EIOPA takes crack at quiet NZIA leavers in greenwashing consultation

Regulator sets out draft principles for sustainability claims, flags poor disclosures around net zero alliance departure as bad practice.

Photo of illustration of giant finger blaming person who is sitting.

The European Insurance and Occupational Pensions Authority (EIOPA) has highlighted insurers who did not publicly communicate about their departures of the Net Zero Insurance Alliance as an example of “bad practice” as it consults on draft principles for sustainability claims by insurers and pension providers.

In the consultation, published on Tuesday, EIOPA sets out four principles for sustainability claims, which it says will establish a framework to assist national regulators in their monitoring of insurance and pension providers.

It follows on from a joint call for evidence on greenwashing carried out by the EU financial regulators at the end of last year.

Under the principles, sustainability claims should be accurate, concise and consistent with a provider’s business model; be kept up to date with timely disclosure of changes and a clear rationale; be substantiated with clear reasoning and facts; and claims and their substantiation should be accessible by the targeted stakeholders.

The consultation sets out examples of good and bad practices under each of the principles. The first example of bad practice given in a joint section for principles one and two concerns insurers leaving “an alliance that pledged to transition its underwriting portfolio to net zero emissions by 2050”.

The insurer in the example uses its membership to portray itself in marketing as a green provider but decides to leave after a few years. In the example, the firm does not put a public statement on its website giving reasons for its departure or indicate whether it plans to still pursue its net-zero target. Instead, articles relating to its alliance membership remain on the website.

The consultation does not name any alliance or individual insurer, but many European firms dropped out of the Net Zero Insurance Alliance in quick succession as it lost the majority of its membership earlier this year.

A spokesperson for EIOPA told Responsible Investor that “the examples presented in the report blend real-life observations with hypothetical cases. These do not concern the activities of any particular entity but instead aim to illustrate how greenwashing can occur in practice.”

Other examples of bad practice include a pension provider committing to transition its investments to net zero but not specifying how it plans to reach this commitment, or an insurer making ambiguous and overly positive sustainability claims without providing concrete details.

The consultation paper says that providers should only make claims they are able to adequately substantiate or for which they have done sufficient due diligence. Where these claims relate to longer-term objectives such as net zero, these should be backed up by credible plans, interim targets and continuous progress reporting.

There is also guidance on naming for insurance-based investment products, where EIOPA says providers should use the term “sustainable” or “green” only for Article 9 products or Article 8 products with a substantial sustainable investment share and no non-taxonomy aligned fossil fuel investments.

The consultation closes on 12 March.

EIOPA today also published a consultation on the prudential treatment of sustainability risks under the Solvency II directive. The 157-page consultation paper “assesses the potential for a dedicated prudential treatment of risks associated with environmental and social factors” in line with the regulator’s expectation that it will later be mandated to do so.