INVERCO supports the need to improve undertakings' disclosure of social and environmental information, as well as, developing positions towards considering ESG aspects and integrate them on a voluntarily basis in their asset allocation decisions. Nevertheless, “comply or explain” should be the fundamental transparency principle.
From our point of view, there should not be any compulsory ESG rules in the investment strategy/asset allocation, given the many different approaches for the implementation of ESG factor. The necessary leeway for Pension Funds or CIS in finding the appropriate way to implement ESG aspects in the investment process need to be guaranteed.
Moreover, social investment strategies, should be clearly distinguished and separated from ESG integration, since social investment strategies also seek purposes not always related to the delivery of a financial return. Such strategies, often involve a narrowing of the available investment universe through the screening of sectors or stocks on ethical grounds.
CIS and Pension Funds, as institutional investors, have the opportunity to vote with their feet, and so, the investment horizon should be taken into account to provide the appropriate flexibility and proportionality in terms of information of assets and engagement. Member States shall allow CIS and Pension Funds to take into account the potential long-term impact of investment decisions on environmental, social, and governance factors, nonetheless, as stated above, a further compulsory consideration of ESG aspects should not be required.
The concept of fiduciary duty in the EU is clear and is not an impediment to responsible investment. Indeed, the duty of care to their clients is a common EU standard, which adapts to reflect market practice and investment industry norms.
ESAs should not supervise on ESG integration. Supervision is still a national matter and should be left to NCA’s. Besides, ESAs should not deliver EU-wide definitions about what sustainable investment stands for and what is not. That should be set up individually and may differ considerably between different CIS and IORPs.
In addition, any integration of ESG criteria into pan-European stress tests and excessive ESG related reporting requirements should be avoided since it would not help to make ESG-related investing more wide-spread, but more burdensome.
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