Insurers have been accused by activists of watering down the sector’s first attempt to quantify the climate impact of their underwriting portfolios.

Insurance and reinsurance plays a crucial role in the energy sector but companies that provide the cover for oilfields and mines have provided scant details of the emissions they are responsible for.

France’s Axa and Germany’s Allianz are among the insurers preparing to assess the carbon footprint of their underwriting business after the Partnership for Carbon Accounting Financials released standards for the industry in November.

Activists, however, say that the new industry group standard allows insurers to omit the largest chunk of emissions associated with underwriting portfolios — so-called scope 3 emissions made up of greenhouse gases emitted not by the companies themselves but along their supply chains and by those who use their products.

Including these emissions, which would account for the biggest chunk of the average company’s carbon footprint, is currently a recommendation but not a requirement of the PCAF standards.

In its current form the accounting standard “opens the door” for companies to “hide” their exposure to fossil fuels, and is “clearly not in line” with the advice of UN bodies, said Peter Bosshard, finance programme director at the Sunrise Project, a network of climate activists.

Privately, insurance executives say adding in indirect emissions would increase the probability of “double counting”. People close to PCAF pointed out that it does require insurers to explain their reasoning for not including scope 3 emissions, if they choose not to do so.

Renaud Guidée, the group chief risk officer at Axa, one of the 18 insurance members of PCAF, told the Financial Times that the accounting standard heralds a “sea-change in non-financial reporting”, which insurers will use to “steer the behaviour of customers into net zero”.

Guidée said that scope 3 data was not yet of a high enough quality to make its disclosure mandatory: “We need to make sure we have not only available but reliable data.”

Another potentially damaging omission, say activists, is that cover for construction risks — without which new fossil fuel projects cannot be built — are not included under the PCAF’s guidelines. Data on the emissions generated by construction projects over their lifetime are “most of the time not available”, the PCAF said.

More broadly, the same activists say that insurers are skewing the weighting of emissions in their favour, arguing that insured emissions should be based on the value of the project being insured. Currently they are calculated on the cost of cover, as a proportion of the client’s total revenue.

Estimates by Swiss Re and Oxford Economics suggest insurers that disclose their carbon footprint using the current method would on average take roughly just 0.5 per cent of clients’ total emissions on to their own carbon books.

The insurance sector’s footprint should be linked to the total value of insured assets, not just to premiums, argued Julian Richardson, chief executive of sustainable insurance specialist Parhelion. “They could have been bolder and recognised the enabling importance of insurance . . . so I think it [the standard] needs work,” he added.

The PCAF said its recommendation that scope 3 emissions should be disclosed went further than those of the Greenhouse Gas Protocol, the carbon accounting tool it uses.

Allianz said it is “committed to accelerate the transition to a decarbonised economy and supports its insurance clients in the transition to climate resilient business models over the next years”.

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