The consultation is being held by EIOPA following a request from the European Commission to specifically investigate this area ahead of the review of Solvency II that it must complete by January 2021 (more information about the consultation).
Finance Watch responded to the consultation to support many of the proposals made by EIOPA to ensure that insurers take sustainability risks into account. However, several areas still should be addressed by EIOPA including the need to broaden the approach to sustainability to look at nature depletion and eco-systems as well as climate change impacts (see Finance Watch report ‘Making Finance Serve Nature’).
Finance Watch also raised long-standing concerns over the use of capital charging approaches and the way in which they steer insurers’ asset allocation decisions – both generally and for sustainability purposes. These concerns are ultimately that regulation based on risk weighting and internal modelling is overly complex and too prone to manipulation to be able to properly achieve its objectives.