PensionsEurope has called out the European Insurance and Occupational Pensions Authority (EIOPA) for publishing opinions on the implementation of the IORP II Directive which “do not reflect the minimum-harmonisation character of the directive”.

In a statement, the umbrella organisation representing national pension fund associations said EIOPA’s opinions do not take on board concerns which have been repeatedly raised, and that they are too prescriptive and based on a harmonised framework for risk assessment which was rejected by the co-legislators.

PensionsEurope also said it supports the EU’s sustainable finance agenda and notes that an increasing number of IORPs have a responsible investment policy but that it takes issue with the EIOPA opinion on ESG risks for a number of reasons.

It found that the opinion misrepresents the legal framework by indicating that IORPs are required to take ESG factors into consideration as part of the investment policy, as the directive allows for opting out of incorporating ESG factors.

Furthermore, the opinion urges national competent authorities to push IORPs towards impact investing. PensionsEurope said that while there are IORPs that want to make a societal impact, the primary duty of an IORP remains to ensure good pension outcomes for their members. Any societal objectives can be adopted voluntarily, but should not be forced upon pension funds by supervisors.

PensionsEurope CEO/Secretary General Matti Leppälä stated: “If you invest for the long run like a pension fund, ESG risks like climate change should receive attention as part of risk management. However, it remains up to the pension fund to decide whether the incorporation of ESG factors leads to better risk-adjust returns.

“We also believe supervisors should not push pension funds towards impact investing. The role of pension funds remains to achieve good pensions for their members and any consideration of societal sustainability objective should remain purely voluntary.”

The opinions also add pressure on national supervisory authorities by providing detailed guidance, monitoring and following up on implementation, and PensionsEurope also fears that by providing monitoring guidance, national supervisory authorities will follow the opinions, even when they are inadequate in national contexts. It also highlights that risk management is essential for IORPs, but that it is strongly against the implementation of EIOPA Common Framework for risk assessment and transparency.

PensionsEurope chair Janwillem Bouma said: “The IORP II Directive is clear in this regard: it is not appropriate to adopt a “one-size-fits-all” approach to IORPs. While appropriate supervision is key for secure occupational retirement provision, we believe that national supervisory authorities are best placed to decide on the appropriate risk-management framework.

“The Common Framework was rejected in the debate on IORP II and should not be introduced through the backdoor, leading to unnecessary cost at the expense of pension fund members. PensionsEurope does not see any benefit from EIOPA continuing to work on the Common Framework and is completely against its application in this or any other context,” Bouma said.

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