Industry bodies outline positions on CSDD Directive

PensionsEurope and the European Association of Paritarian Institutions (AEIP) have published position papers on the European Commission’s proposal for an EU Corporate Sustainability Due Diligence Directive (CSDDD).

The CSDDD will aim to impose a European standard on companies to help implement policy on international socially responsible investment and impose obligations on companies, as well as financial institutions such as pension funds, on sustainability due diligence.

PensionsEurope noted that, regarding sustainable corporate governance, pension funds can play their role in supporting the transition to a sustainable economy based on sustainable ESG criteria.

However, the association believed that there was a need for clarifications and amendments in the proposed CSDDD as part of the legislative process to make it appropriate for institutional investors and financial service providers.

It called for the threshold of 500 employees and turnover of more than €150m to not be lower, as smaller IORPs may lack the resources to align with the framework.

PensionsEurope also opposed the amendment that would bring pension funds in scope as a high-risk sector, urging the European Commission to maintain the original scope.

Some members of PensionsEurope argued that the proposal for the directive to extend the due diligence requirements to investments where there is no direct contractual relationship with the investee company should not be extended to pension funds.

Meanwhile, other members were in favour of including investments through the secondary market, although they believed several amendments would need to be introduced to make the directive workable for institutional investors.

PensionsEurope also argued that the prevention of adverse impacts (Article 7) should not apply to institutional investors as they cannot pose their code of conduct or prevention plans on investee companies, and the article should be amended to recognise the different levels of responsibility depending on the level of involvement.

Regarding Article 22, the association stated that pension funds and institutional investors under the status of minority shareholders should not be civilly liable within the context of the CSDDD.

It also called for more harmonisation with other sustainability regulations, more clarity on planning for transition to meeting the Paris Agreement, and encouraged the supervision of compliance with sustainability regulation within the already established framework.

Meanwhile, AEIP said it welcomed the initiative, and that its members were “strongly committed” and supported sustainable business practices.

However, it stressed that pension funds were inherently different from other financial institutions as they are non-profit, do no have any shareholders and do not sell products, and therefore their members are not customers.

AEIP also called for a specific regime for institutional investors and asset managers, and emphasised that harmonised due diligence was instrumental for the proper functioning of social protection funds.

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