Sweden’s Financial Supervisory Authority (FSA) is arguing that the country’s pension foundations (pensionsstiftelser) should not have to comply with the EU’s green taxonomy rules, because they do not offer financial products.

In its consultation response to the Swedish memorandum on proposed legislative measures in connection with the EU’s green taxonomy regulation – a green-list classification system for environmentally-sustainable economic activities – the FSA (Finansinspektionen) also said it should not have to assess whether underlying investments complied with the EU rules, because it did not have the skills to do so.

The watchdog wrote: “In view of the fact that a pension foundation […] has none of its own pension commitments, but only secures the employer’s pension commitments by managing the employer’s assets, it cannot be considered to provide any financial product as referred to in the regulation (pension product or pension plan).

“The FSA therefore questions whether pension foundations are obliged to comply with the regulation and whether the authority is to exercise supervision over them,” it said.

The proposals in the memorandum do not address the question of what should be considered environmentally sustainable, but rather include items such as disclosure provisions in some Swedish investment fund legislation, and a requirement for fund managers to pay annual fees to cover FSA work relating to the EU regulation.

They also stipulate that even insurance intermediaries and securities firms with fewer than three employees have to apply the EU regulation.

The FSA said a pension foundation’s only task was to manage capital, and it did not normally pay pensions.

“It is the employer who calculates the pension commitments and based on them makes the necessary payments to the foundation,” the FSA said, adding that it was also the employer’s task to manage the payment of pensions.

The authority’s statement supports the bid for exemption made by the Swedish Association of Pension Foundations (SPFA) in its response to the consultation.

Annette Tiljander, SPFA chair, wrote: “Pension funds do not provide financial products and are thus not covered by the regulation in Articles 5-7 of the taxonomy regulation.

“There is therefore no basis for the Swedish Financial Supervisory Authority to exercise supervision over pension foundations in this respect,” she said.

The association has 53 pension foundation members who manage more than SEK200bn (€19.7bn) overall, including those of large companies such as Volvo and Telia.

The FSA told the Finance Ministry in its letter that it did mainly approve the memorandum’s proposal, but that it would need far more resources than envisaged in order to supervise the disclosure requirements – an extra SEK5m was needed.

The scope of its supervisory responsibility with regard to the taxonomy should be made clearer, it said.

“It is unclear whether the FSA’s supervisory responsibility also includes examining whether the underlying investments meet the environmental requirements in the regulation,” it said.

That would be inappropriate, it said, because it did not fit in with its assignment as a financial supervisory authority.

“The FSA does not have the competence that this type of supervision would require, and it would be costly and inefficient to build up such competence within the FSA,” it said.

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