PensionsEurope welcomes EU Commission’s Action Plan on sustainable investment
Written by Natalie Tuck
PensionsEurope has welcomed the European Commission’s Action Plan on financing sustainable growth, which includes an amendment to the IORP II Directive.
The Action Plan specifically aims to reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth; manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues; and foster transparency and long-termism in financial and economic activity.
PensionsEurope believes the Action Plan contains several recommendations that will improve the scope of sustainable investments and expand the amount of information available to institutional investors on environmental, social and governance aspects of investments.
The Action Plan also foresees a revision to the IORP II Directive to amend the fiduciary duty or ‘investor duty’. PensionsEurope noted that pension funds should ensure that they have a sound understanding of the broad range of interests and preferences of their members and beneficiaries, including ESG factors. In addition, pension funds should consult their members and beneficiaries on their sustainability preferences and reflect those in the fund’s investment strategy.
PensionsEurope secretary general/CEO Matti Leppälä said: “Today’s Action Plan signals political commitment to an ambitious agenda for a more sustainable financial system. As its end-users, pension funds look forward to those actions that will bolster their responsible investments. This includes a ‘taxonomy’ for sustainable assets to help create a common language for the markets and measures for better information on ESG factors through improved corporate disclosures.
"The Commission also wants pension funds to incorporate ESG factors in investment decision-making as part of a review of the fiduciary duty, so pension fund board members should expect to give even more consideration to the topic in the future. At the same time, the EU proposals should remain sufficiently flexible not to upset the role of trustees or social partners. Pension funds’ main purpose will continue to be serving the best interests of their members and to delivering adequate pensions at low costs.
"There is a wide variety of responsible investment strategies already employed by pension funds, depending on national traditions, the type and size of the fund, the position of the sponsoring company and the role of the social partners. The number of pension funds that chooses to pro-actively invest according to ESG criteria is growing and will continue to do so.”