German occupational pensions back streamlined sustainability reporting rules

The German occupational pensions industry is in favour of streamlining sustainability reporting requirements that in most cases generate costs for pension schemes, without tangible benefits for beneficiaries.

Hendrik Sponagel, associate director at WTW, told IPE that simplifying sustainable reporting rules through an omnibus package at European Union level would greatly benefit company pension schemes in Germany.

“Current rules on disclosure obligations and sustainability reports according to [Sustainable Finance Disclosure Regulation] SFDR, [Corporate Sustainability Reporting Directive] CSRD and [Non-Financial Reporting Directive] NFRD are not congruent, result in double costs and have no real added value for those entitled to pension benefits,” he said.

Institutions for Occupational Retirement Provisions (IORPs) in Germany are subject to a number of regulations including the SFDR, the IORP II Directive, the NFRD, Taxonomy, the German Act Implementing the Second Shareholder Rights Directive, and requirements of the financial supervisory authority BaFin on sustainability risks and sustainable investments.

The CSRD applies to Pensionskassen and Pensionsfonds, two types of vehicles providing occupational pensions in Germany, if they are established in the form of a stock corporation (Aktiengesellschaft -AG). The Corporate Sustainability Due Diligence Directive (CS3D), instead, does not apply to Pensionskassen or Pensionfonds.

IORPs must determine the compensation of their employees and managers in a sustainable manner under rules relating to compensation requirements in the insurance sector (Versicherungs-Vergütungsverordnung VO), but the majority of employees and managers do not receive remuneration from IORPs, according to WTW.

“The reporting obligations currently in place make services provided via IORPs more expensive, without offering any significant value in return,” Michael Karst, managing director at WTW, added.

ESG criteria might not necessarily play an important role in the investment strategies of companies’ own pension schemes that tend to invest according to more traditional beliefs, and those entitled to benefits don’t have a say in designing the investment strategy, Karst said, explaining why it is necessary to simplify ESG reporting rules.

Dirk Jargstorff, chief executive officer of Bosch Pensionsfonds, suggests not to impose an “additional arbitrary reporting obligation” to occupational pension funds causing costs borne by those entitled to benefits, while taking into account the specific role of IORPs in national laws.

“One should also think about the social partner models in the legal form of the AG [stock corporation] which would also face further administrative and financial hurdles [by adding reporting obligations] without added value,” he said.

Parties change their stance

The position of the occupational pension industry in Germany mirrors the stance of the country’s political parties, and of the government asking the European Commission to simplify reporting standards on sustainability.

IPE understands that the CSRD won’t be transposed into national law in Germany in this legislative period due to a lack of broad support in Parliament. The Social Democratic Party (SPD) continues to support the government’s efforts to consolidate reporting obligations at the European level.

Katharina Beck, member of Parliament (MP) for Bundestag, said to take a close look at which data provides real added value for transparency and control, to relieve companies from burdens when drafting reports.

MPs of the European People’s Party (EPP), which also includes Germany’s Christian Democratic Union (CDU), are asking to suspend the implementation of the CSRD, the CSDDD, EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM) for at least two years, and to limit the scope of the omnibus regulation to the largest companies with more than 1,000 employees.

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