Dutch insurers reject need for deforestation regulation at EU level

The Dutch Insurance Association (VVN) has said the EC’s recently announced proposals for a regulation to effectively ban products that contribute to deforestation is not needed because the risk should already be covered by the EU Taxonomy Regulation and the forthcoming Corporate Sustainability Reporting Directive (CSRD). The EC explained that the proposed regulation sets mandatory due diligence rules for operators that place specific commodities on the EU market associated with deforestation and forest degradation. These include soy, beef, palm oil, wood, cocoa and coffee. The regulation would also cover some derived products such as leather, chocolate and furniture. Its purpose is to ensure that only deforestation-free and legal products, based on the laws in the country of origin, are allowed on the EU market. Operators will be required to collect geographic coordinates of the land where the commodities were produced. This strict traceability is meant to ensure that only deforestation-free products enter the EU market, and that enforcement authorities in member states have the ability to police the law. The regulation would be backed by a benchmarking system operated by the EC that flags countries presenting low, standard or high risk of producing commodities that flout the rules. Obligations for operators and authorities will vary according to the level of risk in the country or region of production, with simplified due diligence duties for products coming from low-risk regions and enhanced scrutiny for high-risk areas, explained the EC. But the VVN said the proposed regulation has major consequences for insurers, which would fall under the rules. “The proposed new law requires insurers to verify (through due diligence) whether products sold in the EU are not produced on deforested or deforestation-affected land anywhere in the world. With this, the parliament and the commission want to halt the ‘alarming pace’ of deforestation and, with it, climate change and loss of biodiversity. If it turns out that a company does not comply with the deforestation regulation, a financial institution is not allowed to invest in it,” said the VVN. However, the association noted that the Dutch government previously stated in its recent assessment of new commission proposals that combating deforestation through the financial flows, or investments, of financial institutions can be better tackled through existing initiatives, such as the EU Taxonomy Regulation and the coming CSRD. “The new regulation means additional legislation to address problems for which legislation already exists. It increases the administrative burden and the costs of compliance. Money and time that the financial sector can no longer invest in sustainable solutions, such as establishing supply chains where deforestation does not take place,” said the VVN. The association is joining forces with Insurance Europe and other financial umbrella organisations to present these positions in negotiations that are expected to start this autumn between member states and parliament on the way to a final set of rules.

Dutch insurers reject need for deforestation regulation at EU level

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