This chapter examines the climate‑related information that Dutch financial institutions currently disclose in practice and assesses how far it can support supervisory monitoring of net-zero commitments. Drawing on the public reporting of banks, pension funds and insurers, it reviews disclosures on emissions, exposures to carbon-intensive sectors, and governance and risk-management practices, alongside international evidence on target coverage and external assurance. The chapter finds that large banks provide the most detailed and standardised information, including sector-level pathway-alignment metrics under EBA Pillar 3, whereas pension funds and insurers rely mainly on portfolio-level indicators. It argues that sector-level physical emissions-intensity metrics offer the clearest measure of net-zero alignment, with WACI, absolute financed emissions and taxonomy metrics providing complementary but more limited information.
Net‑Zero Commitments and Prudential Risks in the Dutch Financial Sector
Abstract
The previous chapter outlined the regulatory, supervisory and voluntary frameworks that shape climate‑related disclosures by financial institutions. Building on this landscape, this chapter examines the climate‑related information currently disclosed by financial institutions in practice. In particular, two elements are relevant for supervisory analysis: first, information on current emissions and exposures to carbon-intensive sectors; and second, the emissions-reduction targets institutions set, which reflect their intended transition trajectory.
Firstly, the chapter presents the share of emissions covered by targets and the prevalence of external assurance of emissions disclosures internationally. Following this aggregate perspective, the chapter examines the information reported by a selection of Dutch financial institutions and assesses how it may support monitoring progress against net-zero commitments. The chapter is based on the examination of the public reporting by more than 70% of Dutch financial corporations with total assets above EUR 15 billion, based on their latest reporting date, as well as select relatively smaller financial institutions to broaden the assessment of reporting practices.
The following sections review the information disclosed across financial subsectors, including banking, asset management, and insurance underwriting, regarding emissions, portfolio exposure to transition risks and governance and risk management practices. For each financial subsector, the analysis summarises the information reported by the largest firms in the Netherlands, for which considerably more information is publicly available.1
Smaller banks, pension funds and insurance companies generally disclose less granular climate‑related information, limiting detailed analysis using public data. Chapter 4 discusses the resulting supervisory challenges and explains how supervisory data and analysis may help address them.
After presenting the information currently disclosed, the chapter assesses how publicly reported quantitative information may be used for risk assessment of net-zero commitments.
3.2.1. How widespread are emission reduction targets in the financial sector?
Jurisdictions in which financial institutions have committed to fewer net-zero transition targets may be less exposed to legal and reputational risks. However, the absence of targets and underlying transition planning may also indicate higher climate‑related traditional prudential risks, such as market, credit or liquidity risk.
Figure 3.1 shows the share of reported Scope 3 emissions for which financial institutions have set reduction targets. This provides a high-level indication of how much of the financial sector’s reported emissions are linked to forward-looking commitments.
Globally, listed financial institutions have set reduction targets for 28% of reported Scope 3 emissions among institutions that disclose such targets. The Netherlands and the United Kingdom show higher shares (68%) than the European average. In Italy, institutions set targets covering only 21% of their Scope 3 emissions.
Target coverage of reported Scope 3 emissions varies widely across jurisdictions, with higher shares in the Netherlands and the United Kingdom
Note: The disclosure of the coverage of GHG emission reduction targets is based on available information from 198 listed financial institutions that disclosed GHG emission targets, 3 of which are located in the Netherlands. The differences may also reflect the relative importance of large financial institutions within each jurisdiction, as larger institutions are more likely to face stricter reporting requirements and often set emissions-reduction targets as part of their climate strategies. As the underlying data are derived from third-party data providers, the results also depend on the availability and coverage of emissions and target data in these databases.
Source: OECD Corporate Sustainability dataset, Bloomberg.
3.2.2. Assurance of emissions reporting
Third-party assurance can strengthen the reliability of emissions disclosures and reduce uncertainty for supervisory analysis.
Globally, around one‑third of all listed financial institutions, representing two‑thirds of global total assets, assured their reported GHG emissions in 2024 (Figure 3.2).
In Europe, 40% of listed financial institutions representing 91% of total assets in the region assured their emissions by a third-party provider. This practice is more widespread in the Netherlands, covering 67% of listed financial institutions and 99% of total assets.
Emissions assurance is more widespread among European and Dutch listed financial institutions, especially when weighted by total assets
Note: The disclosure of the use of assurance on GHG emission reporting is based on available information from 1 126 listed financial institutions disclosing GHG emissions. The analysis includes information from 354 listed financial institutions assuring their scope 1, 2 or 3 emissions, 6 of which are in the Netherlands.
Source: OECD Corporate Sustainability dataset, Bloomberg.
3.2.3. Overview of climate‑related information by Dutch financial institutions
Figure 3.3 summarises the main types of climate‑related information publicly disclosed across financial sectors that may support prudential monitoring of net-zero commitments. The overview shows that banks’ loan portfolios are subject to the most detailed and standardised disclosures, including absolute financed emissions, net-zero pathway alignment metrics and detailed reporting on sector exposures under EBA Pillar 3 templates.
In contrast, reporting for asset management, pension funds and insurance activities relies more on portfolio-level indicators, and information on carbon-intensive sector exposures is limited to fossil fuels. Bank assets other than loans and underwriting activities are currently subject to more limited or principle‑based disclosure expectations, resulting in less comparable information across sectors.
While banks report detailed information on emissions metrics and sectoral exposures, public reporting on investments held by pension funds and insurers are limited
1. Weighted-average carbon intensity; Calculated as tCO₂e/EUR m revenue and weighted by market value, equivalent to SFDR PAI 3.
2. Metrics and targets are reported with varying per cent coverage of each banks’ loan portfolio (details in Section 3.3).
3. Asset management activities of banks may represent an exception and fall under SFDR. In these cases, banks report PAI statements corresponding to these activities.
4. BTAR for banks and GAR for asset management activities.
5. Simplified requirements for less significant institutions. Pension fund report information where they fall under and comply with SFDR.
Source: Public disclosures of 43 Dutch and European financial institutions (2025 annual or integrated reports where available; 2024 reporting for selected pension funds), and underlying frameworks explained in Chapter 2.
3.3.1. Data overview
The section is based on an analysis of the public reporting of nine Dutch banks. Six fall within the EBA Pillar 3 ESG category of large listed and non-listed institutions, while one is a large subsidiary of a non-EU banking group and two classify as other non-listed institutions. Under the proposed CRR3 proportionality framework, these categories correspond respectively to the full, simplified and reduced sets of EBA Pillar 3 ESG disclosures (EBA, 2026[1]; 2022[2]). Of the nine banks, seven have signed the Dutch financial sector Climate Commitment; the exceptions are one of the two non-listed institution and the subsidiary of the non-EU banking group.
While reporting by large institutions is generally extensive and relatively comparable, reporting by other non-listed institutions, large subsidiaries and small and non-complex institutions is more limited and varies across institutions and categories. Therefore, the analysis below focusses on the reporting practices of large institutions and illustrates these through selected examples. The large subsidiary of a non-EU banking group follows a distinct reporting profile. Its disclosures focus mainly on qualitative ESG risk integration and group-level climate ambitions rather than entity-specific emissions or sector-alignment targets.
3.3.2. Bank loans
Emissions-related information
The six largest Dutch banks (referred to as “Bank A”, “Bank B” and “Bank C” and so forth), together representing 84% of total Dutch banking assets,2 publish detailed disclosures on physical emissions-intensity alignment for their loan portfolios.
Figure 3.4 provides an overview, taking the reporting of Bank A as an example of how this information is typically reported by banks falling within the EBA Pillar 3 ESG category of large listed and non-listed institutions.
Disclosures under EBA Template 3 typically include the baseline year, interim targets (for 2030), indicators of progress towards those targets, and information on whether the targets are aligned with recognised science‑based pathways such as the IEA NZE or the Carbon Risk Real Estate Monitor (CRREM) pathway. The disclosures also allow users to identify both the sector with the largest monetary exposure and the sector contributing the largest share of financed emissions. The first may be more relevant from a transition-risk perspective, while the second may be more relevant for legal or reputational risk.
While the template presents the corresponding net-zero pathway against which alignment is assessed, disclosures often provide limited information on subsector composition, such as the geographic distribution of residential real estate portfolios or exposures to specific subsectors within commercial real estate (e.g. offices, warehouses or logistics facilities).
The disclosure allows supervisors to assess financial and emissions exposure at sector level, the chosen physical emissions-intensity metric and the net-zero pathway used for comparison, as well as interim targets for the selected metric
Notes: Select sectors. (1) Carbon Risk Real Estate Monitor.
Source: Bank A’s annual report 2024.
Sector exposures and portfolio composition
This section presents sector-level climate‑related information that significant Dutch banks currently disclose and that may support supervisory risk assessment, especially in relation to risks such as asset-stranding. Data detailed in the section is approximated for anonymisation purposes.
Template 1 of Bank A’s 2024 Pillar 3 report (as of 31 December 2024) provides an overview of credit exposures to carbon-intensive sectors together with the associated financed emissions and credit risk indicators. For example, the bank reports an exposure of EUR ~7 billion3 to a carbon-intensive sector. Within this sector, EUR ~1 billion (around 15%) is classified as Stage 2 (exposures that have experienced a significant increase in credit risk) and EUR ~750 million (around 11%) as non-performing exposures (NPEs; where the borrower is unlikely to repay in full or is more than 90 days past due). The sector also accounts for 21% of the bank’s financed emissions among sectors that significantly contribute to climate change. Such information allows supervisors to identify concentrations of weaker credit exposures in carbon-intensive sectors and assess potential vulnerabilities to transition risks, such as carbon pricing or technological change.
Template 2 reports banks’ exposures to energy-inefficient real estate collateral, using Energy Performance Certificate (EPC) labels to indicate building efficiency. In the case of Bank A, the residential mortgage portfolio amounts to EUR ~150 billion, of which EUR ~15 billion is secured by properties with the lowest energy ratings (EPC labels E, F or G), representing ~10% of total exposure. In addition, ~40% of the residential portfolio lacks an official EPC label, and ~90% of efficiency data is estimated. This information helps supervisors assess potential risks related to collateral depreciation or renovation requirements as climate policies tighten.
Template 4 discloses banks’ exposures to the world’s largest GHG emitting companies, allowing supervisors to identify concentrated financing of high-emitting counterparties. In Bank A’s reporting, exposures to these companies are practically non-existent. Reported exposures are similarly negligible or zero for the other five large institutions analysed.
In its April 2026 consultation, the EBA proposes to replace this template with a new supervisory reporting template on obligor-level environment-related corporate exposures. Rather than focussing only on the world’s largest greenhouse‑gas emitters, the proposed template would require banks to report material exposures to individual corporate counterparties in selected environmentally sensitive sectors. This would allow supervisors to assess concentration risk using counterparty-level information on exposure size, credit quality, transition plans, pathway alignment, financed emissions and emissions intensity. The proposed template would be part of supervisory reporting only, not public Pillar 3 disclosure, as it contains obligor-level information.
The EBA also proposes removing taxonomy-related templates previously included in the ad hoc ESG reporting exercise, including Templates 6 to 9 and the Banking Book Taxonomy Alignment Ratio (BTAR). These templates measure the share of banking-book exposures financing activities classified as environmentally sustainable under the EU Taxonomy, including through the Green Asset Ratio and the broader BTAR. The removal reflects the EBA’s simplification approach and reduces reliance on taxonomy-alignment information in supervisory ESG reporting.
Governance, risk management & engagement
Across the six large Dutch banks analysed, disclosures show a broadly similar approach to climate‑related governance and risk management. Oversight of climate strategy and climate‑related risks is generally anchored at board level and supported by dedicated committees or senior management structures. Executive management is responsible for implementing the bank’s climate strategy and sector decarbonisation targets.
Climate‑related and environmental risks are integrated into enterprise risk-management frameworks and are assessed alongside traditional financial risks, including through sector risk assessments, scenario analysis and portfolio monitoring. Banks also state that climate considerations are incorporated into credit processes and client due diligence, particularly in carbon-intensive sectors.
All six banks disclose fossil-fuel-related exclusions or restrictions, although the scope of these policies differs across institutions. Three banks combine restrictions on selected fossil-fuel activities with active transition engagement in high-emission sectors. This includes client ESG assessments, transition-readiness or transition-plan assessments, sector-specific decarbonisation targets and, in some cases, consequences for clients that do not make sufficient progress, such as stricter credit conditions or potential client exit.
Two banks apply fossil-fuel exclusions within a public-sector mandate. Their engagement therefore uses similar tools, such as ESG assessments, monitoring of climate action plans and strategic client meetings, but applies them to public-sector clients, including municipalities, housing associations, healthcare and education institutions, water authorities and drinking water companies. One bank applies sustainability criteria as an ex-ante eligibility filter for financing and investments. Its policies exclude fossil-fuel production, energy production using fossil fuels and companies that use fossil fuels in their production processes, alongside other restricted activities such as mining. Its disclosures therefore focus more on portfolio eligibility, selection criteria and net-zero alignment targets than on engagement with high-emission corporate counterparties.
Among the other non-listed institutions analysed, one bank follows a similar ex-ante eligibility approach. It requires all financing to meet minimum sustainability criteria, does not finance fossil fuels and reports engagement with business-lending clients and listed investee companies on climate‑related matters. The other institution, a development bank, applies a more transaction-specific model. It screens and categorises customers by ESG risk, embeds ESG and Paris-alignment requirements in the investment process, uses action plans and monitoring during the investment period, and applies fossil-fuel exclusions and phase‑out criteria adapted to its development-finance mandate.
For banks that deliberately limit or avoid exposures to carbon-intensive sectors, less extensive reporting on engagement with high-emission counterparties may reflect the prior governance choice to restrict such exposures, rather than a weaker engagement framework.
Overall, the disclosures illustrate the type of qualitative governance, risk-management and client-engagement information that significant Dutch and European institutions report in response to supervisory expectations under the ECB Guide on climate‑related and environmental risks and the EBA Guidelines on the management of ESG risks, as explained in section 2.3. The disclosures of the other non-listed institutions appear consistent with a proportionate application of similar expectations.
Data quality and scope
Among the six largest banks, the scope and presentation of alignment disclosures differ. Bank A reports the coverage of its disclosures by sector, with reported scope ranging from 0% to 86% depending on the sector. Bank B reports targets and progress for approximately 63% of its eligible assets. Bank C discloses that 95% of its carbon-intensive assets covered under its net-zero commitments are included in its reporting scope. Bank C indicates that the remaining 5% of exposures will either be incorporated in future updates or remain excluded due to methodological constraints. The two public-sector banks report sector-level coverage close to 100% for most of their main lending sectors, including housing, healthcare, education and public infrastructure. Coverage is lower in selected sectors, such as renewable energy, but remains relatively high at around 70%. One bank does not appear to report an explicit portfolio coverage measure for its climate‑related reporting.
The abovementioned variation in reported coverage is consistent with the EBA’s Template 3 design and instructions, which is intended to capture banks’ Paris-alignment efforts across eight selected sectors, rather than requiring full coverage of the entire loan book (EBA, 2022[2]). In particular, it does not require disclosure for all economic activities and may therefore exclude sectors with relatively low emissions or limited relevance for transition-risk assessment such as professional services and education.
With respect to data quality, the six largest banks report financed emissions using the PCAF data-quality framework. Reported data quality in 2025 is typically around 3.0‑3.5 on the PCAF scale, where a score of 1 reflects verified counterparty-reported emissions data and a score of 5 reflects estimates based on high-level proxies such as sector or regional averages. This indicates reliance predominantly on counterparty-specific or sector-level estimated data rather than verified reported data or high-level national proxies. All nine banks show improvements in reported data quality compared with previous reporting years. For the two other non-listed institutions, data quality scores are similar for one institution, while they are lower for the development bank, potentially reflecting its footprint in less developed markets, where counterparty emissions reporting may be less robust.
The presentation of data-quality scores differs across institutions. Four banks, including the two public-sector banks, report data quality by economic sector, covering areas such as real estate, housing, healthcare, education, public infrastructure, energy and transport. The two remaining large banks report data quality by exposure type or client segment, including business loans, mortgages, corporate bonds and equity. Among the other non-listed institutions, one reports data quality by sector, while the other reports data quality by emissions scope, funding source and product type.
Across banks, data quality for residential real estate or housing exposures is generally lower than for other sectors, or lower than the weighted average where banks report by exposure type. This likely reflects the granular nature of residential mortgage portfolios, which consist of a large number of household exposures and often rely on estimated building-level energy and emissions data.
3.3.3. Other assets
As previously analysed, loan portfolios and other banking-book exposures are covered by the EBA ESG Pillar 3 disclosure framework, which provides structured information on sector exposures, financed emissions and alignment with net-zero pathways. Asset management activities conducted by banks and non-bank financial institutions are typically reported under the SFDR, which relies on portfolio-level rather than sector-level information. Other bank exposures, such as trading-book assets or strategic equity investments, are subject to less standardised climate‑related disclosure.
Emission-related information
Bank A monitors the carbon intensity of client assets using WACI. This covers securities held in investment portfolios managed on behalf of clients and is reported separately from the bank’s loan portfolio. The bank has set WACI reduction targets for 2025, 2030 and 2050, focussing on Discretionary Model Portfolios (DMP) where it has investment discretion (around 41% of client securities). Its climate targets apply primarily to equity holdings in these portfolios and are measured as tonnes of CO₂e per million euros of revenue, relative to market benchmarks.
Bank A appears to monitor WACI at the level of individual “building blocks”, by separating investment portfolios or mandates within its discretionary portfolio structure, each assessed against its benchmark to track progress towards targets. However, the disclosures do not clarify whether these building blocks correspond to distinct investment funds, sector exposures or other forms of portfolio segmentation. While Banks B and C do not refer to WACI as a measurement method in their group reporting, both publish separate PAI statements for their asset management businesses in line with SFDR. The two public-sector banks do not appear to finance material emissions-generating activities outside their banking books, which explains the absence of comparable reporting for these assets.
Sector exposures and portfolio composition
For assets outside banks’ loan portfolios, publicly available climate‑related portfolio disclosures are generally more limited. Where banks conduct asset management activities, the main publicly available sector-related information typically appears in PAI statements under SFDR.
These disclosures include indicators such as PAI 4 (exposure to companies active in the fossil-fuel sector) and, where reported, PAI 17 (exposure to fossil fuels through real estate assets). PAI 4 is a mandatory indicator, while PAI 17 is optional and therefore not consistently reported across institutions. In practice, the disclosures of Bank A and other large Dutch banks largely follow this pattern.
3.4.1. Data overview
As discussed in Chapter 2, pension funds are subject to both IORP II and the SFDR. IORP II requires pension funds to consider ESG factors in investment policy, governance and risk management, while the SFDR is more directly relevant for emissions-related reporting through principal adverse impact indicators. Under the SFDR, pension funds with less than 500 employees benefit from a “comply or explain” approach at entity level and are therefore not uniformly required to publish a detailed PAI statement. As a result, some pension funds choose not to publish an entity-level PAI statement and instead disclose a statement explaining why PAIs are not considered.
In terms of commitments, five Dutch pension funds representing around 75% of total pension assets have committed to the Dutch Climate Agreement.
Pension funds report emissions-related information, sector exposure and portfolio composition in a similar manner, with selected differences in exclusion and engagement policies. The following section shows how pension funds report this information and describes how exclusion and engagement approaches may differ.
3.4.2. Emissions-related information
Pension funds that comply with the SFDR report portfolio-level emissions indicators for their equity, corporate bond and real estate investments. When targets are specified, they usually follow the EU Green Deal’s and Dutch Climate Agreement’s headline reduction targets of reducing absolute GHG emissions by 50% by 2030 – commonly using 2019 as the baseline year. Similar to the approach used by other large Dutch asset owners, the target is not explicitly measured against sector-specific 1.5°C pathways.
Emissions-related PAI reporting of pension funds centres on portfolio-level emissions and carbon intensity
Source: PAI statements of large Dutch pension funds.
3.4.3. Sector exposures and portfolio composition
Public reporting provides limited sector-level detail on portfolio exposures. While pension funds often report separately on real estate, they do not differentiate between residential and commercial real estate. Instead, they often differentiate between listed and non-listed real estate investments.
Standardised portfolio composition indicators for pension funds are available mainly through SFDR PAI disclosures, including exposure to companies active in the fossil fuel sector. These indicators are useful as high-level screening information but provide limited insight into the transition risk of the remaining portfolio.
Pension funds often apply investment restrictions and portfolio policies, including exclusions or limits on direct investments in coal, oil and gas. For example, one large pension fund divested from fossil-fuel producers and sold its liquid fossil-fuel investments in 2024.
By contrast, another large pension fund applies a selective approach and continues to invest only in oil and gas companies that meet its transition-related criteria.
While pension fund PAI disclosures provide information on select carbon-intensive sectors, such as fossil fuels or energy-inefficient real estate, they are less granular than template‑based bank reporting
Source: Annual reports and PAI statements of large Dutch pension funds.
In addition to these disclosures, some funds provide more detailed information on investment policies related to carbon-intensive sectors. For example, one large Dutch pension fund reports that it actively divests from companies with high carbon emissions that do not set adequate absolute or intensity-based emissions-reduction targets, and aims to eliminate any exposure to such companies by 2030.
The same fund has also set a target for its real estate portfolio to align with CRREM decarbonisation pathways by 2030. In addition, it reports an ambition to increase investments in climate solutions, including renewable energy and other transition-related assets.
3.4.4. Governance, risk management and engagement
Overall, an analysis of Dutch pension funds’ disclosure suggests that climate‑related governance and risk management are described at fund level, but usually focussed on investment governance, oversight of external asset managers, portfolio-level risk monitoring and stewardship, rather than on specific processes such as individual investment-specific decision making and due diligence.
For one of the pension funds analysed, the annual report indicates that the fund’s board is responsible for overall strategy and policy, including sustainable and responsible investment, while climate‑related risks and opportunities are integrated into investment decisions and risk management. The report also explains that engagement is a core tool of the investment approach, with climate identified as one of the main engagement themes.
3.4.5. Data quality and scope
The four large Dutch pension funds that have been analysed provide limited assurance over parts of their climate‑related disclosures. For listed equity and corporate bond portfolios, data quality for scope 1 and 2 emissions appears materially stronger than for loan portfolios and private‑market exposures. Reported PCAF scores for these asset classes can be close to the high-quality end of the scale, with some large managers reporting weighted scores below 2.0. However, this does not hold across all asset classes or emissions scopes: data quality weakens for investees’ scope 3 emissions, private equity, mortgages, and other exposures where institutions rely more on proxies, sector averages or external estimates.
3.5.1. Data overview
Insurance companies’ business activities can be separated into three categories relevant for prudential supervision. First, their insurance operations: (i) underwriting insurance policies and (ii) investing assets held to meet future obligations to policyholders. Additionally, insurers also offer (iii) investment products or asset-management services to clients.
These activities are subject to different disclosure requirements. Investment activities may be covered by both the CSRD, SFDR where applicable, and the EU Taxonomy. Under the EU Taxonomy, insurers disclose KPIs for both investments and non-life underwriting, including the share of investments and gross non-life premiums associated with taxonomy-aligned activities. However, they are not subject to a standardised quantitative disclosure framework equivalent to EBA Pillar 3 templates for banks.
Reported financed and underwritten emissions, therefore, depend strongly on the scope of reporting of each insurance company. For some insurers, underwritten emissions represent only a small share of reported Scope 3 category 15 emissions, while for others with broader coverage of their underwriting they can constitute a larger emissions share.
For insurance companies, investment-related emissions may be easier to steer through portfolio allocation, while underwriting emissions depend more on the pace of sectoral economic activity in the transition to net-zero.
3.5.2. Emissions-related information
The analysis covers nine of the largest insurers in the Netherlands. Among them, eight reference the Paris Agreement and three signed the Dutch Climate Commitment. Moreover, four report PAI indicators in line with SFDR for their investment activities and six set targets or mention they encourage target-setting of their investees with reference to the SBTi. The scope of these targets differs across insurers: they may relate to proprietary, policyholder-linked investments, client investment activities, or, where disclosed, underwriting-related emissions.
3.5.3. Sector exposures and portfolio composition
Information on the emissions associated with underwriting activities is reported less systematically than that on insurers’ investment portfolios held on behalf of asset management clients. Insurers often disclose emissions associated with selected underwriting activities, such as property and casualty (P&C) insurance or health insurance.
Similarly, insurers often report targets only for select sectors and activities. For example, insurers may report an absolute financed emission reduction target for their asset management activities on behalf of clients and for their P&C insurance coverage.
3.5.4. Governance, risk management and engagement
Eight of the nine insurers explicitly mention transition risks, and five mention or outline their transition planning practices, and two intend to release transition plans in the coming years.
Recent EIOPA monitoring indicates that insurers have made significant progress in incorporating climate change considerations into ORSA, with most insurers in scope of EIOPA’s monitoring now including climate scenarios covering both transition and physical risks. Many undertakings apply quantitative approaches and increasingly link assessments to management actions. However, practices remain heterogeneous across firms and jurisdictions, and limited data availability and quality can still lead to simplified approaches or qualitative assumptions (EIOPA, 2025[3]).
3.5.5. Data quality and scope
Seven of the nine insurers explicitly mention PCAF standards in their reporting and appear to commonly calculate financed emissions for their investment portfolios using these standards. However, they rarely publish detailed PCAF data-quality scores. In addition, emissions associated with underwriting activities are generally not accompanied by PCAF data-quality indicators.
The sector is therefore developing voluntary standards for insurance‑related emissions to improve consistency in reporting (The Dutch Association of Insurers, 2025[4]).
3.6.1. Publicly disclosed metrics and information related to net-zero commitments
Based on the information in the previous sections, this section discusses the publicly available information that can be used to assess whether financial institutions are on a credible path to meet their net-zero commitments. While existing regulatory and voluntary disclosure requirements are not always designed with prudential supervision as their primary objective, they provide a useful proxy for which information is currently available, comparable and easily accessible to supervisors.
The section discusses four types of metrics and information: absolute financed emissions, WACI, physical emissions-intensity metrics and taxonomy alignment metrics. Each provides useful information, but they differ in how well they allow users to assess whether financial institutions’ exposures are aligned with net-zero pathways. Their discussion sets the basis for identifying and discussing what metrics and information are best suited for assessing legal and reputational and other prudential risks related to net-zero commitments.
3.6.2. Absolute financed emissions
Absolute financed emissions, which capture the total GHG emissions associated with a financial institution’s exposures, allow for a clear and simple assessment. They provide a transparent and intuitive measure of the overall carbon footprint of financed economic activities. However, they do not capture changes in the emissions intensity of financial exposures. Increasing financing for transitioning economic activities and sectors, such as gradually electrifying transportation companies, may temporarily increase the absolute financed emissions of certain sector exposures of financial institutions, while emissions per unit of physical output (e.g. tonne‑kilometre) or per unit of financing decline. Therefore, absolute emissions alone do not allow for a complete assessment of alignment with net-zero commitments.
3.6.3. WACI
In contrast, WACI relates emissions to an economic denominator, typically revenues. At the portfolio level, WACI is calculated by weighting investee companies’ emissions intensity by their portfolio weight, typically based on the market value of exposures. Asset managers and pension funds commonly report the metric, initially recommended by the TCFD (TCFD, 2017[5]), and now widely referenced across climate‑related frameworks.
WACI is relatively simple to calculate, comparable across institutions irrespective of size, and useful for tracking relative changes in portfolio carbon exposure over time. However, WACI has four important limitations:
1. First, as it is reported only at portfolio level, a declining WACI does not necessarily indicate improved sectoral alignment with net-zero pathway risks and may mask misalignment of individual sectoral exposures. This report argues that the risks stemming from the net zero transition are best analysed at a sectoral level. An institution may reduce its overall WACI by divesting from its most carbon-intensive assets, while other sector exposures continue to deviate or deviate more strongly from net-zero pathways. Sector-level WACI reporting would allow supervisors to assess whether emissions intensity is declining consistently across all major sector exposures and would therefore be significantly more informative. In practice, such sector-level WACI reporting is neither mandatory nor commonly observed, as shown in the analysis of current market practices in the previous section. Sector-level data would rather need to be calculated based on internal data.
2. Second, WACI measures carbon exposure rather than pathway alignment. It cannot be assessed against sectoral physical emissions-intensity pathways and therefore does not allow supervisors to confirm whether an institution is on track to achieve its net-zero commitments, particularly when sectoral exposures remain far from net-zero. While this limitation diminishes as portfolios approach net-zero levels over time, it remains material for assessing legal and reputational risks related to net-zero commitments in the near and medium term.
3. Third, as a portfolio-weighted measure, it is sensitive to changes in asset valuations. For example, a decline in the market value of carbon-intensive companies reduces their weight in the portfolio, which may lead to a decrease in WACI even in the absence of real emission reductions. Changes in WACI may therefore reflect valuation effects rather than genuine decarbonisation progress. Isolating these effects requires further decomposing portfolio weights into transaction and price effects.
4. Fourth, as a revenue‑normalised measure, it is sensitive to pricing-driven revenue changes, as well as inflation and exchange rate fluctuations. WACI may decline when, for instance, oil and gas, power, or digital services become more expensive while emissions per unit of physical output remain unchanged. These effects may reflect commodity cycles, scarcity, or pricing power rather than genuine decarbonisation. WACI may also decline due to the inflationary effect on revenues in a short time period. This limitation can partly be overcome by correcting revenue for inflation and exchange rate effects (DNB, 2021[6]).
3.6.4. Physical emissions-intensity metrics
Building on the above, this report identifies assessing sectoral physical emissions-intensity against sectoral net-zero pathways as the most suitable basis for assessing alignment with net-zero commitments. Portfolio-level WACI may still provide complementary information for high-level screening and portfolio comparison, but it should not be interpreted as a substitute for sector-level pathway-alignment metrics.
For this assessment to be meaningful, alignment needs to be measured at sector level, using the most appropriate physical metrics to normalise emissions according to sector-specific activity. For example, in transport, emissions may be expressed per tonne‑kilometre, reflecting the underlying economic output and enabling meaningful comparison across counterparties and over time. Applying these sector-specific normalisation approaches allows exposures to be compared against sectoral net-zero pathways. This enables a more accurate assessment of alignment with net-zero commitments and the associated legal and reputational risks from misalignment (further discussed in Chapter 4).
If a financial institution ensures that its exposures in each relevant sector evolve in line with net-zero emissions-intensity pathways, it can be considered on a credible transition trajectory, regardless of the base year used or whether its business activities expand in the short or medium term. This is because such pathways define how emissions per unit of activity must decline over time in line with science‑based net-zero scenarios, rather than fixing a static level of absolute emissions.
If all sectors in a financial institution’s portfolio follow such trajectories, which ultimately converge to zero (or near-zero in certain sectors), this necessarily implies absolute emissions reductions consistent with the Paris Agreement. At the same time, this approach avoids penalising temporary increases in absolute financed emissions if they result from a relatively larger increase in the transitionary economic activity being financed. Thus, the approach avoids penalising temporary increases in absolute financed emissions where these reflect growth in transition-aligned economic activity. Supervisors should therefore avoid relying only on absolute emission reductions to mitigate legal and reputational risks, where this may, in the short or medium term, discourage transition-aligned growth.
Further, reporting of physical emissions-intensity information and targets has also been identified by the ECB as good practice for significant institutions in meeting supervisory expectations (ECB, 2022[7]).
3.6.5. Taxonomy alignment metrics
Taxonomy alignment metrics, such as the GAR and the BTAR required under EU Taxonomy-related disclosures and EBA Pillar 3 templates, provide valuable information on the share of activities aligned with EU environmental objectives. However, the objective of GAR and BTAR is to measure the share of exposures that are aligned with the EU Taxonomy, thereby providing transparency on the extent to which financial institutions finance activities considered environmentally sustainable under EU criteria. They are not designed to assess transition risk or alignment with net-zero pathways.
This limitation is inherent to the design of the EU Taxonomy. It recognises transitional activities, which are permitted where no technologically or economically feasible low-carbon alternatives exist and where GHG emission levels correspond to the best performance in the sector or industry. This implies that the best available alternative might still emit more than the net-zero pathway required emissions because: (a) technological breakthroughs enabling true zero‑emission production may not yet be commercially viable at scale (e.g. green hydrogen steel production, electric commercial aviation); (b) certain industrial processes have inherent residual emissions even with best available technology (e.g. cement clinker production, agricultural methane); and (c) the “best in sector” threshold today (such as 100gCO2e/kWh from fossil gaseous fuels or 1.331 tCO2e/t for hot iron manufacturing (European Commission, 2025[8])) remains above near-zero levels required by 2050 (and potentially at other points in time).
GAR and BTAR should therefore not be interpreted as substitutes for net-zero alignment metrics. While full taxonomy alignment is likely to be broadly consistent with net-zero objectives by 2050, this outcome depends on the progressive tightening of taxonomy thresholds and the eventual phase‑out of transitional activities with residual emissions. GAR and BTAR therefore serve different measurement objectives and should not be interpreted as substitutes for net-zero alignment metrics.
3.6.6. Conclusion: Sector-level physical emissions-intensity metrics provide the clearest basis for assessing net-zero alignment
Physical emissions-intensity alignment information allows for the most accurate assessment against net-zero pathways. In the absence of such information, supervisors and financial institutions may use WACI, including decompositions (see Chapter 4), as a second-best alternative. Additionally, absolute financed emissions and their relative reductions should also be considered, as they are visible to the public and may shape perceptions of progress in the short and medium term. Finally, exposure to high-emitting sectors may affect how the reputation of financial institutions is perceived but is secondary to net-zero pathway alignment.
Absolute emission may provide a misleading signal if not interpreted alongside intensity-based, sector-specific metrics. While WACI can be a more meaningful indicator, physical emissions-intensity based metrics enable clearer assessment against sectoral net-zero pathways and are thus best suited for assessing legal and reputational risk of net-zero commitments. This is consistent with the Dutch Authority for the Financial Markets’ (AFM) 2025 review of major Dutch banks and insurers, which identifies sector-level financed-emissions reporting, physical intensity targets and sector-specific decarbonisation goals as key elements for understanding institutions’ contribution to real-economy decarbonisation (AFM, 2025[9]). Lastly, during bilateral meetings between the OECD and Dutch banks and insurers, most of the financial institutions agreed that sectoral physical emissions-intensity pathways allow for the most accurate assessment, while recognising that WACI may be helpful for high-level comparisons.
References
[9] AFM (2025), Towards transparent reporting on climate transition plans, https://www.afm.nl/en/sector/actueel/2025/dec/sb-klimaattransitiesplannen-emissies.
[10] DNB (2026), Balance sheet of the Dutch banking sector (consolidated), https://www.dnb.nl/en/statistics/data-search/#/details/balance-sheet-of-the-dutch-banking-sector-consolidated/dataset/225413c4-dddd-4343-a94f-0751258ac723/resource/441c5932-561b-4863-b3bc-1588acd5925b (accessed on 30 April 2026).
[6] DNB (2021), Misleading Footprints. Inflation and exchange rate effects in relative carbon disclosure metrics, https://www.dnb.nl/en/publications/research-publications/occasional-study/nr-1-2021-misleading-footprints-inflation-and-exchange-rate-effects-in-relative-carbon-disclosure-metrics/.
[1] EBA (2026), The EBA consults on major simplification of supervisory reporting to deliver a simpler, smarter and more proportionate framework, https://www.eba.europa.eu/publications-and-media/press-releases/eba-consults-major-simplification-supervisory-reporting-deliver-simpler-smarter-and-more.
[2] EBA (2022), EBA publishes binding standards on Pillar 3 disclosures on ESG risks, https://www.eba.europa.eu/publications-and-media/press-releases/eba-publishes-binding-standards-pillar-3-disclosures-esg.
[7] ECB (2022), Good practices for climate-related and environmental risk management, https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.thematicreviewcercompendiumgoodpractices112022~b474fb8ed0.en.pdf.
[3] EIOPA (2025), Public statement on the monitoring exercise on the use of climate change scenarios in the ORSA, https://www.eiopa.europa.eu/document/download/058569c7-13b9-495e-a82b-9e912bb703d2_en?filename=Public%20statement%20on%20the%20monitoring%20exercise%20on%20the%20use%20of%20climate%20change%20scenarios%20in%20the%20ORSA.pdf.
[8] European Commission (2025), EU Taxonomy Compass, https://ec.europa.eu/sustainable-finance-taxonomy/taxonomy-compass/the-compass.
[5] TCFD (2017), Final Report: Recommendations of Task Force on Climate-Related Financial Disclosures, https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf.
[4] The Dutch Association of Insurers (2025), Association completes 1st ESG standards and takes next step towards other insurances, https://www.verzekeraars.nl/en/publications/news/association-completes-1st-esg-standards-and-takes-next-step-towards-other-insurances.
← 1. The section seeks to present reporting practices by financial subsector. This is partly constrained by heterogeneous and relatively less extensive reporting by smaller institutions. Some smaller institutions, predominantly development and promotional banks, do not meaningfully finance carbon-intensive sectors based on their stated mission or mandate and therefore intentionally rely on governance choices rather than detailed sector-level exposure reporting.
← 2. Based on their 2025 financial year end reporting and DNB statistics for the consolidated total assets of the Dutch banking sector (DNB, 2026[10]).
← 3. Approximate and illustrative data for anonymisation purposes.