The German supervisory financial authority, BaFin, is considering including sustainability in the governance requirements of Pensionskassen and Pensionsfonds, if rules are reviewed in the future.
The supervisory authority will continue to follow the development and, if for example something changes with regard to the MaGo – which sets the regulatory minimum requirements for the governance of institutions for occupational pensions (MaGo for IORPs) – sustainability aspects will be taken into account, BaFin’s executive director Frank Grund said.
BaFin has not yet set out a proper timetable for risk management, Grund added, speaking at “Sustainable finance – new EU standards, risk management and supervisory practice” conference held last week in Berlin.
According to BaFin, in principle, each occupational pension institution can determine whether to classify risks as significant. In some cases, however, a definition that applies to all Institutions for Occupational Retirement Provision (IORPs) may be more appropriate than a company-specific approach, it said in the MaGo requirements.
The management team of an occupational pension institution should have an overview of all risks to which the IORP is actually or potentially exposed to.
MaGo applies to Pensionskassen and Pensionsfonds providing benefits for old-age, and domiciled in Germany. It outlines guidelines for the interpretation of the requirements on the organisation of IORPs in the Insurance Supervision Act (VAG).
BaFin considers the requirements binding, to make sure that instructions are consistently applied to all IORPs it supervises, taking into account the principle of proportionality.
The German financial supervisory authority decided to enforce requirements on minimum risk assessments (ERB) and governance (MaGo) for Pensionskassen and Pensionsfonds last year, following a consultation on the matter.
BaFin’s governance rules are based on the principle of proportionality to the scale, type, scope and complexity of activities of an occupational pension scheme.