A new report on global ESG monitoring shows banks and insurance companies are excelling in climate reporting, with potential for transparency and resilience reporting.
According to The Global ESG Monitor (GEM), an independent think tank, banks and insurance providers are crucial in promoting ecological sustainability and economic prosperity as lenders and investors. The sustainability reports of the two sectors do not fully reflect the requirement for their combined consideration, as mandated by the Corporate Sustainability Reporting Directive (CSRD).
Europe’s major insurers and private credit providers, crucial to the financial system, are examining climate issues, highlighting strategic awareness but insufficient thorough reporting. The two sectors received scores below 50% in the GEM evaluation, indicating a need for increased communication and cooperation in ESRS compliance.
Climate reporting significantly impacts banks and insurers as businesses and Green Deal facilitators. Businesses have shown success in comprehensive reporting, going beyond scope emissions disclosure and adherence to the Paris Climate Agreement, and are also excelling in transition plans.
For instance, there are significant gaps in the reporting on the subject of resilience. Both sectors have figures of slightly less than 60 percent, which is significantly higher than the sample as a whole (38 percent of points). According to the European Central Bank’s report on resilience analyses, only about half of the nine major institutions are included. Additionally, the situation for insurers is not always better. Specifically, there is very little reporting on the financial effects of climate change (15 percent of points). Here, it is especially clear that there is virtually no reporting on financial topics like net income, transition risks, and market opportunities.
The Global ESG Monitor 2024 evaluation shows that both sectors are only slightly above the average of 194 companies, with their reporting quality falling short of the 50% threshold. Despite the release of ESRS-compliant reports, there is still significant work to be done in both sectors to prepare for ESRS standards.
Though insurance firms and banks are crucial stakeholders in climate reporting, they are yet to fully fulfill their sustainability reporting obligations as businesses, investors, and risk managers.
Financial firms are displaying poor performance in climate reporting, despite providing comprehensive reports on greenhouse gas emissions and resilience. The financial risks and opportunities associated with climate change are not adequately addressed due to a lack of specific data, GEM said.
Michael Diegelmann, Co-Founder, GEM and co-CEO, IR and ESG consultancy cometis, said, “Banks and insurance companies can tap into further future-proof investment and return opportunities in the long term through the pressure they generate. To this end, they should also continue to improve their reporting quality. The best practices of the pioneers from the sectors show that there is still a lot of potential here.”
Ariane Hofstetter, co-founder of GEM and board member of the IR and ESG consultancy cometis, sums up the challenges for both sectors: “Climate change is already causing immense costs today. Transparent reporting is therefore essential because it is about more than just documented responsibility, but about the sustainable transformation of the economy.”
The GEM evaluated the non-financial reporting of 194 companies, including 10 major insurers and 10 banks, using the European Sustainability Reporting Standards as a significant reporting framework.
