PensionsEurope has written to the European Financial Reporting Advisory Group (EFRAG) welcoming its proposals to introduce a Europe-wide sustainability reporting framework.
The retirement-industry body, which represents 25 member associations across continental Europe, noted the “increasing demand from pension funds for ESG data due to the growing sustainable investments of pension funds”.
However, the group has also called on rulemakers to exempt “pension funds, asset managers and other financial market participants from reporting under [the Corporate Sustainability Reporting Directive] CSRD” given that “[Sustainable Finance Disclosure Regulation] SFDR reporting requirements already provide stakeholders with sufficient information”.
PensionsEurope also wants to see more consideration given to avoiding duplication as a result of overlaps between different reporting regimes and pressed EFRAG to tighten up its proposed requirements around the assessment of materiality.
Finally, it pressed EFRAG to include specific disclosures about workplace pension provision within the final version of the reporting framework.
EFRAG published its first batch of draft sustainability reporting standards on 29 April for public comment. The standards address four key themes:
- Cross-cutting: general principles, strategy, governance, and materiality;
- Environment: climate impact, pollution, resource use;
- Social: workforce, community impact, consumers; and
- Governance: risk management, governance issues and business practices.
If adopted across the European Union, this framework will require corporate reporters to disclose information covering the four themes and volunteer suitably audited assurance about the reliability of the information.
Work on these standards ran in parallel with the legislative process on the EU’s proposed CSRD regime. The origins of the CSRD lie in the Non-Financial Reporting Directive (NFRD), the broad purpose of which is to improve corporate accountability.
The standards also cross-reference the EU’s legal framework and sustainability initiatives such as the SFDR and the Taxonomy ‘Article 8’ delegated act.
And from their perspective as asset owners, PensionsEurope recommends that the SFDR Principle Adverse Impact (PAI) indicators “should be the priority indicators to disclose under the CSRD” and that it would be in the interests of pension funds for the disclosures to be made mandatory.
The principal adverse impact of the PAI regime is one of the most challenging elements of the SFDR. It requires companies to disclose information on a number of ESG-related topics such as greenhouse gas emissions.
However, PensionsEurope said that because pension schemes hold assets outside the EU, the CSRD and the SFDR are only part of the solution.
Their comment letter added that “[ESRSs] should be coherent with other legislation, in particular the SFDR and the EU taxonomy.”
Further, on the issue of materiality, PensionsEurope suggested “including a review or auditing requirement for the materiality assessment to avoid subjectivity and by adding further transparency when PAI indicators are not considered material by a company.”
It goes on to argue that companies that consider a PAI indicator immaterial should be made to make an explicit report on that fact, given that pension funds must explain data gaps for entity-level PAI indicators.
Finally, PensionsEurope has also emphasised the need to better recognise private pensions, which will be open to all company’s workforce, as an indicator of a good remuneration policy.
It suggested entities disclose the existence of a pension scheme, who funds it, and a narrative description of the scheme.
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- Central securities depositories regulation (CSDR)
- Corporate governance
- European Financial Reporting Advisory Group (EFRAG)
- greenhouse gas emissions (GHG)
- Non-Financial Reporting Directive (NFRD)
- Reform & Regulation
- Sustainable Finance Disclosures Regulation (SFDR)