EU: EIOPA consultation on anti-greenwashing opinion for insurance and pension sectors

The European Insurance and Occupational Pensions Authority (EIOPA) has published a consultation paper on its proposed approach to tackle greenwashing in the insurance and occupational pensions sectors.

The draft opinion describes four principles that EIOPA believes should be observed when providers (i.e. insurers and pension providers) make sustainability claims. It includes guidance to competent authorities on how to identify misleading sustainability claims and monitor greenwashing throughout the relevant product lifecycle. EIOPA has also listed examples of good and bad practices against each of the proposed principles. 

Broadly, the opinion spans all firms and products within EIOPA’s remit. 

The four principles are:

• principle 1 – sustainability claims made by a provider should be accurate, precise, and consistent with the provider’s overall profile and business model, or the profile of its product(s);
• principle 2 – sustainability claims should be kept up to date, and any changes should be disclosed in a timely manner and with a clear rationale;
• principle 3 – sustainability claims should be substantiated with clear reasoning and facts; and
• principle 4 – sustainability claims and their substantiation should be accessible by the targeted stakeholders.

The opinion also seeks to reaffirm understanding of what sustainability claims are - fundamentally, any claims related to the sustainability profile of an entity or a product - and how such claims can be misleading. EIOPA gives a non-exhaustive array of examples of how claims can be misleading, from selective disclosure, empty claims and lack of clarity, through to lack of meaningful comparisons or thresholds, unsubstantiated statements and misleading imagery.

Many of the matters raised – as underscored by the examples of good and bad practice – relate to life and pensions-related products (where the EU’s sustainable finance regulatory framework is currently focused). Examples of bad practices in respect of principles 1 and 2 include:

• failure to publicly disclose the firm having left a relevant alliance (e.g. an alliance pledging to transition its underwriting portfolio to net zero emissions) which had been used to promote the product or service in marketing collateral; 
• failure to conduct qualitative testing and scenario analysis to verify if the investment options selected for a life insurance product with investment options align with its sustainability objectives;
• products which disclose under Article 9 of the SFDR, but which disclose a sustainable investment objective with 0% commitment.

However, the opinion will need to be considered by general insurers too. For example, in relation to principle 3, examples of bad practice include non-life insurers which indicate their product is sustainable in view of its claims management process (absent any clear explanation of how the process benefits sustainability factors).

The deadline for comments on the draft opinion is 12 March 2024. EIOPA is expected to fine-tune the opinion based on feedback to the consultation paper.