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Insurers support future solutions to expand current climate-related taxonomy, but priority must be its completion and supporting the transition

15-9-2021

Insurance Europe has responded to a consultation by the European Commission on a draft proposal by its Platform on Sustainable Finance for an extended taxonomy to support economic transition.

The EU taxonomy has a key role to play in promoting transition finance and Europe’s insurers welcome the EC’s efforts to improve clarity in financial markets regarding different levels of environmental performance.

While insurers are generally supportive of extension proposals in the future, further work is required to ensure that those extensions are efficient for investors and achieve consistency with other ongoing work related to sustainable finance.

With respect to the no significant impact (NSI) taxonomy, it is important that the taxonomy framework recognises intermediate performance levels of economic activities in the future, while avoiding further administrative burdens and layers of complexity for investors. While not the main priority, defining such intermediate performance can help better recognise transition efforts of all sectors and encourage activities to move towards substantial contributions. This is key for developing consistent transition plans and tools to reach the environmental performance envisaged under the European Green Deal.

With respect to the significantly harmful (SH) taxonomy, the industry recognises that the SH taxonomy could be useful. However, the focus must be on finalising the current green taxonomy and on supporting transition activities that can improve companies’ sustainability performance beyond significant harm. Equally important, the introduction of an SH taxonomy beyond the do no significant harm (DNSH) category should rely on information about the implementation of the current framework, which is currently not available, and accompanied by a realistic impact assessment that duly considers the actual progress in implementing the Taxonomy Regulation.

Overall, insurers support a positive approach towards the green transformation. Pressure on financial institutions is not the means to achieve this outcome since this would be both inefficient and ineffective. SH activities should instead be directly addressed by introducing specific regulations regarding these activities. Similarly, investors’ risk management and allocation decisions should remain risk-based and not be distorted via any artificial factors or political objectives.

 

 

 

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