EIOPA issues guidance on sustainable finance disclosure

EIOPA today set out a tighter sustainable finance disclosure framework through a joint SFDR Opinion with the other European Supervisory Authorities and a final report on greenwashing, adding detailed expectations on how sustainability claims are made and evidenced for insurance products. The measures affect insurance-based investment products within the SFDR scope and extend from product categorisation and disclosure design to principles for supervising sustainability-related communications.

Sustainable finance disclosure framework and product categorisation

In 2024, the European Supervisory Authorities (EBA, EIOPA and ESMA) published a joint Opinion on the assessment of the Sustainable Finance Disclosure Regulation, formally opening the door to structural changes in the regime. In that Opinion, the ESAs call for a coherent sustainable finance framework that is designed both to support the green transition and to strengthen consumer protection.

A central proposal is the introduction of two voluntary product categories, labelled “sustainable” and “transition”, which financial market participants should use for financial products. The SFDR already applies to insurance products, covering Article 8 contracts that promote environmental or social characteristics and Article 9 contracts that pursue a sustainable investment objective.

The ESAs also propose simplification of how disclosures are presented to investors, moving away from the current complexity of templates and cross-references. Alongside this, they propose improvements to the definition of “sustainable investments”, aiming to make the concept more operational for product design and disclosure.

Greenwashing risk and supervisory expectations for sustainability claims

EIOPA issued its final report containing advice to the European Commission on greenwashing risks and the supervision of sustainable finance policies on 4 June 2024. In that report, EIOPA defines greenwashing as practices where sustainability-related statements, declarations, actions or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product or financial services.

The report sets out four core principles for sustainability claims made by insurance or pensions providers. First, EIOPA recommends that sustainability claims should be accurate and precise and should fairly represent the provider’s profile and/or the profile of its products. Third, it recommends that sustainability claims and their substantiation should be accessible to the targeted stakeholders, which EIOPA links to both the location and comprehensibility of the information.

Fourth, EIOPA recommends that sustainability claims should be kept up to date, with any material change disclosed in a timely manner and accompanied by a clear rationale. These principles are framed as supervisory expectations for how national authorities should assess sustainability-related communications in the insurance and pensions sectors.

Principal adverse impact disclosures under SFDR

The ESAs published their third annual report on disclosures of principal adverse impacts under the SFDR on 30 October. This 2024 report assesses both entity-level and product-level principal adverse impact disclosures, covering how financial institutions describe the negative effects of their investments on sustainability factors.

The ESAs report that financial institutions have improved the accessibility of their principal adverse impact disclosures compared with earlier years. This finding sits alongside the ESAs’ broader push for simplified and more coherent disclosure formats in the SFDR Opinion.

Closing the loop between these strands, the ESAs’ work on principal adverse impacts, EIOPA’s greenwashing principles and the joint SFDR Opinion now form a more detailed supervisory playbook for sustainable finance disclosures across insurance products. The next decision point rests with the European Commission on whether, and how, to translate the ESAs’ proposals on product categories, definitions and disclosure simplification into binding SFDR amendments.

--- Sources: https://www.eiopa.europa.eu/ https://www.williamfry.com/knowledge/eiopa-publishes-final-advisory-report-on-greenwashing-and-sustainability-claims/ https://www.eiopa.europa.eu/esas-propose-improvements-sustainable-finance-disclosure-regulation _en