Bao Jie, Deng Jielin et al.: A Comparative Analysis of ESG Policy Development in Insurance Asset Management Across Jurisdictions

Introduction

The year 2026 marks the beginning of China’s 15th Five-Year Plan period and represents a critical stage for advancing carbon peaking targets, policy implementation, and evaluation mechanisms. As a major channel for long-term capital allocation, insurance asset management plays an indispensable role in promoting energy conservation and carbon reduction at both the corporate and project levels. According to data from China’s National Financial Regulatory Administration (NFRA), by the end of 2025, the balance of insurance funds under management had reached nearly RMB 38.5 trillion, representing a year-on-year increase of 15.7% and an annual net increase exceeding RMB 5 trillion. Such investment activities exert substantial leverage and guiding effects on economic and social development.

Three years ago, the Asian Development Bank (ADB) launched the technical assistance project “Promoting Environmental, Social, and Governance (ESG) Investment by Insurance Funds,” aiming to enhance the effectiveness of ESG investment supervision in China’s insurance sector by integrating ESG factors into regulatory frameworks and insurance investment practices. As one of the leading research institutions for the project, the International Institute of Green Finance (IIGF) at the Central University of Finance and Economics has produced a series of comparative studies on ESG development in the insurance sector across jurisdictions, practical surveys of ESG investment among Chinese insurance institutions, and the Guidelines for ESG Investment Actions by Insurance Institutions. This article serves as the first installment in the jurisdictional comparative research series, focusing on current policy developments in insurance asset management ESG frameworks across major economies, with the objective of providing international reference points for China’s domestic insurance asset management industry.

I. ESG Development in China and Insurance Asset Management Investment

To support China’s carbon peaking objectives and the implementation of associated assessment mechanisms, insurance asset management has become an important capital allocation tool in advancing corporate and project-level energy conservation and carbon reduction efforts. At the same time, as the asset side of the insurance industry, insurance asset management can coordinate with liabilities management and leverage sophisticated risk analysis and risk management capabilities to support sustainable economic development and climate risk governance in China.

Because ESG development is closely linked to each country’s macroeconomic conditions, social environment, regulatory structure, and development stage, significant differences exist between China and developed economies in ESG evolution. Although China entered the ESG field relatively late, it has now entered a period of rapid exploration and expansion. Top-level policy design, product innovation, and academic research aimed at supporting low-carbon transition and sustainable development through ESG concepts have all developed rapidly, providing strong support for insurance institutions seeking to engage in ESG investment. Particularly since the announcement of China’s carbon peaking and carbon neutrality goals, an increasing number of Chinese insurance institutions have joined the United Nations-supported Principles for Responsible Investment (UN PRI) and launched ESG-related products and services.

Nevertheless, China’s insurance asset management sector still lacks clear policy guidance, and supporting policy mechanisms for ESG investment remain underdeveloped. In practice, insurance institutions require not only comprehensive standards frameworks and implementation principles for ESG disclosure and investment activities, but also supporting systems such as talent development, international exchange, and data governance. Accordingly, research into how China can establish and improve ESG policy frameworks to better support ESG investment and institutional ESG capacity-building is essential for deepening industry understanding of ESG concepts and regulatory trends, strengthening policy guidance, and drawing upon international experience to develop an ESG policy system suited to China’s insurance asset management industry.

II. Comparative Development of ESG Policies in Insurance Asset Management Across Jurisdictions

(I) European Union

1. ESG Regulatory and Supervisory Framework

The EU’s ESG regulatory and supervisory framework is characterized by highly directive policymaking and strong influence over market capital allocation. Overall, the EU has institutionalized mandatory ESG-related requirements by embedding ESG principles into laws and regulations.

At the top level, the European Parliament, the Council of the European Union, and the European Commission lead legislative initiatives to systematically incorporate ESG into policy frameworks. Sectoral regulatory bodies such as the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) further refine ESG-related concepts and regulatory standards. Industry self-regulatory organizations—including the European Sustainable Investment Forum (Eurosif), the Geneva Association climate risk working group, and the Net-Zero Insurance Alliance (NZIA)—provide implementation feedback and promote industry practice.

EU member states subsequently localize and refine supervisory mechanisms within the broader EU ESG governance framework. Guided by collective commitments to the UN Sustainable Development Goals (SDGs), the EU ESG framework seeks to channel capital toward sustainable economic activities while strengthening ESG-related risk management in the insurance asset management sector.

2. ESG Policies in the Insurance Asset Management Industry

Current EU insurance ESG policy is primarily structured around sustainable finance taxonomies and disclosure standards. Four core regulatory instruments form the foundation of ESG activities and disclosures among EU financial institutions, including insurers:

  • the EU Taxonomy Regulation,
  • the Corporate Sustainability Reporting Directive (CSRD),
  • the European Sustainability Reporting Standards (ESRS), and
  • the Sustainable Finance Disclosure Regulation (SFDR).

In terms of disclosure policy, the CSRD, adopted in November 2022, replaced the Non-Financial Reporting Directive (NFRD) and significantly expanded ESG reporting requirements. The directive requires a broader range of listed insurance companies to disclose ESG information across the full value chain of products and services, including intangible assets.

In July 2023, the European Commission adopted the first set of ESRS standards prepared by the European Financial Reporting Advisory Group (EFRAG), requiring insurance institutions to report the impacts of investment and operational activities on people and the environment, subject to external assurance of materiality assessments.

In investment regulation, the SFDR requires all financial market participants, including insurers, to integrate sustainability risks and adverse sustainability impacts into investment decision-making processes. The EU Taxonomy further provides a common classification framework for sustainable economic activities, encouraging insurance institutions to direct capital toward low-carbon transition projects.

A particularly significant development was the adoption of the revised Solvency II Directive on November 27, 2024, which formally integrated “sustainability risks” and “sustainability factors” into insurers’ governance and risk management frameworks for the first time.

The European Insurance and Occupational Pensions Authority (EIOPA) has likewise emphasized sustainable insurance and pensions systems in its 2023–2026 strategic plan. In 2026, the EBA, EIOPA, and ESMA jointly released ESG stress-testing guidelines focused on climate risk materiality assessments and forward-looking scenario analysis aligned with NGFS pathways.

Despite recent omnibus simplification measures, the EU has not materially relaxed ESG investment expectations for insurance asset managers. Instead, regulatory efforts increasingly emphasize anti-greenwashing enforcement, stricter sustainability labels, and enhanced oversight of ESG rating agencies.

By early Q2 2026, the European sustainable fund market continued expanding despite tightening regulation. As of the end of 2024:

  • more than 11,000 Article 8 ESG funds existed in Europe; and
  • approximately 1,000 Article 9 funds focused on sustainability objectives such as clean energy, decarbonization, climate mitigation, financial inclusion, educational access, and women’s empowerment.

Assets under management for sustainable UCITS funds exceeded EUR 7 trillion.

(II) United Kingdom

1. ESG Regulatory and Supervisory Framework

The UK ESG framework is characterized by administrative guidance and increasingly strengthened behavioral regulation. Building upon the EU framework while developing its own distinctive approach, the UK places particular emphasis on climate change and net-zero transition issues.

At the top level, the UK government and legal institutions integrate ESG requirements into disclosure obligations for listed entities, including insurance institutions. Regulatory bodies such as the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), The Pensions Regulator (TPR), and Financial Reporting Council (FRC) continue refining ESG requirements and transparency mechanisms.

Industry organizations including UKSIF, Lloyd’s, and the London Stock Exchange (LSE) also support implementation through industry guidance and reform initiatives.

2. ESG Policies in the Insurance Asset Management Industry

UK insurance ESG policy places strong emphasis on ESG disclosure obligations for market participants while steadily advancing ESG legal institutionalization.

The UK amended the Companies Act in 2016 to require disclosure of non-financial information including environmental impacts, anti-corruption measures, and due diligence processes.

In investment regulation, the UK Stewardship Code introduced ESG integration and “comply or explain” principles for asset managers, including insurers and pension funds. The UK Law Commission subsequently clarified in 2014 that ESG considerations form part of fiduciary duty obligations.

Since 2023, UK regulators have intensified ESG-related supervisory efforts. The PRA identified climate change as a cross-sector supervisory priority, while the FCA consulted on sustainability governance, incentive structures, and labeling regimes to ensure consistency in responsible investment practices.

The UK ESG market is highly influenced by mature financial institutions such as the London Stock Exchange Group (LSEG) and FTSE Russell, which have played critical roles in ESG reporting standards and market innovation. The London Stock Exchange joined the Sustainable Stock Exchanges Initiative (SSE) in 2014 and has continuously updated ESG reporting guidance to improve disclosure quality among listed companies, including insurers.

(III) United States

1. ESG Regulatory and Supervisory Framework

In the United States, ESG remains politically sensitive, and many policy discussions are framed instead around sustainability, climate change, or corporate governance.

The US ESG framework is characterized by non-mandatory regulation and significant regional divergence. Market practice historically preceded formal regulation. While governance-related disclosure requirements are relatively strict, broader ESG supervision has primarily been advanced through the Securities and Exchange Commission (SEC), the Department of Labor, and the House Financial Services Committee, alongside self-regulatory organizations such as the New York Stock Exchange, Nasdaq, and US SIF.

States such as California and regions with highly developed insurance industries have taken more proactive ESG regulatory approaches.

2. ESG Policies in the Insurance Asset Management Industry

US insurance ESG policy largely encourages market self-governance within an increasingly standardized disclosure framework.

The US government encouraged ESG integration and disclosure through interpretive bulletins issued in 2015 and 2016. The ESG Disclosure Simplification Act of 2020 further formalized ESG disclosure requirements.

In March 2021, the SEC established its Climate and ESG Task Force to strengthen climate-related disclosure oversight and identify ESG-related misconduct.

In investment regulation, the SEC proposed enhanced disclosure requirements for investment advisers and investment companies in 2022, requiring climate-related disclosures regarding material financial risks.

The National Association of Insurance Commissioners (NAIC) introduced additional climate risk disclosure requirements in 2024 for insurance companies with direct annual premiums exceeding USD 100 million.

Unlike the EU and UK’s policy-led approach, the US ESG market is fundamentally market-driven. Institutions such as Goldman Sachs, Citibank, MSCI, and Sustainalytics have played leading roles in ESG conceptual development, climate finance research, and ESG ratings innovation.

(IV) Japan

1. ESG Regulatory and Supervisory Framework

Japan’s ESG supervision follows a voluntary, principles-based approach jointly shaped by regulators, stock exchanges, and industry associations.

The Financial Services Agency (FSA) plays the leading role, supported by the Tokyo Stock Exchange and financial industry organizations. Japan’s Government Pension Investment Fund (GPIF) and Pension Fund Association have also significantly advanced ESG investment practices.

2. ESG Policies in the Insurance Asset Management Industry

Japan’s insurance ESG framework is primarily built upon soft-law mechanisms and non-mandatory policy guidance.

Japan began integrating ESG into corporate governance and disclosure frameworks in 2014. The Sustainability Standards Board of Japan (SSBJ), established in 2021, works toward aligning Japanese disclosure standards with ISSB standards.

In 2023, the FSA formally required all listed companies to disclose sustainability information aligned with the TCFD framework.

In investment policy, Japan revised its Stewardship Code in 2017 and 2020 to require institutional investors to consider sustainability and ESG factors relevant to long-term returns.

The FSA’s 2022 Supervisory Guidance on Climate Risk Management and Customer Engagement required financial institutions, including insurers, to systematically incorporate climate-related risks into operations and governance.

Japan’s ESG market is especially notable for pension-driven ESG investment growth. Following GPIF’s signing of the UN PRI in 2015, sustainable investment expanded rapidly across the Japanese insurance sector.

Major Japanese insurers have increasingly engaged in climate-focused investments, green bonds, and sustainable finance initiatives. Examples include:

  • Sompo Japan’s investments in social bonds and climate-related projects;
  • Sumitomo Life’s participation in Climate Action 100+;
  • Dai-ichi Life’s investment in World Bank green bonds; and
  • Japan Post Insurance’s ESG Investment Policy focused on decarbonization and emissions analysis.

III. Key International Lessons

(I) ESG Regulatory and Supervisory Mechanisms

Globally, ESG supervision increasingly follows a “dual-track” model combining governmental regulation with market self-regulation, alongside a clear trend toward stronger mandatory requirements.

The EU and UK demonstrate particularly strong top-down regulatory systems integrating legislative action, financial supervision, and market oversight. By contrast, the US and Japan rely more heavily on industry self-regulation and market-driven implementation.

While jurisdictions differ in emphasis across environmental, social, and governance dimensions, Europe overall exhibits stronger mandatory trends, higher regulatory intensity, and greater coordination between regulators and leading financial institutions.

(II) ESG Policies in Insurance Asset Management

International ESG investment frameworks have entered an optimization stage characterized by increasingly effective policy implementation.

The EU and UK have established relatively comprehensive ESG policy systems covering the full investment chain. The US and Japan, meanwhile, have relied more heavily on market-led ESG innovation and practice.

Globally, ESG disclosure requirements are steadily moving toward mandatory implementation. The EU, UK, US, and Japan all require mandatory environmental disclosures for companies with significant environmental impacts, while broader ESG disclosure regimes continue expanding.

Insurance institutions generally follow domestic listed-company disclosure rules, resulting in relatively comprehensive and detailed ESG reporting practices.

Authors

Bao Jie
Director of the ESG Center, International Institute of Green Finance (IIGF), Central University of Finance and Economics

Deng Jielin
Research Fellow, International Institute of Green Finance (IIGF), Central University of Finance and Economics;
Research Fellow, Green Value Investment Research Center, Shangcheng District, Hangzhou

Jin Lei
Visiting Research Fellow, International Institute of Green Finance (IIGF), Central University of Finance and Economics;
Visiting Research Fellow, Green Value Investment Research Center, Shangcheng District, Hangzhou