The European Commission has requested that EIOPA’s advice on the future of the EU’s pension fund law include an exploration of ways to strengthen the sustainability aspects of fiduciary duties and stewardship rules and of the need to reflect the shift from defined benefit (DB) to defined contribution (DC) schemes.
Delivered on 14 June, the Commission’s call for advice also asks that EIOPA explore Prudential requirements to include diversity and inclusion issues in relation to management bodies.
Petra Hielkema, chair of EIOPA, had earlier this month told a PensionsEurope conference that she hoped diversity and inclusion would feature in the call for advice, which at that time had not yet been delivered by the Commission.
EIOPA recently wrote to the Commission, European Parliament and Council calling for diversity of management bodies in insurers and pension funds.
Addressing EIOPA conference delegates today, Hielkema said this was “a badly needed transformation that will have a positive impact across both sectors”.
The scope of the request for advice from EIOPA is to a certain extent determined by IORP II itself. According to this, the review of the legislation should consider its adequacy “from a prudential and governance point of view”; cross-border activity; and the pension benefit statement.
ESG impact duty?
The request for EIOPA to investigate options in relation to pension funds’ duties regarding environmental and social sustainability has also been expected, being in line with the plans the Commission outlined in its “renewed sustainable finance strategy” in 2021.
In keeping with that, in this month’s official call for advice it said EIOPA should assess the potential need to broaden the concept of “the long-term best interests of members and beneficiaries” in the IORP Directive.
“In its analysis it should evaluate the possible introduction of the notion of double materiality, considering members’ and beneficiaries’ sustainability preferences and broader societal and environmental goals,” the Commission added.
It also said EIOPA should further assess whether the prudent person rule in IORP II “should be clarified and/or explore possible avenues to require the integration of sustainability impacts in the investment decision”.
EIOPA has previously shown itself open to recommending that the EU’s pension fund legislation be amended to mandate pension funds to take into account the long-term environmental and social impact of their investment decisions.
EIOPA has been asked to deliver its advice to the Commission by 1 July 2023, which the latter said would give the regulator two years of data about IORP II implementation as a basis for assessment. Normally EIOPA would have had an earlier deadline but because some member states were late to transpose IORP II the review process has been delayed.