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EIOPA publishes ffinal report and opinion on greenwashing

Insurance & Reinsurance

EIOPA publishes ffinal report and opinion on greenwashing

In this short update we focus on EIOPA’s Final Report on Greenwashing, containing key proposals aimed at enhancing the supervision of greenwashing.

Fri 07 Jun 2024

4 min read

On 4 June 2024, the European Insurance and Occupational Pensions Authority (EIOPA), along with the EBA and ESMA (the ESAs) published their final reports on greenwashing in response to the European Commission’s request for input on greenwashing risks and the supervision of sustainable finance policies. The ESAs share a common understanding of greenwashing as “A practice whereby sustainability-related statements, declarations, actions or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, financial product or final service. This practice may be misleading to consumers, investors, or other market participants.”

All three ESAs emphasised that financial market players have a responsibility to provide sustainability information that is fair, clear and not misleading. They called for more action to be taken to address the growing greenwashing risk.

In this short update we focus on EIOPA’s Final Report on Greenwashing (the Report), containing key proposals aimed at enhancing the supervision of greenwashing. Complementing the Report, EIOPA has also released an Opinion on sustainability claims and greenwashing in the insurance and pensions sectors (the Opinion). In the Opinion addressed to national supervisors, EIOPA sets out four key principles to consider when examining an undertakings sustainability claims. The Report and Opinion can be found here.

The Report

In preparing the Report, EIOPA coordinated a survey on sustainability, that involved 16 National Competent Authorities (NCAs) and 99 insurance and pension providers. Some of the key findings of this survey were:

The Report shows an increase in supervisory attention on greenwashing and sustainability requirements between 2023 and 2024, with an increase in the number of NCAs reporting occurrences from 8 in 2023 to 11 in 2024. However, supervisory challenges remain, including constraints on resources, no common supervisory approach and lack of sustainability-related data.

In order to address the challenges faced in combatting greenwashing, EIOPA sets out nine key proposals in the Report to enhance the supervision of greenwashing and improve the sustainable finance framework. These proposals are:

  1. using the ESAs common understanding of greenwashing as a reference point
  2. building a common EU supervisory approach in relation to sustainability claims and greenwashing
  3. tackling greenwashing through enhanced supervision and targeted supervisory activities
  4. preventing greenwashing
  5. enhancing supervisory resources and expertise to tackle greenwashing
  6. closing the gap related to non-life insurance products with sustainability features
  7. consumer-centric sustainability preferences
  8. developing a sustainability-related investment framework that works for insurance and pension consumers and providers
  9. enhancing sustainable finance and mitigating greenwashing in the occupational pensions sector

These proposals are dealt with in detail throughout the Report and are complemented by the Opinion which is addressed to NSAs.

The Opinion

EIOPA has also issued an Opinion to provide guidance to the NSAs on how to identify misleading sustainability claims and monitory greenwashing throughout the insurance lifecycle. EIOPA has indicated four key principles which are derived from the legal obligations under sectoral legislation to provide clear, fair, and not misleading information.

The four principles are:

  1. sustainability claims made by a provider should be accurate, precise and should fairly represent the provider’s profile, and/or the profile of its product(s)
  2. sustainability claims should be substantiated with clear reasoning, facts and processes
  3. sustainability claims and their substantiation should be accessible by the targeted stakeholders
  4. sustainability claims should be kept up to date and any material change should be disclosed in a timely manner and with a clear rationale

EIOPA noted that while the Opinion is addressed to NSAs, entities and products that are under EIOPAs remit should follow the four principles set out in the Opinion. Insurers and insurance intermediaries may find the examples of good and bad practices of sustainability claims annexed to the Opinion a helpful guide to best practice. EIOPA indicated that it will begin monitoring the supervisory actions undertaken by the NSAs 24 months after the publication of the Opinion. As such, it is likely that insurers and intermediaries can expect to see increased scrutiny of green/sustainable claims over the next two years.

Next steps

While the Report and Opinion do not introduce immediate changes for insurers and intermediaries, it is clear that regulatory focus on greenwashing is increasing and will continue to increase over time. As such insurers and intermediaries should:

For advice or for further information on this topic please contact Laura Scanlan, Associate, Laura Mulleady, Partner, Sinéad Lynch, Partner or any member of the A&L Goodbody Insurance & Reinsurance team.

Date published: 7 June 2024

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