Insurance Europe responds to the European Supervisory Authorities' joint consultation on ESG disclosures and, specifically, the proposed Regulatory Technical Standards

Hogan Lovells

Hogan Lovells

Insurance Europe supports the efforts of the European co-legislators towards a more sustainable economy and is in favour of increased transparency in sustainable investments and sustainability risks, provided that the required disclosures are balanced and help consumers make informed financial decisions aligned with their objectives.

To that end, Insurance Europe's response makes a number of remarks on the proposed Regulatory Technical Standards (RTS) with a view to ensuring that the new disclosure regime is implementable in practice, reflective of market reality and based on observable and verifiable facts.

On 22 April 2020, the European Supervisory Authorities (ESAs) published a joint consultation paper setting out the proposed Regulatory Technical Standards (RTS) on content, methodologies and presentation of disclosures, pursuant to Regulation (EU) 2019/2088 on Sustainable Finance Disclosure (SFDR).

The draft RTS relate to several disclosure obligations under the SFDR regarding information on the adverse impacts of investment decisions and financial advice to enable end-investors to make informed investment decisions.

Insurance Europe's response to the consultation notes that with more than €10tn of assets under management, the insurance industry is the largest institutional investor in Europe. Given the nature of their business, insurers invest their assets with a long-term perspective and already consider sustainability as a key factor in their investment decisions.

Insurance Europe therefore supports the efforts of the ESAs in facilitating the development of a more sustainable economy.

The response notes that customer information is a key component in supporting the development of sustainable finance, provided that disclosures are balanced and help consumers make informed financial decisions aligned with their objectives.

However, the Insurance Europe report suggests that certain changes are needed (specifically to the draft RTS) to make the disclosure regime implementable in practice and to reflect market realities.

In particular:

  • Proposed entity-level disclosures should be feasible with respect to financial market participants' activities and based on observable and verifiable facts.
  • Adequate consideration should be given to implementation challenges and related timing implications, including relating to the quality and availability of existing ESG data.
  • The insurance industry considers there needs to be a phased-in approach, to allow financial market participants to implement comparable and meaningful disclosures.
  • Regarding product-level disclosures, there is a risk that the RTS are too prescriptive and will result in overly complex consumer information.
  • Mandatory product disclosure templates should be avoided to allow for flexibility in implementation at national level and across product types.
  • The focus of the RTS should be on what information needs to be disclosed, rather than on the form of these disclosures.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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