On 8th April 2020, the European Commission published a consultation on a renewed sustainable action plan. The initiative is part of one of the key strategic goals of the new European Commission – the EU Green new Deal.

Notwithstanding the ongoing development of the technical details of the sustainable taxonomy, the European Commission identified three areas where significant improvement is necessary to support the green transition of the EU economy:

1. Strengthening the foundations for sustainable investment by creating an enabling framework, with appropriate tools and structures. Many financial and non-financial companies still focus excessively on short-term financial performance instead of their long-term development and sustainability-related challenges and opportunities.

2. Increased opportunities to have a positive impact on sustainability for citizens, financial institutions and corporates. This second pillar aims at maximising the impact of the frameworks and tools in our arsenal in order to “finance green”.

3. Climate and environmental risks will need to be fully managed and integrated into financial institutions and the financial system as a whole, while ensuring social risks are taken into account where relevant. Reducing the exposure to climate and environmental risks will further contribute to “greening finance”.

The insurance industry plays a central role in the process towards a more sustainable Europe and particularly on the issues identified by the European Commission. The investment capacity of insurers as largest group of institutional investors is crucial for funding the transition. In addition, insurers’ core function of transforming and mitigating risks is essential for the ability of the EU to succeed on its way towards a more sustainable Europe.

In order to allow the insurance industry to play its part, it will be important that:

1. Effective and efficient regulation is in place to ensure that insurers can mitigate the risk and provide its investment potential

2. Appropriately designed investment projects are developed to allow long-term focused institutional investors to fund projects and provide reliable return to their customers

3. Sufficient and high-quality data is provided to assess and mitigate risks

Insurance Ireland encourages all interested stakeholders to get in touch. Please contact Natalie Dillon (natalie.dillon@insuranceireland.eu).