The German and Belgian pension associations and PensionsEurope have disputed the findings of an InfluenceMap report which warned of a “blind spot” on sustainable finance policy engagement among Europe’s pension funds and associations.
The report analysed the engagement of 25 of Europe’s largest pension funds and the largest pensions associations on sustainable finance policy in the EU and the UK. Only NBIM, PMT, and the UK’s BT Pension Scheme and Universities Superannuation Scheme met InfluenceMap’s minimum threshold for volume policy engagement.
Funds were scored based on “engagement intensity” – the proportion of policies that a fund engaged with – as well as on positive support for policies, and engagement carried out by industry associations of which they are members. These three scores were aggregated into an overall grade.
PMT scored highest with a “B+” rating. NBIM, Denmark’s ATP and BTPS received a “B” grade. Denmark’s PFA and Sweden’s AMF scored lowest on the scale at “D”. PFA declined to comment.
Paula Castro, senior analyst and author of the report, said that funds are increasingly engaging with climate issues in general, and so there is “definitely capacity” to expand their sustainable policy engagement.
On the association side, the UK’s Pensions and Lifetime Savings Association was highlighted as being the most supportive of sustainable finance policy. PensionsEurope ranked in the middle of the pack, but InfluenceMap noted it “appears cautious” towards sustainable finance policy. Germany’s Aba and Belgium’s PensioPlus scored poorly.
Associations hit back
The publication of the report provoked a critical reaction from the three associations. Matti Leppälä, secretary general of PensionsEurope, said the report had not taken all of its engagement activity into account.
“We are and have been very supportive of the green transition and we need regulation that takes properly into consideration the extremely diverse landscape of pension funds,” Leppälä said. He warned, however, that EU initiatives may result in unnecessary administrative burden, double reporting and unjustifiable increases in costs which are borne by fund beneficiaries. For this reason, PensionsEurope “often need to argue for proportional regulation that fits the reality of pension funds but which has not been properly considered in the legislative proposals”.
Leppälä also explained his previous opposition to further integration of ESG factors or enhanced fiduciary duties into the IORP II regulation, which governs occupational pension funds. This was highlighted by InfluenceMap as an example of negative engagement. In PensionsEurope’s opinion, Leppälä said, the ESG framework for IORPs “is one of the more advanced among European financial market actors”.
He continued: “We want Europe to continue being the leader in the ESG transition, but pension fund specificities have to be recognised and the principle of proportionality respected.”
Germany’s Aba, which received a score of “F” for its engagement, said it had never opposed the integration of ESG aspects into the investment processes of pension funds, but that on the EU level they should be regulated under the legal framework specifically designed for them, pointing to IORP II.
It also disputed InfluenceMap’s interpretation of its comments that the approach to the EU taxonomy chosen by the Technical Expert Group was “based on beliefs and convictions”. Cornelia Schmid, its deputy CEO, said it intended to point out that the development of sustainability criteria “is always subject to political circumstances and zeitgeist as well as normative decision”, pointing to the inclusion of nuclear and gas in the taxonomy.
Belgium’s PensioPlus also said it felt the rating did not accurately reflect its position. Marc Van den Bosch, deputy secretary general, said that the Belgian pension market is relatively small, with many small pension funds who have no dedicated staff. He also highlighted the association’s work on educating its member funds.
“The reactions of our organisation towards the initiatives of the EC on sustainable finance reflect the characteristics of our sector that should be taken into account to make these policies work without negatively impacting the pensions of the pension fund members,” he said.
“Our micro entities require proportionality in the rules and regulations. The rules written for large commercial entities like banks and insurance companies selling products often cannot one-to-one be applicable to social entities not selling any products at all.”
In response to the criticisms, Castro said the analysis “was never intended to be a complete stocktake of what pension funds are doing on climate – its focus was how these organisations are engaging on the specific issue of sustainable finance policy”.
She added: “In preparing this research, we had extensive and productive discussions with the pensions sector and continue to welcome any engagement.”