UK SRS S2 for Asset Managers: Portfolio Boundaries, Financed Emissions and Client Data

Educational practitioner material. Illustrative examples and wording require adaptation and technical review.

An asset manager has its own reporting entity, operations, employees, offices and corporate value chain. It also manages assets owned economically by clients, funds or other vehicles. UK SRS S1 requires the sustainability disclosures to use the same reporting entity as the related financial statements, while UK SRS S2 B61 requires financed-emissions information attributed to assets under management. The report must therefore explain how the manager's corporate boundary connects to the AUM population without implying that client assets are consolidated financial assets of the manager.

This distinction also affects targets and claims. A statement about the manager's operational net-zero target is not a statement about portfolio financed emissions. A product labelled climate-focused is not automatically representative of total AUM. A stewardship programme is evidence of a management response, but it does not by itself reduce the financed-emissions inventory. Each claim needs the correct boundary and evidence.

The asset-manager boundary visual separates the reporting entity, total AUM population, financed-emissions coverage and the client/investee data layer.

Paragraph B61 uses assets under management as the coverage denominator. It requires the amount of AUM included for each Scope 1, Scope 2 and Scope 3 financed-emissions figure, the percentage of total AUM covered and an explanation of excluded asset types and associated AUM when coverage is below 100 per cent. The standard does not use the bank and insurer term 'gross exposure' for the asset-management disclosure.

The manager should define total AUM consistently with its financial and regulatory reporting, while documenting any controlled adjustments needed for UK SRS S2. Custody-only assets, administration, advisory assets, model portfolios, delegated or sub-advised mandates and assets where the entity has no investment discretion may require separate treatment. The decision should follow the actual business model and the metric definition rather than a marketing description.

The B61 population should be decomposed into product and asset-class groupings that support completeness, data quality and materiality. Public equity, corporate bonds, sovereign debt, real estate, infrastructure, private equity, private credit, cash, derivatives and multi-asset funds can require different attribution and look-through methods. The standard does not prescribe a single product taxonomy, but the manager must explain its methodology and exclusions and provide decision-useful information about the risks and opportunities associated with its business model.

Maintain a product master identifying legal vehicle, mandate, strategy, client type, base currency, AUM source and responsible portfolio team.

Map each holding to an asset class and calculation method; record whether the method is supported by PCAF or another controlled approach.

Identify funds and mandates that prohibit disclosure or use external managers, and establish a data-sharing and aggregation control.

Prevent double counting where the manager invests one managed fund into another managed fund or acts as both manager and sub-adviser.

Separate AUM included in financed emissions from assets used only in product, stewardship or climate-opportunity metrics.

Document treatment of cash, sovereigns, derivatives, short positions, securities lending and overlays rather than leaving them as unexplained residuals.

Paragraph 29A permits the entity to limit Category 15 to financed emissions attributed to loans, investments and AUM and to exclude emissions attributable to derivatives. If the asset manager applies the limitation, paragraph 29B requires it to explain what it treated as a derivative and describe the excluded financial activities. Paragraph 29C requires the Category 15 total and financed-emissions subtotal when Category 15 is included.

Derivatives are a particularly important asset-manager judgement because they can provide economic exposure without a conventional ownership position. The permission to exclude derivative-attributable emissions does not mean derivatives disappear from climate-risk analysis, portfolio construction, product claims or target boundaries. The report should explain whether derivatives are included in financed-emissions calculations, exposure metrics, scenario analysis and target monitoring, and why those treatments differ.

B61 requires absolute gross financed emissions disaggregated by the financed portion of investee Scope 1, Scope 2 and Scope 3 emissions. For each item, the manager discloses the amount of AUM included. That design allows coverage to differ by Scope: a portfolio may have broad Scope 1 and 2 estimates but far lower investee Scope 3 coverage. The overall AUM percentage alone is therefore not enough.

The manager should reconcile total AUM to the controlled product and mandate register at the reporting date or approved averaging basis. It should also explain how subscriptions, redemptions, acquisitions, fund launches, closures and foreign exchange movements affect the denominator. If the emissions calculation uses a different AUM date, that timing difference belongs in the methodology and may require a B59A assessment.

B61 does not contain the B62A/B63A requirement to disclose financed emissions by industry and asset class. Asset managers nevertheless need classifications to calculate, manage and explain portfolio climate exposure, and material industry-based information may be necessary under the wider UK SRS S2 requirements. The report should distinguish a classification used as an implementation tool from an explicit B61 disaggregation requirement.

A manager might classify portfolios by asset class, strategy, sector, geography, climate solution, transition risk, physical risk or data quality. If it publishes sector financed emissions or product-level metrics, the taxonomy, hierarchy and materiality basis should be controlled. The same issuer can be classified differently by an economic-activity taxonomy, a risk taxonomy and a product taxonomy; these should not be silently interchanged.

Asset managers depend on data from issuers, fund administrators, custodians, index providers, external managers and clients. Holdings can be current while investee emissions and financial denominators lag. UK SRS S2 permits Scope 3 estimation and requires methods, inputs and assumptions to be explained. The manager should maintain a data-period matrix rather than using the phrase 'latest available data' as a substitute for transparency.

Record the AUM and holdings date or averaging period for each product and mandate.

Record investee emissions periods separately for Scope 1, Scope 2 and Scope 3.

Record the period and source of attribution denominators such as EVIC, total project value or property value.

Identify index, fund and external-manager data dates and any look-through gaps.

Assess material corporate actions and portfolio changes between the emissions-data date and reporting date.

Explain methodology for private assets, newly listed issuers, estimated data and holdings without issuer identifiers.

If reliable same-period financed emissions remain impracticable after every reasonable effort, B59A requires the reason, measurement approach, inputs and assumptions for any information reported and a plan with a timeline. The explanation should identify affected products, asset classes or mandates and the AUM involved. A broad sentence about client-data constraints is not sufficient.

Estimates are expected in Scope 3 reporting. The control objective is not to remove every estimate but to use the highest-quality information reasonably available, make the hierarchy visible and avoid false precision. The manager should distinguish issuer-reported data, vendor estimates, modelled activity data, sector averages and proxies, and disclose the extent to which inputs are primary and verified as required by B55-B56.

Asset managers often reuse the same data in fund reports, client mandates, regulatory templates, stewardship reports and corporate UK SRS disclosures. Reuse is efficient only if the reporting boundary, period, methodology and claim are controlled. A fund-level intensity metric may not aggregate to the corporate B61 absolute financed-emissions total, and a product taxonomy may apply a different denominator or exclusions.

Stewardship can be a strategy response to portfolio climate risk and opportunity. Useful disclosures explain the objectives, prioritisation, escalation, voting, engagement outcomes and how those activities inform investment decisions. They should also distinguish activity from outcome: meetings held and votes cast are evidence of process, not proof that investee emissions fell because of the manager.

Link engagement priorities to material portfolio concentrations and target pathways.

Define what constitutes engagement, escalation, success, closure and unsuccessful engagement.

Record objectives, evidence, management response, voting or escalation and outcome for material cases.

Explain how stewardship information influences portfolio construction, risk monitoring or client decisions.

Avoid claiming sole causation for investee change; describe contribution and uncertainty honestly.

Reconcile stewardship statements to product mandates and public voting records where relevant.

An asset manager may set AUM coverage targets, financed-emissions targets, portfolio-alignment targets, engagement targets, climate-solution allocation targets or operational targets. Each target should state whether it applies to total AUM, selected products, in-scope asset classes or only assets with data. A target based on 'committed AUM' should not be presented as a total-AUM target unless the difference is explicit.

The most reliable asset-manager reporting architecture starts from controlled AUM and holdings, not from the final emissions dataset. Finance or product operations owns the AUM reconciliation; investment data owns securities and look-through; sustainability data owns emissions methodology; portfolio teams validate classifications and material anomalies; legal reviews product and stewardship claims; and the disclosure owner reconciles the corporate report.

Category 15 route: use the 29A-29C guide to document derivatives and other excluded financial activities.

Timing route: use the B59A guide for client, investee and external-manager data lags.

Bank route: apply B62 separately to banking exposures; do not reuse AUM as gross exposure.

Insurance route: separate third-party AUM, insurer-owned investments and underwriting metrics within mixed groups.