Insurance Europe has responded to a call for feedback on the EU Platform on Sustainable Finance’s (PSF) draft report on minimum safeguards (MS). This is welcomed by the industry since the draft aims to advise the European Commission on the application of MS as set out under Article 18 of the EU Taxonomy Regulation.
The insurance industry also agrees with the PSF’s proposed two-pronged approach, which includes two sets of criteria for the establishment of non-compliance with MS: one related to adequate due diligence processes implemented in companies (ie relying on corporate reporting and disclosure) and the other related to the actual outcome of these processes or the company’s performance (ie relying on external checks on companies).
Insurance Europe also wishes to highlight the following points:
- European insurers welcome the fact that the report clearly accounts for upcoming EU legislation (eg the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD)), but caution against setting overly prescriptive requirements for the short transition period.
- Compliance with the upcoming CSDDD should always be considered as fulfilling the MS.
- The PSF's report should clarify the amendments needed in the EU’s sustainability reporting standards (ESRS) to ensure complete compliance with the MS. It is essential to integrate MS in the ESRS to ensure equal data availability and to avoid fragmentation of reporting requirement and data sources.
- The proposed approach is not suitable given current data availability and reliability. Criteria, which (as of now) rest on ESG rating agencies’ collection of information, should be developed because many instances will remain where data supporting the two-pronged approach is not available, at least for the foreseeable future.
- Regarding external checks, the PSF should rethink the proposed criterion on final conviction and provide for a clear framework and timeframe according to which a company can be deemed compliant with the MS again after a violation.
- The insurer-policyholder relationship should not be deemed equivalent to other business relationships.
- Better alignment on the definition of good governance within the EU sustainable finance framework is required.