Smaller municipal green projects 'could be bundled in funds' to aid smaller insurers - GDV

Written by Adam Cadle

20/08/2020

Smaller municipal investment projects supporting the green restructuring of Europe “could be bundled in funds” to save costs and to aid smaller insurers which do not have the resources to manage many individual projects, the German Insurance Association (GDV) has said.

Jörg Asmussen, member of the management at the association said there is also an essential need for a criteria for green investments.

“In order for insurers to be able to expand their involvement in sustainable investments, for which they are supposed to be accountable in the future, the question must be answered: what actually counts? Criteria are required - comparable to the labelling of food. Work on a classification has started. So far, however, criteria have only been available for two of the six formulated environmental goals - namely climate protection and climate adaptation - and that’s only for selected sectors."

He added: "Requirements for social or governance goals are not yet in sight. We're only looking at the 'E' of ESG."

The association said the delay is "annoying" for insurers. Asmussen is therefore urging more speed and calls for an unbureaucratic solution. And one that could lead to an international standard in the long term. Financial flows are global, the GDV said. "Asian investors pay very close attention to how Europe deals with the ESG criteria."

Insurers gearing their risk management and capital investments more closely to environmental aspects will depend on how the long-term interest rate is modelled under Solvency II in the future, with which life insurers assess their oligations, the GDV also stated.

“The lower it is, the higher the provisions must be made by the company,” it said. “And the less equity they have left for investments, including in sustainable investments.”

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