Lloyd’s and Moody’s link on new carbon accounting solution


Lloyd’s, a renowned insurance and reinsurance marketplace, and Moody’s Analytics have joined hands to forge a path forward in carbon accounting.

Their ambitious collaboration aims to set the gold standard in greenhouse gas (GHG) emissions accounting, especially for underwriting and investment portfolios.

The heart of this collaboration is a recognition of the urgent need for insurers to comply with burgeoning GHG emissions reporting mandates. These regulations are not only evolving from current structures like the Streamlined Energy and Carbon Reporting (SECR) but are also emerging from forthcoming directives such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB).

Delving deeper, Lloyd’s is an eminent player in the insurance and reinsurance space, offering a comprehensive marketplace for both. Its counterpart in this endeavour, Moody’s Analytics, is revered for its robust risk management solutions on a global scale, helping clients navigate the financial markets with greater precision.

A key component of the partnership involves meticulous tracking of Scope 3 emissions, which pertain to the Greenhouse Gas Protocol’s 15th category. These emissions, linked with investments and financing operations, have notoriously been challenging to monitor due to the scarcity of pertinent data and outside corporate declarations.

This revolutionary venture will kick off with a 12-week evidence-based examination as an integral aspect of Lloyd’s “Lab Challenge Programme”. Established as a space for ideation and rapid product evolution, this programme aims to address the pressing challenges of the insurance sector. A cornerstone for the emission’s evaluation in this initiative is anchored on the Principles for Carbon Accounting Financials (PCAF) norms. Significantly, just last year, PCAF rolled out its Global GHG Accounting and Reporting Standard for Insurance-Associated Emissions, a move to empower insurance and reinsurance entities to precisely gauge and declare GHG emissions intertwined with their underwriting activities.

Rebekah Clement, director of corporate affairs at Lloyd’s said, “A robust and credible emissions measurement process will allow us to meet our regulatory reporting requirements while improving transparency across the Lloyd’s market. Moody’s have established expertise in this field and are well placed to help us achieve this.”

Andy Frepp, general manager – risk solutions at Moody’s Analytics, elucidated, “Building on our unique experience in delivering specialised sustainable solutions and analytics to brokers, carriers, and reinsurers, we are excited to help the Lloyd’s market quantify its insurance and financed-associated carbon emissions by leveraging our extensive carbon and financial data, advanced name-matching algorithms, and the knowledge of our climate and insurance experts.”

Lastly, Dawn Miller, commercial director at Lloyd’s, emphasized, “A regulatory imperative is coming within the next three years, and the Lloyd’s Lab can play a useful role by helping the market get to a better, swifter, and more consistent outcome.”

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