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EU: New sustainability disclosures required for pension funds

Retirement|Investments|Pension Board and Trustee Consulting|Pensions Corporate Consulting

January 16, 2020

IORPs required to report sustainability information by March 10, 2021, in general, to support the EU’s climate, environmental and social sustainability goals.

Employer Action Code: Act

The European Union (EU) has published a Regulation requiring employer pension funds1 to disclose sustainability‐related information to members. This applies to financial market participants such as insurers, investment firms and institutions for occupational retirement provision (IORPs). As a Regulation (rather than a Directive), member states must comply, with no need for domestic implementing legislation. The Regulation, consistent with the EU’s 2018 action plan on sustainable finance, is intended to support the EU’s climate, environmental and social sustainability goals.

Key details

The information which IORPS will be required to make available to prospective members, current members and beneficiaries free of charge through electronic means, websites or on paper (by March 10, 2021 unless otherwise noted), includes the following:

  • To the extent they consider any adverse impacts of investment decisions on sustainability factors (defined as environmental, social and employee matters; respect for human rights; anti‐corruption; and anti‐bribery matters):
    • A statement of due diligence policies regarding those impacts, including (at least) identification/prioritization of the impacts, a description of the principal impacts, brief summaries of engagement policies and a reference to adherence to responsible business conduct codes
    • From December 31, 2022, a clear and reasoned explanation of whether and how the IORP considers adverse impacts on sustainability factors, and a statement that more information is available in the pension fund’s annual report
  • Where they don’t consider such adverse impacts, an explanation of the reasons why not, together with whether and when they intend to do so
  • Information regarding the consistency between the IORP’s remuneration policies and “the integration of sustainability risks” (sustainability risk is defined as an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment)
  • The manner in which sustainability risks are integrated into the IORP’s investment decisions
  • To the extent the IORP includes financial products that promote environmental or social characteristics, further details including: 
    • A description of the environmental or social characteristics or the sustainable investment objective
    • A statement of the methods of assessing/measuring impacts — including data sources, screening criteria and relevant sustainability indicators
  • For prospective members only, an assessment of the likely impacts of sustainability risks on investment returns.

Employer implications

The European Insurance and Occupational Pensions Authority is expected to prepare regulatory technical standards (RTSs) on the content, methodologies and presentation of information (which are likely to be prescriptive and detailed in their requirements) by December 30, 2020, for RTSs pertaining to sustainability indicators relating to adverse impacts on the climate and other environment-related adverse impacts, and by December 30, 2021, for those relating to adverse impacts in the field of social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. The level of effort necessary to comply with the Regulation will vary across countries, depending on existing local disclosure requirements. There are indications that the U.K. will implement the requirements regardless of Brexit. Employers that sponsor IORPs should begin to work with trustees and investment advisors to ensure compliance.


1. Institutions for Occupational Retirement Provision under Directive 2016/2341


Mark Dowsey

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