Do Financial SMEs Need to Report Financed Emissions?

Financial advisors, small asset managers and insurance brokers often ask whether they must report “financed emissions” — the greenhouse gas (GHG) emissions linked to the companies or assets they finance, invest in, or insure. Here’s what CSRD and VSME say. For background on emissions categories, see what counts as Scope 1 vs Scope 2 and the CSRD guide for financial advisors and brokers.

What Are Financed Emissions?

Financed emissions are indirect (Scope 3) greenhouse gas emissions resulting from loans, investments or insurance underwriting activities. For example:

• A bank’s lending portfolio contributes to financed emissions.
• An insurance broker’s underwriting of industrial clients may do so indirectly.
• A financial advisor recommending ESG funds does not directly generate financed emissions.

Under the GHG Protocol and ESRS E1 (Climate Change), financed emissions are a key disclosure for large financial institutions — not for small non-listed firms.

Are Financial SMEs Required to Report Financed Emissions Under CSRD?

No, not directly.

The CSRD Directive (EU 2022/2464) and VSME Standard (EFRAG 2024) distinguish between:

• Large institutions (banks, insurers, asset managers) → must report financed and insured emissions.
• SMEs (most advisory firms and brokers) → not required to calculate financed emissions.

However, SMEs may be asked by clients or lenders for high-level sustainability data to support their own CSRD reporting.

What Does the VSME Standard Say?

Under the VSME Comprehensive Module, SMEs may disclose relevant Scope 3 information if material or requested by partners. The standard encourages but does not require:

• Quantification of financed emissions.
• Complex portfolio-level climate metrics.

Instead, small financial firms can:

• Describe their sustainability policies (e.g., ESG advice or exclusion lists).
• State that financed emissions are not applicable if no lending or underwriting occurs.

Example disclosure: “As an independent insurance broker, the company does not manage assets or underwrite insurance directly. Therefore, financed emissions are not applicable to its operations.”

What If My Firm Manages Client Assets?

If you are an investment SME managing assets under MiFID II, and you actively select investments, you might consider disclosing qualitative information on:

• ESG screening or exclusion criteria.
• Share of sustainable investments.
• How climate risk informs product selection.

But detailed financed emissions metrics (like PCAF methodology) are still voluntary unless your firm exceeds CSRD size thresholds.

Practical Takeaway

Key Terms

• Financed emissions: Indirect (Scope 3) GHG emissions linked to investments or underwriting.
• Scope 3: Emissions from activities not owned or controlled by the firm, including financed emissions.
• ESRS E1: European sustainability reporting standard on climate change.
• VSME: Voluntary Sustainability Reporting Standard for non-listed SMEs.
• SME: Small and medium-sized enterprise under EU definitions.

To understand which Scope 3 categories apply to your financial services business, including financed emissions, use our interactive selector:

This tool will help you determine which indirect emissions categories are relevant to your financial services operations.