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How European insurers are advancing the sustainability agenda

Transparent, consistent benchmarking allows the industry to track its progress on developing sustainable finance.

In brief

  • European insurers outperform global peers and their financial services counterparts on ESG disclosures.
  • The Index shows significant variations between markets and identifies areas for improvement, including diversity and inclusion.
  • Later this year, we will turn our focus to asset management and other regions, tracking evolving industry thinking.

The sustainability agenda is now a leading strategic priority for many insurers. This extends beyond their products and services, investment decisions and risk management. It increasingly includes corporate social responsibility, with insurers becoming a leading voice on climate risk and mitigation in particular.

Advances in sustainability reporting frameworks, especially the Stakeholder Capitalism Metrics defined by the World Economic Forum and International Business Council (WEF-IBC), are helping to create a comparable set of global metrics for assessing sustainability. However, corporate reporting is not yet fully aligned with these frameworks. Nor can any framework yet provide a definitive set of sustainability objectives. A commitment to sustainability among industry leaders and across the whole insurance sector holds the key to achieving lasting improvements.

EY’s Sustainable Finance Index aims to accelerate improvements in sustainability across financial services, by tracing institutions’ progress over time against a broad set of sustainability parameters. Transparent, measurable benchmarking allows comparisons at the company, sector and country levels, and helps to identify examples of best practice and areas for improvement.

In this article we focus on insurers in six key European markets. The Index shows that European insurers currently outperform both their global peers and their banking counterparts on their sustainability disclosures. However, it also highlights some areas of divergence and identifies areas for improvement, including green products, D&I, linking executive compensation to sustainability and incorporating Sustainable Development Goals (SDGs) into reporting frameworks.


EY’s Sustainable Finance Index uses more than 200 individual parameters to monitor the ESG disclosures of over 1,000 financial institutions worldwide, including 217 insurers. It reviews the breadth and depth of every parameter, each of which is classified within one of 25 defined ESG categories. It standardizes results based on the size of each organization and penalizes firms that do not disclose against certain measures. It then assesses overall performance against the three ESG components, separately and in aggregate, to identify the markets and institutions leading the sustainability agenda.

The Index ranks companies’ progress on sustainability against each parameter, using a score out of 10 (the ESG score) and the extent of disclosures expressed as a percentage (the disclosure rate). In this article we focus mainly on disclosure rates, which are a strong indicator of firms’ commitment to sustainability and willingness to be publicly scrutinized – something that leads to increased activity and disclosure.

The Index is broadly aligned with the Stakeholder Capitalism Metrics set out by WEF-IBC. It is not yet possible to directly map the Index’s 200 plus individual parameters with WEF-IBC’s 21 core themes, since many of WEF-IBC’s themes do not yet have specific metrics. However, as WEF-IBC’s work continues our parameters will evolve with it, allowing the Index to stay aligned with best practice industry thinking.


Chapter 1

Sector focus: European insurance

European insurers outperform banks and their global peers, albeit with some inconsistencies.

In this analysis we focus on 47 insurers in six key European markets: France, Germany, Italy, the Netherlands, Switzerland and the UK. This group includes five large insurers which have set themselves a collective target of making approximately US$70bn in ESG-related investments by 2024, and many firms that are committed to UNEP FI’s four Principles for Sustainable Insurance. Our analysis of this group reveals four key high-level findings:

1. European insurers outperform their global peers – and their financial services counterparts:

The 47 European insurers in our sample – which include many of the largest institutions in the region – disclose against 64% of the Index’ parameters on average, compared with 55% for insurers globally. This leading position is driven by increasing emphasis on sustainability from regulators and policy makers, and by growing demand from investors, customers and other stakeholders. The disclosure rate will continue to climb as requirements move toward a mandatory footing within the region, and will be boosted by progress toward global common standards. European insurers’ disclosure rate also exceeds that of European banks, which have an average rate of 61%, and European wealth and asset managers (55%). This points to the identification of the insurance industry with environmental and social themes, and its efforts to show leadership in responding to these issues.

2. Major EU headquartered insurers set the bar for insurance disclosure globally:

European insurers disclose, on average, against 70% of the Index’s parameters. By contrast the average disclosure rate of UK insurers (63%) is the lowest of the six European markets in our sample, although it still compares favorably with international peers and companies in other sectors. This requires us to look under the headline disclosure rate and consider the quality of disclosure. For example, UK insurers’ Governance disclosure rates are the strongest globally at 80%, reflecting the UK’s track record of leadership on corporate governance over many years. In contrast, UK insurers’ Environmental disclosure rates are Europe’s lowest at just 37%.

3. There is a significant gap between large and small insurers:

The average disclosure rate for European insurers with annual premiums in excess of US$1bn is 67%, while firms beneath that threshold average 50%. This striking difference is common to many industries, given the investment budgets of larger organizations and the expectations of their shareholders, customers and regulators. Insurance is no exception, and we see large multinational insurers and global reinsurers setting the pace.

4. Environmental, Social and Governance performance varies widely:

Like their banking counterparts, European insurers’ disclosure rates differ significantly between the three ESG components. On each pillar, European firms significantly outperform the global insurance average. The European insurers in our sample have an ‘E’ disclosure rate of 52%, an ‘S’ rate of 64% and a ‘G’ rate of 74%. Those rules compare favorably with global insurance averages of 29% for ‘E’, 54% for ‘S’ and 68% for ‘G’. The difference is greatest in the Environmental arena, where European consumers and companies have a longer history of focus on climate change than in many other regions.


Chapter 2

Areas for improvement

There is scope to strengthen environmental disclosures, D&I and executive compensation.

The Index not only offers comparisons between different markets and sectors. It also allows us to take a detailed look at industry practice, identifying strengths and weaknesses in disclosure and reporting. From the analysis, it is evident that the European insurance industry leads on ESG disclosures, especially in the area of governance. That said, our analysis highlights three key areas where European insurers could take steps to improve their progress on sustainability.

Improving environmental disclosures

1. On AUM environmental disclosure

European disclosures on environmentally focused assets under management (AUM) are generally strong, helped by the region’s evolving regulatory focus on environmental taxonomy. We see strong disclosure as a critical criterion for assessing organizational maturity; where organizations are not reporting it is very difficult to ascertain their progress. A first step to driving a focus on environment-related areas must be disclosure. This should be a focus for the UK market, which is the laggard here. Only 27% of UK insurers in our sample report on environmental AUM compared to a European average of 60% and a global average of 32%. Similarly, just 36% of UK insurers report on the development of new sustainable products, compared with an average of 70% across Europe.

2. On green products

Reporting on green products is a challenging area for insurers. Within our sample, Italian insurers lead the pack on green product disclosures while the UK performs comparatively weakly. European insurers are wary of greenwashing when rebranding existing products, but several leading firms are adapting their products for greater sustainability. Examples include special insurance rates for energy efficient buildings or cars with recycled parts, and travel insurance incorporating carbon offsets. Developing green products can demonstrate a tactical approach to sustainability, but insurers have an opportunity to go further and embed ESG factors across their full set of products and services.

3. On supply chains

Like their banking peers, European insurers make limited disclosures about the environmental profile of their extended ecosystem. Despite their growing use of technology partnerships, only 43% of European insurers say they conduct surveys of their suppliers’ environmental performance and just 17% report or show readiness to end an external sourcing relationship if environmental criteria are not met. However, there are differences between key markets. The Italian insurers in our sample achieve an average ESG score of 5.0 in this area, compared with 2.5 for their French counterparts, 1.7 for Swiss firms and 0.9 for UK insurers.

Strengthening D&I

1. Disclosure

On average, European insurers’ disclosure rates against the Index’s social parameters are higher than their global peers (64% v. 54%). However, like their banking counterparts, European insurers could improve their activity and disclosure around D&I – a finding that holds true across firms of every size and business model.

2. Leadership

Few European insurers report specific targets across a wide range of D&I parameters. This not only makes it hard to grasp the full extent of activity taking place, but also leaves open to interpretation whether improvements to D&I are happening. Across European insurance the proportion of female executive board members is still below parity (33%), although it’s worth noting that is significantly higher than in other key regions such as North America (21%) and Asia-Pacific (18%). Within our sample, French insurers achieve the highest average ESG score for D&I (4.3) while Swiss firms score the lowest (3.0).

3. Inclusivity

Some insurers are taking progressive steps to encourage female leadership. The Index shows that 34% of European insurers provide day-care facilities for employees, compared with only 15% of insurers in North America and 14% of those in the Middle East. Looking beyond gender, salary gaps can be a good indicator of inclusivity. European insurers have strong disclosure rates in this area and report a lower – if still significant – gap than other regions. On average, the highest paid employees of European insurers earn around 150 times more than the lowest paid staff. In comparison, the average salary gap is over 460 times in Asia-Pacific and more than 500 times in North America.

Making leadership, compensation and reporting more sustainable

1. Boards

European insurers could do more to build diverse boards. In addition to the need for better gender balance, European firms should increase the cultural diversity of their governing bodies. Currently, 35% of European insurers’ board members are from a minority cultural group, based on the location of their headquarters. That compares with an equivalent figure of 46% in North America.

2. Compensation

Differences in compensation structure and policy are often affected by cultural and social norms. That said, overarching frameworks for compensation policies should be aligned to organizations’ strategic objectives and reward sustainable performance and long-term value creation. Currently, only 9% of European insurers report linking executive remuneration to objectives beyond a two-year horizon – something that could reduce focus on long-term sustainability goals. On the upside, European insurers are taking a lead in linking executive compensation to ESG performance. A majority (57%) report such a link. This compares well to European banks (31%), but there is still room for improvement. Only 53% of insurers in France, Germany and Italy report aligning executive compensation with ESG performance compared with 73% in the UK.

3. Reporting and attestation

Most European insurers have formal sustainability reporting in place, with dedicated CSR committees. However, the auditing of sustainability reports is a potential area of improvement. In the UK and Germany, 43% of the insurers in our sample do not report having their sustainability reports externally audited. That contrasts with France, where all the insurers we cover have their sustainability reports audited, and Italy where the figure is 75%. The differences could be driven by local regulatory requirements on attestation, but that should not stop organizations from being proactive in having their sustainability-related performance validated. There is a clear opportunity for firms to build stakeholder confidence in their sustainability efforts, especially with the advent of more consistent reporting frameworks.


Chapter 3

Looking ahead

Can European insurers continue to shape best practice in sustainable finance?

Supported by a strong policy and regulatory framework, European insurers are the leaders in the areas of sustainable reporting and governance. The industry needs to stay focused on this topic as the picture is constantly evolving, with financial institutions responding to changing legislation and regulation, increasing investor expectations, and growing public awareness of sustainability.

Europe’s insurers are currently leading the global pack but can’t afford to rest on their laurels. Some key areas of improvement for firms to consider include:

  • Improving performance against environmental metrics, especially in relation to developing innovative products
  • Addressing D&I gaps at board and executive level, and more broadly across the organization
  • Expanding sustainability governance across the broader ecosystem, to cover third parties and suppliers

Insurers must also remember that they have a leading role to play in improving the performance of other sectors. Firms can advance sustainability through their underwriting decisions, their investment choices and by engaging with clients on ESG issues. We look forward to monitoring insurers’ progress in future reports, using the Index to compare their performance over time – and against their peers in banking and asset management.


European insurers are showing leadership in sustainable reporting and governance, but still have shortcomings to address. As the industry moves forward, the Index will continue to track its role in the evolution of sustainable finance.