Recital 3

(3)In March 2018, the Commission published its Action Plan ‘Financing Sustainable Growth’ ⁴ , setting up an ambitious and comprehensive strategy on sustainable finance. One of the objectives set out in that Action Plan is to reorient capital flows towards sustainable investment to achieve sustainable and inclusive growth. The impact assessment underpinning subsequent legislative initiatives published in May 2018 ⁵ demonstrated the need to clarify that sustainability factors should be taken into account by insurance and reinsurance undertakings as part of their duties towards policyholders. Insurance and reinsurance undertakings should therefore assess not only all relevant financial risks on an ongoing basis, but also all relevant sustainability risks as referred to in Regulation (EU) 2019/2088 of the European Parliament and of the Council ⁶ that, where they occur, could cause an actual or potential material negative impact on the value of an investment or a liability. Commission Delegated Regulation (EU) 2015/35 ⁷ does not explicitly refer to sustainability risks. For that reason and to ensure that the system of governance is properly implemented and adhered to, it is necessary to clarify that the system of governance of insurance and reinsurance undertakings and the assessment of those undertakings’ overall solvency needs should reflect sustainability risks.