Disclosures according to the EU Taxonomy Regulation
In order to achieve the targets set under the European Green Deal and the EU’s 2030 Climate Target Plan, the EU Action Plan on Financing Sustainable Growth calls for the creation of a standardised classification system for environmentally sustainable economic activities in the form of the EU Taxonomy. The Taxonomy Regulation, which lays down the framework for the EU Taxonomy, was published in the Official Journal of the European Union in June 2020 and entered into force on 12 July 2020. The Taxonomy Regulation states that financial market participants offering relevant financial products in the EU are obliged to disclose their share of Taxonomy-aligned activities.
At the time this report was prepared, there is no uniform data basis for applying the Delegated Regulations, and there are different interpretations as to how they are applied. Our quantitative and qualitative disclosures are therefore determined in line with a “best effort approach” and take into account what we currently know. Our over-all strategy involves pursuing the climate targets set under the Paris Agreement. Our aim therefore is to record both the indirect emissions of the assets in our investment as well as the indirect emissions of the insured risks through our management approach and engagement, as well as reduce these emissions going forward according to interim targets yet to be laid down. We are working on the assumption that this will also increase the share of Taxonomy-aligned activities in future.
With regard to investment, UNIQA conducted some initial research in autumn 2020 with respect to the corresponding conversion of databases. Given that no information in accordance with Article 8 of the Taxonomy Regulation had been disclosed by the reporting company during the financial year, UNIQA was forced to revert to alternative data sources from specialised data providers for the initial estimation of the data owing to the lack of specific company information available. A detailed analysis and comparison of ESG data providers showed that the sustainability data of ISS ESG corresponded to a fundamental approach, even if these data were mostly based on derived information and estimates. Both quantitative as well as qualitative information is available in great detail, thus ensuring a comprehensive ESG assessment of our activities can be carried out. In order to provide technical support to ensuring compliance with the Regulation, ISS ESG has developed a comprehensive solution aligned with the EU Taxonomy. The corresponding switch in data supply took place in April 2021.
With the ISS ESG EU Taxonomy Aligned Solution, our external data provider now covers more than 400 Taxonomy-specific screening factors over the course of a five-stage screening process. The five stages involve identifying Taxonomy-related activities, estimating the revenues generated from them, assessing their compliance with the criteria for a substantial contribution as defined in the EU Taxonomy, checking whether the activities fulfil the DNSH (Do No Significant Harm) criteria and reviewing whether they are in line with social safeguards. Each issuer is assessed on the basis of 74 activities, whereby each activity corresponds to the five individual stages of the process.
Although there are still no company reports on alignment with the EU Taxonomy published as yet, ISS ESG believes that the tool will provide a realistic assessment. However, it is important to note that those particular instances where there are no data currently available will have to revert to approximations and assumptions.
The tool goes beyond a binary assessment in assessing the compliance of corporate issuers with EU Taxonomy criteria. There are also different categories of alignment as per the EU’s recommendation that investors are responsible for reporting not only the share of investments that are demonstrably EU Taxonomy-aligned, but also the share that is potentially EU Taxonomy-aligned. The EU Taxonomy Aligned Solution from ISS ESG is based on several internal modelling activities as well as third party data sets.
During the 2021 financial year, a share of 4.20 per cent of general Taxonomy-aligned sustainable activities and a share of 44.87 per cent of non-Taxonomy-aligned investments were derived from our investments. The published assessment criteria for the first two climate targets set under the EU Taxonomy Regulation were observed as a result. All government bonds and bonds from supranational issuers were removed from the calculation in accordance with the Delegated Acts to the EU Taxonomy Regulation. The share of exposure to central governments, central banks and supranational issuers amounts to 47.09 per cent with regard to all investments. The share of derivatives amounts to 1.95 per cent with regard to all investments. The share of exposure to undertakings to entities subject to an obligation to disclose non-financial information in accordance with Article 19a or Article 29a of Directive 2013/34/EU amounts to 26.95 per cent with regard to all investments.
In terms of non-life insurance, detailed research was conducted on approximately 40 non-life insurance lines with regard to all premium elements on the basis of the premiums written before reinsurance. The content of insured benefits and scope of cover were examined by underwriting specialists in terms of being adapted in line with the effects of climate change. As a result of different cover being issued in places, the private customer business and industrial/commercial business were analysed separately and classified in relation to the insurance activity’s Taxonomy eligibility. The premium shares of the non-life insurance lines subject to analysis were subsequently combined into the categories as defined in the Delegated Regulations. Furthermore, the share of general Taxonomy-aligned sustainable activities in relation to the total non-life insurance premiums written (before reinsurance) was derived.
During the 2021 financial year, a share of 41.79 per cent of general Taxonomy-aligned sustainable activities, which can be allocated to the environmental target of adapting to climate change, was derived from our non-life insurance premiums written (before reinsurance). This relates primarily to insurance cover for natural disasters that are also linked to climate change. Accordingly, therefore, 58.21 per cent of non-life insurance premiums written (before reinsurance) can be allocated to non-Taxonomy-aligned activities.