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IORP II should mandate environmental risk assessment, urges ShareAction

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European parliamentarians should force pension funds to weigh up the environmental risks associated with their investments, under changes proposed to the IORP Directive.

ShareAction, a UK responsible investment charity, and sustainable investment association Eurosif have approached members of the parliament’s Economic and Monetary Affairs Committee (ECON), urging them to reinstate the European Commission’s wording on environmental, social and governance (ESG) risks, after changes made by EU member states.

In a note published by ShareAction, it said it supported rapporteur Brian Hayes’ emphasis on general principles, rather than overly prescriptive rules. But it added that it was important the directive still deliver “meaningful positive change” in areas of disclosure, and investment and risk management.

Amendments suggested by ShareAction include requirements for a greater emphasis on the long-term interests of beneficiaries, and the impact of investments on the financial system and a member’s future quality of life. 

It further argued that all funds covered by IORP II, which it would like to see capture pension funds under 100 members where it covers investment guidelines, governance arrangements and a member’s right to request information, should be required to publish its Statement of Investment Principles and detail how these have been implemented.

Hayes, an Irish MEP, tabled his proposed amendments to the revised IORP Directive over the summer, and ECON recently convened to discuss them and agree a compromise position.

The MEP’s suggestions largely mirror those proposed by EU member states, and the notion that climate investment risk should be assessed was dropped in a compromise draft put forward in September last year.

A report commissioned by the Commission’s directorate-general on climate action in April urged the inclusion of environmental risk assessment, as it would set an example for other pension markets to follow. Commission urged to include climate risk assessment in IORP 

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