Danish pension funds create tax principles for external managers of unlisted investments

Move will involve “spot checks” at external managers

Several Danish pension funds have created a set of common responsible tax principles to inform manager selection for their unlisted investments.

ATP, Industriens Pensions, PensionDanmark and PFA are behind the new Tax Code of Conduct, which applies to their “unlisted investments” and includes “spot checks” on managers’ own “general tax practices”.

The new principles, announced today, outline how external managers “should behave” on tax.

A spokesperson for ATP told RI that the Code of Conduct will be used “as part of the negotiations when we consider investing in unlisted assets through an external manager”.

He added that the “avoidance of aggressive tax planning has been on top of our agenda” for the last few years.

Karsten Kjellerup Kjeldsen, CIO at Industriens Pension, also told RI that the Code would “form part of the contract negotiations” with asset managers.He added that “several other pension companies have already shown interest in the principles”.

The new code, which does “not accept aggressive tax planning”, calls on managers’ “best efforts to ensure compliance with applicable tax law and regulations within the jurisdictions where the investments are made”.

Managers themselves are also expected to be transparent on their approach to tax and will be subject to “spot checks” by asset owners. Lack of compliance with the code will lead to dialogue.

The importance of tax as an integral part of the UN’s sustainable goals is recognised in the framework.

“Each pension fund can only do so much on their own and with our common tax code of conduct we are able to influence the investments in a larger scale,” ATP’s spokesperson said.

“The Tax Code of Conduct is meant to be shared with the industry both in Denmark and abroad,” added Industriens’ Kjellerup Kjeldsen.