Following the release of a report from the European Commission’s (EC) High-Level Group on Sustainable Finance, and a recent EC public hearing, Insurance Europe has said the insurance industry is ready to collaborate and engage with policymakers to support their goals.
The EC’s High-Level Group on Sustainable Finance was launched in 2016 under the EC’s commitment to support the United Nations’ COP21 Paris Agreement. The Group is chaired by Axa’s Christian Thimann, and comprises 20 experts from a range of industries.
The Group recently published its interim report, which is open for consultation until mid-September, 2017, with the final report Sustainable Finance expected to ready in December, 2017.
Commenting on the report, Director General of Insurance Europe, Michaela Koller, said; “The Group correctly identifies the insurance sector, with its long-term investment focus, as particularly suited for supporting sustainability. Our industry has already demonstrated its interest in long-term sustainable assets.
“However, as the Group notes, insurers’ willingness and ability to invest in sustainable assets is not matched by the availability of suitable projects. Given the lack of sufficient supply of green assets for insurers to invest in, it is important to avoid automatic penalisation of brown assets.”
The interim report claims that designed prudential and accounting guidelines that fail to reflect the business model of insurance companies, drives investment disincentives. Furthermore, the Group calls for greater discussion around policies surrounding Solvency II regulation, a move supported by Insurance Europe, so areas of the regime are “adjusted to facilitate long-term products and long-term investment, and to reduce pro-cyclicality.”
“Insurance Europe continues to support further initiatives by the Commission, such as EFSI 2.0, to increase the availability of suitable sustainable finance opportunities.
“Insurers optimise their investments and the “green” characteristic is one of the decision-making parameters. However, if a project is not economically viable, it will not gain support. Over recent years, insurers have increased the weighting of environmental and social criteria in their investment strategies, which has led to a significant increase in the allocation to green assets. We believe that the appropriate regulatory frameworks can further enhance this trend, said Koller.
Commenting on the EC public hearing, Koller, added; “It is very encouraging to hear two Vice-Presidents of the European Commission speak not only about the challenges, but also the great opportunities that sustainable finance could bring to the European economy. The insurance industry stands ready to engage with European policymakers and to support achieve their objectives.”
