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Commission moves to increase transparency of infrastructure loan market

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European Union member states should publish infrastructure investment plans and ensure credit information on infrastructure loans is readily available in a central database if they wish to attract pension funds, the European Commission has argued.

In a communication published alongside the revised IORP Directive, the directorates general for internal markets, industry and economic and monetary affairs threw their support behind a number of proposals to encourage long-term financing by institutions other than banks.

Building on the work of the Green Paper for long-term investing, internal market commissioner Michel Barnier said it was important for the Commission to be ambitious in its support for growth.

“Our financial system must regain and increase its ability to finance the real economy,” he said. “This includes banks as well as institutional investors such as insurers and pension funds.”

The Commission identified telecommunications infrastructure, as well as transport and renewable energy, as three of the areas in need of patient capital, and pointed towards its revision of the IORP Directive as one way of attracting investment.

Under the revised Directive, the Commission will seek to do away with any investment rules that hinder pension fund investment in assets that would finance growth in the real economy. 

In a move that will further impact the pension industry, it also highlighted the importance of a “wider framework for sustainable finance”, with the forthcoming Shareholders’ Rights Directive identified as a way of improving the situation, as well as an emphasis on environmental, social and governance matters and a review of fiduciary duties – mirroring similar moves in the UK.

Considering how private finance could be attracted to European infrastructure projects, the Commission recommended the introduction of infrastructure plans, likely drawing on the experience of such reports by government-backed Infrastructure Australia and, more recently, the UK’s National Infrastructure Plan – a pipeline of imminent and otherwise viable projects.

Additionally, it called for more transparency in the infrastructure loan market, addressing some of the points previously raised by German pension association aba, which suggested the European Investment Bank should offer assistance in assessing projects.

The Commission said it would evaluate the feasibility of “collecting and, where possible, making available comprehensive credit statistics on infrastructure loans and setting up a single-point compilation of project bond issue data”.

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