Response to EIOPA discussion paper BoS-22-527 on the prudential treatment of sustainability risks
PDF | 217 kb
PDF | 217 kb
The European Insurance and Occupational Pensions Authority (EIOPA) is conducting an analysis of the sustainability risks posed to insurers’ investment and underwriting activities, in order to help improve how prudential regulation addresses these risks. EIOPA has issued a discussion paper seeking views on its proposed methodology for this analysis. In our comments on this discussion paper, we propose (amongst other matters) that:
1. Precautionary approach: EIOPA should take a precautionary approach when assessing transition risk exposures, which recognises that historical data may underrepresent climate risks.
2. New fossil fuel activities: The capital regime must accurately reflect the heightened risks posed by investments in companies that are involved in the new exploration, expansion or development of fossil fuel projects and related infrastructure, such as the risk of stranded assets. EIOPA’s analysis should therefore assess the transition risks posed by investments in such companies.
3. Scope 3 emissions: Any measure of company emissions used by EIOPA in its transition risk analysis must include scope 3 (i.e. value chain) emissions. This information is a vital part of many companies’ emissions footprint, and in many sectors it comprises the vast majority of companies’ emissions.