Insurance policyholders, personal pensions savers and scheme members are increasingly interested in environmental and/or social factors.
Given this rising interest, insurance and pension providers have increased their offer of sustainable products and schemes and made their offer and business models more sustainable.
However, issues arise when insurers or pension providers misleadingly portray themselves, their products or schemes as sustainable by making claims about environmental or social benefits.
In this section we look at what greenwashing is, how it can take place and what impact it can have on consumers.
What is greenwashing?
Greenwashing is a practice whereby 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.
This practice may be misleading to consumers, investors, or to other market participants.
Where does greenwashing occur in the insurance and pension sectors?
Greenwashing is a complex and multifaceted issue.
It can occur at all stages of the insurance and pensions lifecycle:
- at entity level, in the product manufacturing, in delivery and management of insurance policies
- in the design, delivery and management of pension schemes
Examples of greenwashing
An insurer declares that it would plant a tree for every new life insurance policy subscribed.
At the same time, this insurer still invests in companies that are developing new fossil fuels projects.
According to the stakeholder that provided this example, potential consumers may wrongly believe that buying an insurance policy with this insurer would contribute positively to the environment, while this insurer invests in fossil fuels projects.
An insurance company outlines its sustainability credentials publicly by running a television advertisement highlighting the increasingly sustainability-oriented behaviour of its clients, or by communicating about a philanthropic fund dedicated to sustainability factors.
At the same time, this insurer continues to underwrite risk for large companies developing new oil and gas fields as well as new fossil fuel infrastructure.
The mismatch between the way the insurer is portraying itself and its clients publicly – i.e., conscious of sustainability aspects – and its underwriting activities – i.e., underwriting in fossil fuels – could constitute a potential greenwashing practice.
Some insurers may use ESG labels as marketing arguments in an unsubstantiated way.
For example, some providers claimed offering a majority of ESG labelled investment options, without providing a detailed list of funds which have been awarded that specific label.
This could mislead consumers into believing that if they invest their money with this insurance undertaking, this would be a sustainable investment, no matter what they would invest in.
Examples included in this section have been either identified by EIOPA as part of its market monitoring activities, are reported by National Competent Authorities or by stakeholders.
These are practical examples of concrete cases which may lead to possible greenwashing. However, no clear conclusions have been drawn as to whether such examples definitively constitute or not greenwashing.
How can greenwashing impact you?
Greenwashing:
- Can deceive consumers into buying products that are not aligned with their preferences
- Can deceive consumers into buying products from a pension or insurance provider that misleadingly portrays itself as an entity with sustainability credentials
- Can erode consumers’ trust in the ability of insurers or pension providers to positively impact environmental or social factors
- Misleading sustainability claims do not allow consumers as well as the society to hold providers accountable for their environmental and social impact
What do consumers think about sustainability claims made by insurance undertakings or distributors?
The EU-wide Eurobarometer survey carried out by EIOPA in June 2022 shows that 62% of EU consumers do not trust the sustainability claims made by insurance undertakings or distributors, while a similar percentage (63%) says that sustainability claims about insurance products are often misleading.
Further reading
- EIOPA's advice to the European Commission on Greenwashing
- Greenwashing: of the barriers to the transition, Eurofi magazine article