EFAMA Statement

EIOPAs consultation on integrating sustainability risks and factors in Solvency II and the Insurance Distribution Directive (IDD)

Cross-sectoral consistency needed

Brussels, 30 January 2019 - EFAMA submitted today its response to EIOPAs consultation on its draft technical advice on possible amendments to the delegated acts under Solvency II and IDD aiming at integrating sustainability risks and factors.

In its response, EFAMA highlights the need to ensure cross-sectoral consistency between work-streams being undertaken by EIOPA and ESMA on integrating sustainability risks and factors in Level 2 delegated acts of Solvency II and IDD (in the case of EIOPA) and UCITS, AIFMD and MiFID II (ESMAs mandate). It is crucial that sustainability risks and factors are treated similarly in the regulatory frameworks of the insurance and the asset management industry, in order to allow both the insurance and the investment industry to act consistently in respect to the investment decision and distribution processes.

EFAMA welcomes EIOPAs approach to identifying in principle sustainability risks based on the impact ESG factors have on the financial performance of an investment, and not on the ESG impact of the fund, (i.e. the impact risks to environment and society) which is a very different concept. From a risk management perspective, sustainability risks have to be financially material to the investment. This is the most crucial point to consider when determining the integration of sustainability risks and factors.

EFAMAs Director General Tanguy van de Werve comments: "Regulatory requirements for insurance undertakings on the integration of sustainability risks affecting the financial performance of their investments will have a significant impact on the asset management industry, as insurance companies are amongst their biggest institutional clients. Therefore, it is of paramount importance to ensure a consistent definition and treatment of sustainability risks and factors across sectors and to make it clear that these risks are limited to material risks linked to the investments financial performance.

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