Denmark’s financial supervisory authority (FSA) has deemed Velliv’s sustainability disclosures “not sufficient”.
Finanstilsynet revealed last week that it had conducted an inspection of the Danish pension provider in order to examine its compliance with the EU’s Sustainable Finance Disclosure Regulation (SFDR).
According to a translation of its official statement, “in specific areas, the Danish FSA finds that the processes or documentation are not sufficient”.
The supervisor claimed to have found that Velliv didn’t disclose the likely impacts of sustainability-related risks on the returns of financial products that it had designated as ‘Article 8’ under the SFDR regime – meaning they promote environmental or social characteristics.
It noted that Velliv uses external asset managers to run its ‘sustainable’ alternative investments, but doesn’t “sufficiently take into account when [their] investments contribute to a social or environmental goal” or provide enough information about ongoing monitoring and reporting.
“The company’s methodology and process for ensuring that investments do not significantly harm any social or environmental objectives fail to include several of the mandatory indicators for negative impacts on sustainability indicators (PAI indicators),” the FSA continued.
It also found that Velliv didn’t have sufficient safeguards in place to ensure that non-sustainable investments don’t end up in its Article 8 funds.
Mikkel Bro Petersen, Velliv’s head of press and public affairs, told IPE it “has had a productive dialogue with the Danish Financial Supervisory Authority, and we appreciate that the collaboration contributes to strengthening both Velliv and the rest of the industry”.
“We take note of the orders,” he added.
Feedback on SFDR redesign
The announcement comes amid major lobbying on the future design of SFDR.
The law is being overhauled after complaints that it has failed to reduce greenwashing and created excessive reporting requirements for financial market participants.
The European Commission was flooded with feedback on its new proposals earlier this month. Franklin Templeton and Allianz are among those calling for the regime to be mandatory only for retail funds.
“Professional investors understand sustainable investing and often impose their own requirements on managers,” wrote Franklin Templeton in a formal response to the Commission. “It should be possible to opt into SFDR, if the client wishes, but not mandatory.”
There’s also a big debate about what should be considered eligible for the proposed new ‘transition’ category.
Many investors are calling for government debt to be included in the criteria, while Franklin Templeton asked the Commission to clarify how firms can prove they have legitimate transition pathways.
BlackRock insisted that “engagement should not be a mandatory criterion for the transition category as it is an entity-level stewardship tool, not a product-level outcome”.
Green investment house Mirova, on the other hand, argued that passive funds should only be able to qualify for the Transition category if they have “an active engagement strategy”, and should not be able to qualify for the Sustainable category at all.
It added that financial products that don’t seek to market themselves as sustainable in any way should still be obliged to undertake minimal disclosures, to ensure sustainable products weren’t unfairly burdened.
“Non categorised funds should also be clearly identified through explicit and visible warnings in documentation,” it suggested.
