A recent PwC study highlights a significant gap in sustainability compliance among EU banks and insurers. The report reveals that most financial institutions are not aligning their activities with the EU’s taxonomy for sustainable activities, falling short of the European Union’s sustainable transition goals. 

The study, reported by Environmental Finance, assessed banks, insurers, and non-financial corporates against EU taxonomy benchmarks using indicators like the Green Asset Ratio. The findings show that banks have low alignment with sustainability goals, with both turnover-based and capital expenditure-based measures averaging a mere 2%. This figure varies across countries, ranging from 0% to 13%. 

The insurance sector faces a similar challenge. The average taxonomy alignment for underwriting activities is just 2%. Insurers’ investments show nearly non-existent alignment for exposures to financial undertakings and only marginally better for non-financial corporates, with turnover-based and capital expenditures-based KPIs at 4% and 5%, respectively. 

In contrast, some non-financial corporates, particularly in the utilities, energy, and resources sectors, demonstrate higher levels of taxonomy alignment. These industries appear more advanced in integrating sustainability into their business practices. 

The PwC analysis covered a broad survey across 12 EU countries, including data from 530 non-financial and 97 financial companies. The study emphasizes the urgent need for financial institutions to recalibrate their strategies to enhance sustainability compliance. 

“PwC analysis shows that there is a significant journey ahead to direct financial flows towards sustainable transition,” said PwC partner Mark Wright. “This research underlines the urgent need for financial institutions to recalibrate their strategies towards sustainability.” 

The findings indicate that while some progress has been made, there is still a long way to go for financial institutions to fully embrace ESG and achieve sustainability compliance in alignment with EU goals. 

Sources: 

https://fintech.global/2024/07/26/eu-banks-and-insurers-lag-in-green-compliance-pwc-study-finds/ 

https://hipther.com/latest-news/2024/07/26/75502/eu-banks-and-insurers-lag-in-green-compliance-pwc-study-finds/