Austrian pension and provident funds are finding that investing sustainably has become more expensive and that overall regulation needs to be reviewed, delegates at the Institutional Capital Forum’s 7th Sustainable Investor Summit 2024 in Vienna heard this week.

“We have been ‘living’ sustainability for a while now but it is costing more and more money,” said Dietmar Schuster, member of the executive board at the €1.3bn Bundespensionskasse for state employees and civil servants.

He was referring to the regulatory framework that is demanding much more data and reporting, but he sees a bigger problem: “The expectations of the financial supervisory authorities and also of the public are much more detailed than the data,” Schuster said during a summit panel.

The same line was taken by Johannes Puhr, chief executive officer of Fair-finance Asset Management, which manages the €1bn Fair-finance provident fund.

“Over the last years we were able to act sustainably practically without costs. Now it costs us either manpower or data we have to generate,” he said.

Talking to IPE after the panel, he explained why that is a problem: “The regulatory costs will bring structural change because these additional costs are hardest on small, innovative companies.”

And also in the asset management industry there will be players passing on the costs to their customers, he added.

No long-term losses

As the topic of ‘sustainability vs. return’ is discussed more frequently – particularly because of renewed scepticism in the US – it was also part of the panel discussions at the conference.

Günther Schiendl, member of the executive board for the €15bn VBV Pensionskasse, said: “Sustainability brings an additional dimension to portfolios which do not make any difference in return over the long term, but some major differences over the short term.”

As an example, he mentioned an asset owner not having oil and gas exposure which was detrimental in 2022 and 2023 for their portfolios but very good in other years.

“Reporting about sustainable investments helps people understand what it happening,” he said, adding that mandatory non-financial reporting introduced by the European Union “has been an important step”.

Schiendl said that many asset owners were investing sustainably “out of conviction”. On a political level he sees “some back-padelling” when it comes to convictions about sustainability.

Sometimes, he added, that could be a good thing as in the case of the Corporate Sustainability Due Diligence Directive (CSDDD) – which a vote continues to be postponed over criticism that it would be too burdensome.

“It should not lead to structural disadvantages for Europe,” Schiendl said, noting that some regulations might need a bit of maturing before being passed.

A representative of the Austrian Financial Market Authority (FMA) pointed out the regulator was also looking forward to “deepening some existing regulation”.

The FMA is taking part in the review of the Sustainable Finance Disclosure Regulation (SFDR) currently under way, the representative said, adding that some “room for improvement” was found in the practical application.

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