European insurers warn against rushed implementation of sustainability standards

Europe’s insurers have welcomed the recently published draft European Sustainability Reporting Standards (ESRS) but have warned against a rushed implementation that could lead to a lack of quality. The standards should be phased more gradually than currently envisaged to ensure they achieve what they are supposed to, said Insurance Europe, the representative federation of European insurers, in a joint response with the CFO Forum, the group of top-level CFOs at Europe’s leading insurance groups. The consultation was issued by the European Financial Reporting Advisory Group (EFRAG) on behalf of the EC. Insurance Europe stressed that European insurers are committed to supporting the transition to a more sustainable economy and tackling climate change as a “matter of urgency”. “The European insurance sector strongly supports the EU’s objective of transforming Europe into a climate-neutral continent by 2050 and is ready to contribute to that objective,” stated the group. Europe’s insurers therefore support the EC’s ambitious objective of developing a robust sustainability reporting framework through the Corporate Sustainability Reporting Directive (CSRD). Insurance Europe said insurers require the data the CSRD will provide to fully develop and embed environmental, social and governance factors into how they operate, progress with net-zero transition plans and comply with mandatory reporting requirements. The CSRD will also ensure greater transparency on how many companies operate, and manage social and environmental challenges, stated the group. Insurance Europe said trying to finalise all the proposed standards in the very short time available is unrealistic and could create standards that are not of suitable quality. “There is an urgent need for a phased approach in the development and implementation of the ESRS. The first phase should focus exclusively on standards related to mandatory reporting (eg Sustainable Finance Disclosures Regulation and EU Taxonomy Regulation) and on requirements that overlap with the standards of the International Sustainability Standards Board (ISSB),” stated Insurance Europe. The body said it supports the EU’s ambition to go beyond the ISSB’s global baseline, and the fact that compliance with European standards is set to mean automatic compliance with relevant ISSB standards. But it stressed that European sustainability reporting standards should favour quality and relevance over “exhaustiveness”. “Companies must be able to focus their efforts efficiently on the standards that relate to relevant and material activities and impacts. EFRAG should not introduce the rebuttable presumption (requiring companies to consider all areas relevant unless they can prove otherwise) as it is currently proposed, since this would not only create inconsistencies with financial reporting and the ISSB proposals but could also lead to a situation in which the effort to justify non-disclosure by using the rebuttable presumption would exceed the effort to report immaterial data,” said Insurance Europe. The group added that the definition of value chain for the financial sector in the draft ESRS is currently too vague and needs to be clarified. “This includes clarifying that a look-through to (all) investees, clients and policyholders for all disclosures is not required given the significant implications for reporting and challenges related to data availability,” concluded Insurance Europe.

European insurers warn against rushed implementation of sustainability standards

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Want to read this article?

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