Explore Insurance Europe’s appeal for changes to the EU Taxonomy Regulation, aiming for better clarity and effectiveness in sustainable finance.
Insurance Europe is advocating for alterations to the EU’s Taxonomy Regulation, contending that specific reporting mandates impose an undue strain on insurers without effectively gauging their contributions to sustainability. In a detailed position paper, the industry association endorses efforts to refine sustainability reporting and disclosures, yet it urges regulatory bodies to reconsider key performance indicators (KPIs) that are proving challenging to execute.
This paper emerges as a response to the European Commission’s consultation on the technical application of the regulation, known as Level 2 measures. The EU Taxonomy is designed to delineate what constitutes a sustainable investment, thereby directing capital towards eco-friendly initiatives. However, insurers caution that some of its stipulations are impractical and result in excessive compliance costs.
Concerns Over Insurance Underwriting KPI
One of the notable concerns is the insurance underwriting KPI, which assesses the proportion of insurers’ underwriting activities in alignment with the taxonomy. Insurance Europe is advocating for either its elimination or suspension, arguing that it introduces complexity without offering substantial insights into insurers’ sustainability endeavors.
Questioning the Insurance Investment KPI
Insurance Europe is also scrutinizing the utility of the insurance investment KPI, which quantifies the percentage of insurers’ assets deemed sustainable under the taxonomy. The association contends that this metric does not accurately portray the sector’s role in sustainable finance and imposes an unnecessary administrative load on companies. It suggests suspending the KPI until a comprehensive review ascertains its practical benefits.
Proposals for Simplified Compliance
To facilitate compliance, Insurance Europe proposes a 10% materiality filter that would exclude companies with fewer than 1,000 employees from the denominator in investment KPI calculations. Additionally, it advocates for simplified reporting templates, particularly for performance metrics and disclosures related to exposure to fossil gas and nuclear energy activities.
The EU Taxonomy is a fundamental element of the bloc’s sustainable finance framework, aimed at channeling investments into environmentally sustainable projects. However, as the European Commission endeavors to refine the regulation, there is growing concern across the financial sector regarding the complexity and practicality of some of its reporting requirements.
Insurance Europe’s proposals reflect broader industry apprehensions over regulatory burdens and the challenge of aligning financial activities with evolving sustainability norms. The group is urging policymakers to ensure that reporting obligations remain proportional and do not impede insurers’ capability to support the green transition.
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