The sector supports the EU's objectives of cutting GHG emissions by at least 55% by 2030 and making the EU economy net-zero in greenhouse gas (GHG) emissions by 2050, said Insurance Europe in its response 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 industry can play a key role in the transition to sustainability, as insurers have significant potential to help fund the required investments. However, to reach these targets, policy action is needed to drive the transition and provide the right incentives to encourage participation in the transition across economic sectors and jurisdictions. This includes improvements to Solvency II under the current review to remove the current barriers for long-term investment.
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.
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. Significantly harmful (SH) taxonomy 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.
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, the response said.
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