 categories included and the characteristics of the data used. Estimates are expected in Scope 3; their use should be transparent rather than hidden.
In practice
| REQUIRED ELEMENT | INSURANCE APPLICATION | CONTROL QUESTION |
|---|---|---|
| Absolute gross financed emissions | Disclose attributed Scope 1, Scope 2 and Scope 3 emissions for each industry by asset class. | Can each reported amount be traced to a controlled investment population, emissions input and allocation method? |
| Gross exposure | Disclose exposure to each industry by asset class in the financial-statement presentation currency. | Does the population reconcile to the investment ledger before loss allowance where applicable? |
| Funded and undrawn amounts | Funded gross exposure uses funded carrying amounts before loss allowance; full undrawn commitments are presented separately. | Are drawn and undrawn positions separately identified and controlled? |
| Coverage | Disclose the percentage of gross exposure included and explain exclusions when coverage is below 100%. | Are the numerator, denominator, exclusions and types of omitted assets reproducible? |
| Risk mitigants | For funded exposure, the required gross exposure excludes the effects of risk mitigants. | Has collateral, guarantee or hedging treatment been kept separate from the required gross-exposure basis? |
| Methodology | Explain how emissions are calculated and allocated to the insurer. | Are source, data year, quality, estimates, allocation factors and methodology changes documented? |
| Industry classification | Select a system that makes transition-risk exposure understandable; prioritise a commonly used system when equally useful; disclose the system and rationale. | Is the classification consistent and does it reflect the activity driving transition exposure? |
| Asset classes | Include loans, bonds, equity investments and undrawn loan commitments; explain useful additional classes. | Has the disclosure retained the required classes rather than only one total investment figure? |
Rule
CURRENT AMENDMENT POINT
The current issued text permits an entity to limit Scope 3 Category 15 to financed emissions and, for that limitation, to exclude emissions attributable to derivatives. If the limitation is used, the insurer explains derivative treatment and the financial activities excluded. If Category 15 is included, the total Category 15 amount and financed-emissions subtotal are disclosed.
What the financed-emissions requirement does not cover
The December 2025 amendments clarify that the insurance financed-emissions requirement applies to financial activities associated with the insurer's assets. IFRS S2 does not require disclosure of the associated emissions of insurance and reinsurance underwriting portfolios as financed emissions. Underwriting-associated emissions can fall within the wider Category 15 landscape, but they do not meet the financed-emissions definition.
In practice
| DO NOT CONFUSE | WHAT IT IS | IFRS S2 TREATMENT |
|---|---|---|
| Investment financed emissions | A share of an investee's or counterparty's gross emissions attributed to the insurer's loans and investments. | Specific additional disclosure under B63-B63A when the insurer participates in those financial activities. |
| Underwriting-associated emissions | Emissions associated with activities covered by insurance or reinsurance contracts. | Not the financed-emissions disclosure required by B63-B63A. The current Category 15 limitation can permit their exclusion, with the required explanation. |
| Underwriting climate risk | Physical or transition effects on insured risks, claims, pricing, capacity, reinsurance, capital and products. | Disclose material information through governance, strategy, risk management, metrics, targets, scenario analysis and industry-based metrics. |
| Insurer operational emissions | Scope 1, Scope 2 and relevant non-investment Scope 3 emissions of the reporting entity. | Part of the general cross-industry emissions disclosure, separate from financed emissions. |
In practice
| MYTH | If underwriting-associated emissions are not required as financed emissions, und |
|---|---|
| REALITY | No. Material underwriting climate risks and opportunities remain within the core IFRS S2 disclosure architecture. The distinction only prevents the wrong emissions label and metric boundary. |
Build the investment data population and preserve insurance-specific controls
Begin with the controlled investment ledger, not with a vendor emissions file. The population should identify each legal holder, mandate, fund or general-account segment, instrument, issuer, asset class, industry, gross exposure, reporting date and any look-through decision. It should then attach emissions data and allocation inputs.
1. Freeze and reconcile the investment population at the reporting date.
2. Map each holding to the required asset class and a controlled industry classification.
3. Document treatment of funds, securitisations, cash, derivatives, short positions, collateral and look-through structures.
4. Attach emissions data, source period, verification, estimation method and data-quality status.
5. Calculate attributed emissions and aggregate by Scope, industry and asset class.
6. Calculate coverage and explain exclusions by type and amount.
7. Perform investment, finance, emissions-methodology and disclosure consistency reviews.
In practice
| REGISTER FIELD | WHY IT MATTERS | EXAMPLE CONTROL |
|---|---|---|
| Stable security / issuer / facility ID | Supports reconciliation, aggregation and duplicate control. | Map multiple market identifiers to one controlled issuer and preserve instrument-level ownership. |
| Portfolio and legal holder | Distinguishes general account, unit-linked, participating, separate account and other relevant structures. | Document inclusion and control rationale; reconcile to the reporting entity and AUM/investment statements. |
| Asset class and industry | Drives required disaggregation and transition-risk interpretation. | Retain source code, mapped code, classification version, override and reviewer. |
| Gross exposure | Creates the disclosure denominator in presentation currency. | Reconcile carrying amount before loss allowance; document FX and valuation-date treatment. |
| Emissions data and year | Identifies the source and vintage of Scope 1, 2 and 3 data. | Record reported/estimated/proxy status, boundary, method and verification. |
| Allocation factor | Attributes issuer or project emissions to the insurer's exposure. | Retain denominator, valuation date, method version and exception handling. |
| Coverage and exclusion code | Explains portions not calculated. | Separate missing issuer data, excluded instruments, cash, derivatives and methodological limits. |
| Owner, reviewer and change status | Creates accountability and comparability. | Separate preparation, investment-data reconciliation and methodology review where practical. |
Rule
LRA IMPLEMENTATION TOOL
A controlled investment and emissions register is not a prescribed IFRS form. It is a practical way to support completeness, reconciliation, methodology disclosure, change control and future assurance.
Explain underwriting physical and transition exposure
Underwriting disclosure should explain how climate information affects the insurance business model and risk decisions. The objective is not to publish every model output. It is to provide material information about concentrations, processes, strategic responses, metrics and assumptions that help users understand the insurer's prospects.
The Industry-based Guidance contains insurance metrics that can support this explanation, including probable maximum loss for catastrophe products, catastrophe losses, incorporation of environmental risk into underwriting and capital adequacy, low-carbon or energy-efficiency premiums and product features. Paragraph 32 requires the entity to refer to and consider the applicability of industry-based metrics; it does not make every metric in the guidance automatically applicable or material.
In practice
| UNDERWRITING AREA | PHYSICAL-RISK QUESTIONS | TRANSITION-RISK / OPPORTUNITY QUESTIONS |
|---|---|---|
| Risk selection | Which hazards, locations, construction types or business activities drive accumulation and loss potential? | How do policy, technology, litigation and market changes affect insured activities and coverage appetite? |
| Pricing and terms | How are hazard trends, uncertainty and claims experience reflected in price, deductibles, limits and exclusions? | Are transition conditions, risk-engineering services or policy features incorporated where decision-useful? |
| Aggregation and capacity | Where can correlated losses arise across policies, perils and geographies? | Where can policy change or technology shifts create sector-wide loss or demand effects? |
| Reinsurance | How do attachment points, limits, pricing and availability affect retained risk? | Could transition exclusions or market capacity change the insurer's product strategy? |
| Claims and reserving | How are catastrophe losses, claims inflation, litigation and repair/rebuild conditions monitored? | Could legal standards, business interruption or technology replacement alter claims outcomes? |
| Products and services | Which products are exposed to affordability or protection gaps? | Which products support resilience, low-carbon technology, energy efficiency or risk reduction? |
Rule
MATERIALITY CONTROL
Select underwriting metrics because they explain material climate-related risks or opportunities and how the insurer manages them. Do not copy the entire industry guidance without testing relevance, data boundary and user value.
Use scenario analysis to connect underwriting, investments and capital
IFRS S2 requires climate-related scenario analysis to assess climate resilience using an approach commensurate with the entity's circumstances. For insurers, scenario work can connect asset values, liability cash flows, claims, reinsurance, capital, liquidity and strategic choices. A useful disclosure distinguishes the purpose and limitations of catastrophe models, climate scenarios, transition pathways and financial planning models.
An insurer should explain where models use historical calibration, where climate change may challenge stationarity, how non-modelled perils are treated, and where investment and underwriting data use different periods or classifications. These limitations can be material to interpreting the results.
In practice
| SCENARIO COMPONENT | INSURANCE APPLICATION | EVIDENCE / LIMITATION |
|---|---|---|
| Hazards and pathways | Acute events, chronic shifts, policy and technology changes, customer behaviour and litigation. | Scenario source, severity, time horizon and whether it is exploratory or used for a management decision. |
| Exposure mapping | Geocoded insured assets, issuer locations, industries, collateral, supply chains and concentrations. | Coverage, geospatial precision, proxy treatment and date. |
| Financial channels | Claims, premiums, lapses, reinsurance, expenses, investment income, valuations, capital and liquidity. | Model linkage, assumptions, second-order effects and areas not quantified. |
| Management actions | Pricing, limits, reinsurance, investment allocation, product design, engagement and risk reduction. | Feasibility, timing, governance approval, cost and dependency. |
| Results and resilience | Vulnerabilities, thresholds, strategic options and decision points across time horizons. | Do not reduce a complex result to an unsupported statement that the insurer is resilient. |
Rule
MODEL DISCIPLINE
Catastrophe-model output, an orderly transition pathway and a financial-statement stress are different tools. Explain their purpose, coverage and connections rather than presenting them as one interchangeable scenario result.
Hypothetical case: a composite insurer with coastal and transition exposure
The insurer separates the two lenses. It discloses financed emissions and gross exposure for the covered investment portfolio, explains the omitted private debt and fund holdings, and describes a two-year data plan. For underwriting, it explains concentration, probable maximum loss, catastrophe losses, non-modelled peril limitations, reinsurance actions and revised pricing and risk-engineering measures. Strategy connects both portfolios through capital allocation, product changes and investment engagement without claiming that financed emissions describe underwriting risk.
The stronger wording is not a template. It works because it distinguishes investment and underwriting boundaries, identifies concentrations and limitations, and links metrics to decisions.
Hypothetical scenario
HYPOTHETICAL SCENARIO
A composite insurer has a general-account investment portfolio with material utilities and real-estate exposure and a property underwriting portfolio concentrated in coastal regions. Investment financed-emissions coverage is 78%. The catastrophe model covers major wind and flood perils but not all secondary perils. Reinsurance prices increased and a regulatory transition scenario identified vulnerability in several investees.
Illustrative only. It shows how the decision is made, not wording that can be copied or relied on.
In practice
| WEAK WORDING | STRONGER ILLUSTRATIVE WORDING |
|---|---|
| Climate risk is integrated into underwriting and investments, and the Group is well positioned for the transition. | Investment financed emissions were calculated for 78% of gross exposure. The principal exclusions were private debt and externally managed funds for which issuer-level inputs were unavailable. Coastal property represented 24% of property sum insured and generated 61% of modelled 1-in-200 wind loss. During the period, the Risk Committee increased selected deductibles, purchased additional catastrophe cover, introduced engineering requirements for defined locations and approved an issuer-engagement programme for two transition-sensitive investment sectors. Scenario analysis also identified non-modelled flood and claims-inflation limitations; these are being addressed through an exposure-data and model-development programme. |
In practice
Common errors
| ERROR | WHY IT MISLEADS | CORRECTION |
|---|---|---|
| Calling underwriting emissions financed emissions | It confuses different Category 15 activities and the B63 boundary. | Keep investment financed emissions and underwriting climate exposure separate. |
| Disclosing only investment emissions | It omits material business-model risk in pricing, claims, capital or reinsurance. | Add entity-specific underwriting risk, scenario and strategy information. |
| Using one total investment figure | It hides industry, asset-class, gross-exposure and coverage information. | Preserve required disaggregation and explain concentrations. |
| Reporting model output without limitations | Users cannot assess coverage or uncertainty. | Explain model purpose, perils, geography, data, period and non-modelled risks. |
| Treating lower catastrophe losses as lower risk | One year of losses can reflect event experience rather than exposure or resilience. | Connect claims to exposure, PML, scenarios and management actions. |
| Listing every industry metric | Volume is not relevance. | Test each metric against material risks, opportunities and decision usefulness. |
| Claiming assurance of the whole climate report | A metric-level engagement may be narrower. | State exact subject matter, scope, level and provider. |
In practice
| MYTH | A catastrophe model is the insurer's IFRS S2 scenario analysis. |
|---|---|
| REALITY | A catastrophe model can be an important input, but climate resilience may require additional physical and transition scenarios, financial channels, management actions and strategic time horizons. |
Readiness
Final disclosure checklist
- • ☐ Investment financed emissions are disaggregated by Scope, industry and required asset class.
- • ☐ Gross exposure, coverage, exclusions, methodology and data limitations are controlled and explained.
- • ☐ Industry classification and selection rationale are disclosed and comparable.
- • ☐ Underwriting-associated emissions are not mislabeled as financed emissions.
- • ☐ Material underwriting physical and transition risks are explained through risk, strategy, metrics and targets.
- • ☐ Scenario purposes, assumptions, coverage, model limits and management actions are visible.
- • ☐ Industry-based metrics are selected through the refer-and-consider process rather than copied mechanically.
- • ☐ Investment, underwriting, reinsurance, capital, product and financial-effect narratives are reconciled.
- • ☐ Any target has a defined portfolio or business boundary, baseline, milestones and progress method.
- • ☐ Assurance wording accurately describes the engagement scope and local requirement.
Bottom line
An insurer's IFRS S2 disclosure should show two connected views: financed emissions and transition exposure in investment assets, and physical and transition effects in underwriting. The report becomes decision-useful when both views are reconciled to scenario analysis, capital, reinsurance, products, strategy, targets and controlled data limitations.
Official source anchors
The source set below should be rechecked as part of the pre-publication update control. Normative conclusions are based on current official IFRS Foundation and ISSB sources. Registers, templates, workflow steps and control suggestions identified as LRA practice are implementation aids rather than prescribed IFRS templates.
1. IFRS S2 Climate-related Disclosures. Current December 2025 issued text. Main anchors: paragraphs 13-16, 22, 24-37 and B19, B37-B63A. Open official source
2. Amendments to Greenhouse Gas Emissions Disclosures. Issued December 2025; Category 15 limitation, derivative treatment, revised industry-classification requirements and clarification of insurance financed-emissions scope. Open official source
3. Greenhouse Gas Emissions Disclosure requirements applying IFRS S2. Official May 2025 educational material. Non-mandatory and does not add to or change IFRS S2. Open official source
4. Industry-based Guidance on Implementing IFRS S2 - Insurance. Official accompanying guidance containing insurance climate topics and metrics for refer-and-consider assessment. Open official source
5. Using ISSB Industry-based Guidance when applying ISSB Standards. Official educational material on industry selection and applicability. Open official source
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