Campaign groups lobby European Parliament to get ESG factors in EU pension directive

A group of influential campaign groups have written to Members of the European Parliament calling on them to support environmental, social and governance (ESG) factors in the revised European pension fund directive.

As reported by RI in July, references to ESG were omitted from the latest draft text from the Parliament’s Economic and Monetary Affairs Committee (ECON). It marked a departure from the original text proposed by the European Commission, the executive arm of the European Union, for the revision to the directive – formally known as the Institutions for Occupational Retirement Provision (IORP).

The concept of ‘stranded assets’ had even made it into one draft, courtesy of Dutch Green MEP Bas Eickhout.

But the new draft overseen by Brian Hayes, the Irish MEP who is the ‘rapporteur’ for the directive at the ECON committee, omits such references, reflecting an objective to focus instead on improving the Internal Market for IORPs and workers’ access to workplace pensions. Hayes has said he is committed to getting the legislation adopted by early 2016.

Now a group including ShareAction, Eurosif, Friends of the Earth, the 2° Investing Initiative, ActionAid, 350.org, UK union Unison, the Finance Innovation Lab, Réseau Finacité and WWF have intervened ahead of a vote on the text next week at the committee. The final text would then go to the vote at the Parliament’s plenary. To add amendments at this stage would require a party, not an individual MEP, to submit them.

“It is disappointing that the draft text from the ECON committee removed the commission’s proposal that IORPs’ ‘risk evaluation should include new or emergingrisks, such as risks related to climate change, resource use or the environment’,” they write in a letter to ECON members. They want MEPs to vote for a “strengthened

text” mandating consideration of not only environmental but also social and governance factors by IORPs.

“The European Parliament has an opportunity to take a leadership role in seeking to protect pensioners’ financial futures through promoting a culture of responsible investment,” they continue.

“European Parliament has an opportunity to promote responsible investment”

ShareAction’s Senior Policy Officer Camilla de Ste Croix, who has been involved in the initiative, told RI she has had meetings with MEPs to explain about ESG – although she conceded responsible investment is not necessarily at the top of their agenda, with the debate centring on the cross-border aspects of the directive.

“The RI angle is not getting a look-in,” she said. The arguments against its inclusion were that it added ‘red-tape’ and was a burden.

The directive came into force in 2003 and the Commission was using its revision, known as IORP2, as a way to feed into the broader long-term investment agenda, specifically its Green Paper on long-term financing of the European economy.

There are 125,000 IORPs operating in the EU with combined assets of around €2.5trn. The text is set to go to the vote at the ECON Committee on December 1.