Germany’s occupational pensions association Aba and cosultancy WTW have questioned the application of the Corporate Sustainability Reporting Directive (CSRD) to institutions for occupational retirement provision (IORPs), foreseen by the draft law put forward by the Federal Ministry of Justice (BMJ) to transpose the European Union directive into German law.

The BMJ’s draft bill largely exempts Pensionsfonds from non-financial reporting obligations, but “as long as no more than 500 employees are employed”, a requirement that is not mentioned in the EU directive, Aba said in a statement.

In Germany, companies covered by the sustainability reporting requirement are large or capital market-oriented corporations, insurance companies and Pensionsfonds, among others, according to the draft bill.

The German version of the EU law is “neither sensible nor necessary”, said Dirk Jargstorff, chief executive officer of Bosch Pensionsfonds, who is also deputy chair of Aba’s board of directors.

“Neither institutional nor private investors who could benefit from non-financial reporting can invest in these pension funds”, he said, adding that CSRD reporting will lead to additional costs for pension institutions.

The CSRD changes the EU directive on annual financial statements and consolidated financials, that apply in Germany to Aktiengesellschaften (stock companies, AG), and insurance companies, Hendrik Sponagel, associate director at WTW, explained. The legal form for Pensionsfonds is an AG, he added.

There are no legal basis, according to the EU law, to include insurance companies and Pensionsfonds in financial and non-financial reporting, therefore the expansion of the scope of the CSRD application should be dosed and thoughtful, Sponagel said.

Moreover, the Ministry of Justice’s draft bill is considering gross contributions as a measure to define the size of the companies falling under sustainable reporting requirements, instead of the net turnover according to the EU directive.

A lower net turnover, with the pension institution not required to meet reporting requirements, would lead exactly to the result wanted by the European legislator, namely that really only large institutions must have to comply with the requirement, he said, speaking at an Aba event last week.

The German government seems to have gone beyond the goals set by the EU directive, and compared to, for example, what is happening in the Netherlands, where pension funds, legally considered foundations, do not fall under the national version of the CSDR, he added.

WTW is in “constructive” talks to possibly change the draft bill, Sponagel said. Germany will rollout the new rule for sustainability reporting gradually.

For the first financial year, 2024, sustainability reporting only applies to large “capital market-oriented companies” with more than 500 employees, according to the justice ministry. In the following financial years, until 2028, further companies will gradually come under the CSRD, it added.

According to current estimates, a total of around 13,000 German companies will be affected by the Directive, it added.

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