Assets currently considered as green could be put at risk of becoming stranded if they were found to fall outside of the bounds of a green taxonomy, according to Scor head of group investment Michèle Lacroix.
Speaking to Insurance Asset Risk, Lacroix expressed her support for the principle of classifying what qualifies as a green investment.
“Everybody understands that defining what is green and what is not should help shifting investments toward a low carbon economy and potentially avoid green washing,” said Lacroix.
However, she cautioned that any missteps or oversight in the implementation of such a measure, could lead to unintended consequences that would hinder the growth of sustainable finance rather than accelerate it.
Outlining a possible negative outcome of the implementation of an official taxonomy, like that proposed by the European Commission’s (EC) Action Plan on Sustainable Finance, she explained that “some assets currently stamped green could lose their shadow label and become stranded”.
Lacroix added:“As a lot of them may not be liquid and be long term investments, the potential negative effects on investors’ portfolio should be taken into consideration.”
Despite this risk, and the complexities around developing a taxonomy that delivers against its objectives, such as classifying an investment that increases renewable energy at the expense of biodiversity, she stressed the need for a system to clarify greenness to be completed quickly.
In addition to combatting greenwashing, Lacroix suggested the very development of a taxonomy is in fact serving as a disincentive to investors to invest until the taxonomy is agreed.
“Unexpectedly, it seems that the current work of the EC on a taxonomy has had negative impact on the market as investors tend to wait for the official EU position to finally invest”.
Outlining Scor’s approach to ESG investments, Lacroix explained that it has a heavy focus on infrastructure debt and real estate, both direct and through debt financing, with the reinsurer’s investments in green debt valuing €225m ($255m) at the end of 2017.
One key investment process it has adopted for a number of years is to buy up brown buildings in and around Paris, refurbish them as energy efficient certified, and then reletting and selling them.
Lacroix will speak at the Insurance & Climate Risk EMEA conference on 3 December at County Halls in London. Click here for more information and to confirm your attendance.