Social issues and sovereign bonds need more focus in EU sustainability agenda, says pensions group

Expert group also recommends creation of body and tools to help pension funds understand ESG risks

The EU must provide more details on how social issues fit into ESG risks and opportunities for pension funds, according to a new report from The High Level Group of Experts on Pensions.

The group, which is made up of academics, civil society representatives and trade bodies (see below for full list of members) completed the report in December, but only published it last week. The 83-page document has a section dedicated to “supplementary pensions and the EU sustainable finance goals”, in which it presents a number of recommendations.

“The EU, Member States and the European social partners should… develop cost-effective tools and methodologies to assess the vulnerability of pension providers in the EU to long-term environmental and social sustainability risks,” it says, and “further clarify the social dimension within ESG”. On the latter, it points out that “regarding social sustainability, the discussion on the taxonomy has yet to start at the EU level,” referring to current efforts to define sustainable business activities through an EU taxonomy.

Another areas that need more attention is “the treatment of government bonds… as ESG investments,” the report states. The role of sovereign bonds in the context of the EU taxonomy should also be looked at, it adds.

Other recommendations for the EU on sustainable finance include setting up another ‘expert group’ – this time to “prepare voluntary guidance on how pension providers can better understand and model ESG-risks and their relation to ‘traditional’ financial risks in their portfolio”; and “clarify[ing] how pension providers can take into account the impact of ESG factors on investment decisions”.

The High Level Group of Experts on Pensions was convened by the European Commission in 2017 to assess and advise on “the role of supplementary pensions in contributing to adequacy of old age incomes and the development of their market in the Union”. The EU’s Action Plan on Sustainable Finance was launched the following year and will be refreshed in 2020 to include new objectives and a wider scope.

“Supplementary pensions have the potential to contribute to close the gap for the transition to a sustainable economy, while fulfilling their primary goal of delivering adequate pensions to members and beneficiaries,” the report insists.

The group members are:

  • Matti Leppälä, Secretary General/CEO of PensionsEurope
  • Nicolas Jeanmart, Head of Personal and General Insurance at Pensions Europe
  • Anne-Sophie Parent, Secretary General for AGE Platform Europe
  • Richard Nicka, representing BusinessEurope, CEEP and SMEunited
  • Josef Wöss, representing European Trade Union Confederation
  • Barthold Kuipers, representing the European Insurance and Occupational Pensions Authority