European pension associations have welcomed the outcome of the European parliament’s vote to reduce reporting duties and due diligence requirements for companies, but cautioned that the sector will still need reliable data.

With 382 votes in favour, 249 against, and 13 abstentions, the European parliament adopted its negotiating position on simplified sustainability reporting and due diligence duties for businesses.

The MEPs have backed a proposal that, if adopted, will see only businesses employing over approximately 1,750 employees, with a net annual turnover in excess of €450m, carry out social and environmental reporting.

Businesses within this scope would also be required to provide sustainability reporting under taxonomy rules (i.e. a classification of sustainable investments).

In addition, reporting standards would be further simplified and reduced, requiring fewer qualitative details, and sector-specific reporting would become voluntary.

Regarding due diligence requirements, these would apply only to large corporations with more than 5,000 employees and a net annual turnover of over €1.5bn. MEPs want these businesses to adopt a risk-based approach to monitoring and identifying their negative impact on people and the planet.

MEPs also want the European Commission to establish a digital portal for businesses with free access to templates, guidelines and information on all EU reporting requirements, complementing the European Single Access Point.

In response, Insurance and Pension Denmark CEO, Kent Damsgaard, said there is “no doubt” that the insurance and pension industry is “delighted” that the EU parliament now supports reducing regulatory burdens. Although he said the “task is not complete”, he believes it is an “important step in the right direction”.

“There is no doubt that the EU flag will be flying high in the industry's investment departments this afternoon. Parliament has just paved the way for reducing the scope of EU regulations that our industry must report on,” he stated.

“We have been holding our breath since the proposal was not passed a few weeks ago, despite the fact that many politicians have previously supported Draghi's conclusion that excessive regulation stifles growth in the EU. So, it's a good day for Europe's competitiveness, but also for sustainable transition.”

Meanwhile, PensionsEurope policy adviser, Andreea Lungu, also welcomed the objective of simplifying sustainability reporting and reducing unnecessary administrative burden for companies.

However, she stated that it is essential that the European framework continues to deliver “consistent, reliable and decision-useful sustainability information for long-term investors such as pension funds”.

“Streamlining is positive, but companies must still identify and report material impacts, risks and opportunities transparently,” she said.

For example, she stated that the association has “consistently cautioned” that excessively reducing the scope risks removing a substantial portion of ESG data on which pension funds depend for risk management, portfolio construction and SFDR disclosures.

“We do not support any upward revision of employee thresholds, as this would significantly undermine data availability, including in key asset classes such as private equity,” she explained.

She concluded that a “stable and predictable reporting framework is critical”.

“Frequent structural changes increase costs and create uncertainty for both preparers and users. Regulatory stability should remain a central objective in the next phase of negotiations,” she said.

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