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🌱 '''Science-based target''' is a greenhouse gas emissions reduction goal aligned with what climate science indicates is necessary to limit global warming to 1.5°C or well below 2°C above pre-industrial levels, as set out in the Paris Agreement. Within the insurance industry, science-based targets have emerged as a concrete mechanism through which [[Definition:Insurance carrier | insurers]] and [[Definition:Reinsurer | reinsurers]] formalize their commitments to decarbonize both their investment portfolios and underwriting books. The Science Based Targets initiative (SBTi) provides the most widely recognized framework for setting and validating these targets, and a growing number of major insurers — including members of the [[Definition:Net-Zero Insurance Alliance (NZIA) | Net-Zero Insurance Alliance]] and similar coalitions — have adopted or are developing SBTi-aligned commitments.

⚙️ For an insurer, setting a science-based target involves quantifying its carbon footprint across multiple dimensions: Scope 1 emissions from direct operations, Scope 2 emissions from purchased energy, and — most consequentially — Scope 3 emissions, which encompass the carbon intensity of invested assets and, uniquely for insurance, the emissions profile of insured activities. The SBTi has developed sector-specific guidance for financial institutions, including criteria for how insurers should measure and reduce financed and insured emissions over defined timelines. In practice, this means an insurer committing to a science-based target must develop decarbonization pathways for its [[Definition:Investment portfolio | investment portfolio]] (reducing exposure to fossil fuel-intensive assets) and increasingly for its [[Definition:Underwriting | underwriting]] portfolio (adjusting appetite for carbon-intensive risks such as coal, oil sands, or heavy industry). The challenge lies in data availability and methodology: attributing emissions to individual policies or investment positions requires sophisticated analytics, and industry-wide standards for measuring insured emissions are still maturing.

📊 The significance of science-based targets for the insurance sector extends beyond reputational positioning. [[Definition:Regulatory compliance | Regulatory]] and supervisory bodies are increasingly integrating [[Definition:Climate risk | climate risk]] into their oversight frameworks — the [[Definition:European Insurance and Occupational Pensions Authority (EIOPA) | EIOPA]], the UK's [[Definition:Prudential Regulation Authority (PRA) | Prudential Regulation Authority]], and the Monetary Authority of Singapore have all issued guidance or requirements relating to climate scenario analysis and sustainability disclosures. Having a validated science-based target demonstrates to regulators, investors, and rating agencies that an insurer is proactively managing its [[Definition:Transition risk | transition risk]] exposure. It also shapes commercial strategy: insurers with credible decarbonization pathways are better positioned to underwrite emerging [[Definition:Renewable energy insurance | renewable energy]], [[Definition:Green bond | green infrastructure]], and [[Definition:Climate adaptation | climate adaptation]] risks, which represent growing segments of global premium. Conversely, failure to address carbon-intensive exposures may lead to stranded assets in investment portfolios and reputational drag as stakeholder expectations around [[Definition:Environmental, social, and governance (ESG) | ESG]] performance continue to tighten.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Climate risk]]
* [[Definition:Environmental, social, and governance (ESG)]]
* [[Definition:Transition risk]]
* [[Definition:Net-Zero Insurance Alliance (NZIA)]]
* [[Definition:Sustainable insurance]]
* [[Definition:Carbon footprint]]
{{Div col end}}

Definition:Science-based target - Revision history

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