Response to EIOPA discussion paper BoS-22-527on the prudential treatment of sustainability risks

ClientEarth argues that EIOPA's reliance on historical data to assess transition risks is flawed because future decarbonization will be non-linear and more rapid than past trends. The organization advocates for a precautionary approach, specifically proposing a 100% capital requirement for companies engaged in 'New Fossil Fuel Activities' (exploration, expansion, or development). ClientEarth also warns that sustainability market indices and corporate emissions targets are often unreliable due to greenwashing and inadequate methodologies, urging EIOPA to include absolute emissions and scope 3 emissions in its risk assessments to avoid underrepresenting systemic financial risks.

• Relying on historical data to assess transition risk is insufficient because future decarbonization will be non-linear and more rapid than past trends to meet global climate goals. The current global policy response is consistent with 2.7°C warming, while IPCC findings suggest policies implemented by the end of 2020 were on track for 3.2°C warming.
• Investments in 'New Fossil Fuel Activities'—defined as the new exploration, expansion, or development of fossil fuel projects and infrastructure—pose heightened transition risks and should be subject to a 100% capital requirement and excluded from the matching adjustment.
• Sustainability market indices are unreliable proxies for low transition risk because their methodologies often fail to align with science-based decarbonization pathways. For example, some indices exclude coal but allow oil and gas expansion, and others have included companies like Adani Ports (linked to the Carmichael coal mine) or Glencore and BP despite 'low carbon' labels.
• Corporate emissions targets are often not based on credible science-based plans and may be used for greenwashing. A CDP report found that only 2% of companies claiming to have climate transition plans disclosed sufficient details, and Carbon Market Watch found the strategies of 15 out of 24 surveyed major companies were of low or very low integrity.
• EIOPA should use absolute GHG emissions and scope 3 emissions rather than relying solely on emissions intensity. Scope 3 emissions are critical as they represent over 70% of corporate emissions on average and comprise 81% of total emissions for oil and gas sector respondents in CDP surveys.
• Failure to meet Paris Goals creates systemic risks for the insurance sector, including the potential for a world that is 'largely uninsurable' due to unpredictable risks and the inability of insurers to price premiums or accept maximum possible losses.

APA

ClientEarth (2023). Response to EIOPA discussion paper BoS-22-527on the prudential treatment of sustainability risks. https://www.clientearth.org/media/wqwjgd5d/eiopa-sustainability-risks-discussion-paper-clientearth-response.pdf

Chicago

ClientEarth. Response to EIOPA discussion paper BoS-22-527on the prudential treatment of sustainability risks. 2023. https://www.clientearth.org/media/wqwjgd5d/eiopa-sustainability-risks-discussion-paper-clientearth-response.pdf.

Wikipedia

{{cite press release |author=ClientEarth |title=Response to EIOPA discussion paper BoS-22-527on the prudential treatment of sustainability risks |date=March 2023 |url=https://www.clientearth.org/media/wqwjgd5d/eiopa-sustainability-risks-discussion-paper-clientearth-response.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{clientearth2023response, author = {{ClientEarth}}, title = {{Response to EIOPA discussion paper BoS-22-527on the prudential treatment of sustainability risks}}, publisher = {ClientEarth}, year = {2023}, month = mar, url = {https://www.clientearth.org/media/wqwjgd5d/eiopa-sustainability-risks-discussion-paper-clientearth-response.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }