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Sustainable Finance

Moving towards a common framework – an insurance perspective

The European Commission has published a package of legislative proposals which seek to help investors identify which investments are
sustainable and to integrate environmental, social and governance (“ESG”) considerations within the investment process.

Building on the Commission’s Action Plan on sustainablefinance, which was published in March of this year, the proposals would impose new transparency and disclosure requirements on insurers and insurance intermediaries and would require a customer’s ESG preferences to be taken into account by them when assessing the suitability of insurance based investment products (“IBIPs”) for their customers.

Many of the proposals contained in the Commission’s package apply not only to insurance undertakings and insurance intermediaries, but also other “financial market participants”.


One of the Commission’s recommendations in its Action Plan was that a unified EU classification system – or “taxonomy” – should be introduced in order to provide clarity on which activities can be considered “sustainable”, with the ultimate goal of shifting capital flows towards more sustainable economic activities.

"Once work on the taxonomy is complete, it would be used as a point of reference for the ESG-related disclosures that insurers would need to make."


The draft Regulation on disclosures relating to sustainable investments and sustainability risks imposes a number of new obligations on insurers which make available IBIPs and on insurance intermediaries which provide insurance advice with regard to IBIPs. These are for the purpose of increasing disclosure and transparency in relation to ESG factors.

"The Regulation requires insurance companies to publish on their websites written policies on the integration of sustainability risks in their investment decision-making processes."

Changes to insurance 

The Insurance Distribution Directive ((EU) 2016/97) requires that undertakings and insurance intermediaries which provide advice on an IBIP should, as part of the assessment of suitability, collect certain information about the customer’s investment objectives.

"The Commission has published a draft Delegated Regulation amending certain Insurance Distribution Directive delegated acts so as to ensure that customers’ ESG preferences are taken into account in the advisory process."

Future developments 

In its package, the Commission has provided a process for periodic review of the taxonomy, including an evaluation of the appropriateness, in the future, of integrating social objectives into the framework.

"The package also foresees the possible introduction of a verification mechanism to assess levels of compliance."