UK SRS S2 Scope 3 Category 15: Investments, Exclusions and the 2025 Amendments

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

Scope 3 Category 15 is not a single self-defining number for a financial institution. It can encompass emissions associated with loans and investments, managed assets, facilitated capital-market activities, insurance underwriting and other financial services depending on the underlying accounting framework and methodology. UK SRS S2 now provides a specific reporting permission that can narrow this population to financed emissions, but the permission has disclosure conditions and does not erase the wider climate-risk analysis.

The practical problem is that three different populations are often collapsed into one spreadsheet: the total Scope 3 inventory, the Category 15 amount within that inventory and the financed-emissions subset. A report can therefore show a detailed bank, insurer or asset-manager financed-emissions table while still failing to explain what happened to other Category 15 activities. Paragraphs 29A-29C were added precisely to make the boundary and subtotal visible.

The Category 15 visual separates the Scope 3 total, the Category 15 total and the financed-emissions subtotal, then shows the explanation required when the paragraph 29A limitation is used.

The ISSB issued targeted amendments to IFRS S2 in December 2025. The UK Government incorporated the substantive Category 15 changes into the final UK SRS S2 issued in February 2026. The principal additions are paragraphs 29A-29C, together with revised financed-emissions wording and the new classification requirements in B62A and B63A. The UK did not need the IFRS transition paragraphs for the amendments because UK SRS S2 was issued after the amendments had already been finalised.

For the purpose of paragraph 29A, financed emissions are emissions attributed to loans and investments made by the entity to investees or counterparties. The standard explicitly includes loans, project finance, bonds, equity investments and undrawn loan commitments. For an entity participating in asset management, the definition also includes emissions attributed to assets under management.

This list is a minimum boundary description for the permission, not a complete calculation manual. The standard does not prescribe a single attribution formula for every financial product. Paragraphs B61, B62 and B63 instead require disclosure of the methodology and allocation method used. An entity can use an external methodology such as PCAF where suitable, but that remains an implementation choice. It must be tested against the UK SRS S2 disclosure objective and the entity's facts.

1. Start with the relevance of Category 15

Paragraph 29(a)(vi)(1) requires an entity to identify the Scope 3 categories included in its Scope 3 measure. If Category 15 is relevant and included, the institution decides whether to measure the wider Category 15 population or apply the paragraph 29A limitation. The decision should be made consistently with materiality and the reporting basis, rather than chosen after seeing which number is easier to produce.

2. Define loans, investments and derivatives

The institution should map its product and activity inventory to the paragraph 29A concepts. The derivative definition is especially important because paragraph 29B requires the entity to explain what it treated as a derivative. A defensible approach may align to the definition used under the accounting framework applied in the related financial statements, but the report still needs to explain the approach and any product-specific judgements.

3. Describe excluded financial activities

If the limitation is applied, the report must describe the financial activities excluded from Category 15, including activities associated with derivatives. The explanation is qualitative; it does not automatically require a separate quantified emissions inventory for every excluded activity. However, vague wording such as 'other products were excluded' is unlikely to help users understand the boundary. The description should connect to the business model, segment information or product architecture.

4. Preserve the total and subtotal relationship

When Category 15 is included in Scope 3, paragraph 29C requires the total Category 15 amount and the financed-emissions subtotal included in that total. If the institution has applied 29A so that Category 15 contains only financed emissions, the two numbers may be equal. That equality should still be transparent: it tells the reader that the total is the result of a permitted measurement boundary rather than evidence that no other financial activities exist.

The basis for the 2025 amendments explains that financed emissions are a subset of Category 15 and distinguishes other types of emissions associated with financial activities, including facilitated emissions and insurance-associated emissions. The 29A permission therefore matters most to institutions with capital-markets, advisory, underwriting or derivative businesses in addition to lending and investment activities.

Derivatives: emissions attributable to derivatives may be excluded under 29A, but the derivative definition and associated excluded activities must be explained.

Facilitated activities: underwriting or arranging capital can be measured under separate methodologies, but such amounts are not automatically part of the financed-emissions subtotal.

Insurance underwriting: insurance-associated emissions can be measured and reported separately; B63-B63A concern financed emissions from the insurer’s financial assets, not emissions associated with underwriting portfolios.

Client services and advisory activities: their climate risks may remain material to strategy, reputation, transition exposure or targets even where the emissions are outside the Category 15 measurement boundary.

A robust methodology note should allow a reviewer to reconstruct how a financial position entered the population, how the counterparty emissions were obtained or estimated, how the institution's share was attributed and how the result was aggregated. The method should also identify the reporting date or period of the exposure and emissions data, treatment of undrawn commitments, currency translation, restatements, data-quality hierarchy and material exclusions.

UK SRS S2 expects Scope 3 measurement to include estimation. Paragraphs B43-B56 establish a hierarchy that prioritises direct measurement, primary data, timely and representative secondary data and verified data, while recognising that estimation is often unavoidable. Paragraph B57 contains a presumption that Scope 3 emissions can be estimated reliably using secondary data and industry averages. Impracticability is therefore a high threshold reached only after every reasonable effort.

For financial institutions, three mechanisms must be kept separate. First, an entity can estimate financed emissions using reasonable data and disclose the method and data characteristics. Second, if same-period financed emissions remain impracticable to estimate reliably, UK-specific paragraph B59A requires an explanation of the reason, alternative measurement approach and plan. Third, paragraph C4 is a broader Scope 3 relief whose use must be disclosed and whose future availability may be controlled by law or regulation. These are not interchangeable labels for the same data problem.

1. Create a complete financial-activity register covering lending, project finance, securities, AUM, insurance, capital-markets, derivatives, advisory and other client services.

2. Identify the reporting entity and map each activity to legal entities, segments, systems and accountable owners.

3. Decide whether Category 15 will be measured broadly or limited to financed emissions under paragraph 29A; document the decision and materiality rationale.

4. Define loans, investments, AUM and derivatives, and map the minimum asset classes named in UK SRS S2.

5. Reconcile the in-scope exposure or AUM population to controlled finance records and quantify coverage before emissions calculations begin.

6. Apply the approved emissions-data hierarchy and attribution methodology; retain source, date, estimate, quality and review fields for each record.

7. Produce the Scope 3 total, Category 15 total, financed-emissions subtotal and the B61/B62/B63 tables with explicit exclusions and period information.

8. Run legal, risk, finance and technical review of the boundary note, claims and relief wording before the board or disclosure committee approves the report.

The example works because the boundary decision is visible and connected to the group's business model. It does not imply that the excluded activities are immaterial. The advisory and underwriting teams still assess transition, reputational and physical risks, and the insurer may voluntarily calculate insurance-associated emissions under a separate methodology.

Timing route: use the B59A guide to document period mismatches and the path to same-period reporting.

Bank route: build the exposure, classification and credit-risk controls described in the commercial-banking guide.

Insurance route: separate financed emissions from underwriting metrics and test resilience across both portfolios.

Asset-management route: define AUM, product, client-data and estimation boundaries before calculating coverage.