The environmental group WWF has published a framework to assess central banks and supervisors’ progress in integrating environmental and social issues into their oversight of the insurance sector.
The group says the document can be used to guide policymakers wishing to bolster their work on environmental risks, and will allow researchers to track progress in G20 nations and 20 other countries. The project is an extension of the Sustainable Financial Regulations and Central Bank Activities (Susreg) framework, which covers banking regulation and was released by WWF last year.
The framework contains over 80 indicators, covering micro and prudential supervision and disclosure, as well as regulator leadership and internal organisation. WWF expects to publish its first assessment based on the criteria in June 2023.
A key focus of the framework is the use of transition planning, both by supervised firms and supervisors themselves. One indicator of progress is that supervisors should publish a strategy outlining a science-based transition plan with associated measures for contributing to a net-zero and nature-positive financial sector.
Recommending the report, Daniel Wang, executive director of the Monetary Authority of Singapore, said the insurance sector has critical roles to play in addressing the climate and nature crises as both underwriters and investors. He said the sector is well-placed to support sustainability goals because of its long-term focus and risk management expertise.
The global landscape of sustainability-related regulation of the insurance sector is evolving rapidly, with the European Union currently reviewing its Solvency II regime, in part to better reflect climate risks and unlock investment towards the green transition. US insurance firms, along with other publicly traded companies, are set to be required by a new Securities and Exchange Commission rule to disclose climate-related information in their financial reports.
These regulatory manoeuvres come on the top of industry-led initiatives, most notably the Net-Zero Insurers Alliance (NZIA), which is developing a global standard to measure and disclose greenhouse emissions associated with underwriting portfolios, due to be launched by the end of 2022.
However civil society groups have expressed frustration that the sector is not making more tangible progress. Research published in June by the responsible investment charity ShareAction found that many of the world’s largest insurers, including founding members of the NZIA, are channelling billions into new fossil fuel projects.
To develop its framework, WWF has drawn on its involvement in several major sustainable finance initiatives, such the European Commission’s technical expert working group and its successor Platform on Sustainable Finance.
This page was last updated October 7, 2022
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