09/07/2018

Europe to reward sustainable investments

green investment

The announcement by Swiss Re on 2 July that it would no longer provide re/insurance to businesses with more than 30% exposure to thermal coal highlights growing support in Europe for the transition to a low-carbon economy. This follows publication by the European Commission of a package of actions to bring climate change, sustainability and clean energy further into the sphere of finance.

The Commission’s programme is intended to implement the final report of the EU High-Level Expert Group on Sustainable Finance. FERMA welcomed the report of the expert group and has made sustainability and responsible business conduct key topics for its European Risk Management Seminar 2018 in Antwerp on 8-9 October.

The expert group’s recommendations aim to steer public and private capital towards sustainable investments, identify the steps that financial institutions and supervisors should take to protect the stability of the financial system from risks related to the environment, and deploy these policies on a pan-European scale.

FERMA board member with responsibility for environmental and natural catastrophe issues, Xavier Mutzig, said: “The package of measure and proposed actions from the Commission is a step in the right direction to a greater awareness of corporate businesses regarding sustainability and responsible business conduct. I think it should go further by promoting positive collaboration and joint initiatives between all public and private stakeholders and across industries.”

The Commission has proposed actions calling for:

  • Greater transparency of companies on their environmental, social and governance (ESG) policies. The Commission will evaluate the current reporting requirements for issuers to make sure they provide the right information to investors.

  • A 'green supporting factor' in the EU prudential rules for banks and insurance companies. This means incorporating climate risks into banks' risk management policies and supporting financial institutions that contribute to fund sustainable projects.

  • A clear and detailed EU classification system – or taxonomy – for sustainable activities.

  • EU labels for green financial products.

  • Measures to clarify the duties of asset managers and institutional investors, such as insurance companies, regarding sustainability.

 

The FERMA Seminar will provide risk and insurance managers with an understanding of responsible business conduct. FERMA has consistently stressed the value of professional risk management in creating an overview of such non-financial exposures and methods for mitigating the risks. For example, in the context of the revision of the EU strategy on adaptation to climate change, FERMA has urged the European Commission  to take account of the value of professional risk management practice to increase the resilience of organisations to extreme weather events.