Sustainable investment in new pan-European personal pension product takes a step closer

Vote at EU Parliament’s Economic and Monetary Affairs Committee

Europe’s proposed pan-European personal pension product (PEPP), which looks set to include “rules on sustainable investment”, took a step closer to becoming a reality after being backed by MEPs on the European Parliament’s Economic and Monetary Affairs Committee (ECON), the lead committee for the proposal, in a vote yesterday.

The PEPP, which is tipped to swell Europe’s personal pension market to €2.1trn, is an ambitious plan to create a pan-European ‘third-pillar’ complementary pension product.

It was proposed by the European Commission, the EU’s executive arm, last year and is now working its way through the EU’s legislative process.

The proposal, which received 29 votes in favour and 10 against, with 17 abstentions, will now go through the so-called trialogue negotiations between the Parliament, Commission and Council.

In a tweet following the vote, liberal Dutch MEP Sophia in ‘t Veld, who is also an ECON member, stated that PEPP would include “opportunities for providers, strong consumer protection and rules on sustainable investment”.

In July, the European Parliament’s Employment and Social Affairs Committee (EMPL) called for a raft of sustainable investment amendments to the proposal, including the proviso that PEPP to be prevented from engaging in “aggressive tax avoidance”.When asked if the proposal’s current shape reflected EMPL’s feedback, RI was told that it had gone in a “good direction” by a spokesperson for the office of in ‘t Veld but that no further details could be given at this point.

“Strong consumer protection and rules on sustainable investment”

He added that the final version should be published in the next few days.

The PEPP idea grew out of a 2012 European Commission white paper on pensions and also fits in with its Capital Markets Union plans. It’s envisaged that insurers, pension funds, investment firms, banks and asset managers will be able to design PEPPs.

In its opinion on the proposal from July, EMPL called for several ESG amendments including the stipulation that PEPP “should adopt an investment exclusion policy in order to ensure that savings are not invested in highly controversial and harmful products such as coal-based energy, nuclear weapons, cluster munitions, the production of tobacco or used to support harmful conducts such as serious human rights and labour rights violations, severe environmental, climate damage, corruption and tax avoidance”.