Dutch Pension Fund Body Sets Out Stall On CMU Agenda

The Dutch occupational pension funds association has set out its stall concerning the European Commission’s Capital Markets Union (CMU) project, issuing  recommendations based on those from a group of experts created on the initiative of the finance ministers for France, Germany and the Netherlands.

The Commission, which is responsible for planning and proposing new European legislation, has since set up its own group to develop the CMU agenda for the next five years, with a deadline of the end of May to deliver policy recommendations.

Pensioen Federatie’s intervention came shortly before the EU Council, the body for all EU governments, today announced what could be seen as its response to the work of the Next CMU group, the body created by France, Germany and the Netherlands.

“With the new European Commission kicking off this week, we call upon the EU to reinvigorate the project and set an ambitious new agenda for the next five years,” said the Dutch pension fund association.

It highlighted three main recommendations for the EU “to harness the long-term investment potential of pension funds”.

According to the association, although almost 90% of Dutch pension funds’ assets were invested outside the Netherlands, there were still barriers to investing cross-border in the EU.

It called for a harmonised procedure for repayment of withholding tax, arguing that a “patchwork of procedures and outcomes” held back intra-EU investments, particularly for smaller pension schemes.

The Commission should also seek to drive further improvements in the area of insolvency regimes.

Pensioen Federatie also backed a multi-pillar adequacy test for pension systems whereby EU member states would set their own long-term improvement targets but get assistance from EU bodies.

“While the design of pension systems should remain a national competence, the EU should urge member states to set the level of ambition for retirement income for their citizens,” it said.

“This would shine a light into the pension saving deficit that exists in parts of Europe and create a strong drive for developing occupational and personal pensions.” 

Corporate non-financial reporting

The Dutch association also called for better non-financial corporate reporting, saying this was needed to allow institutional investors to incorporate sustainability risks and factors in investment decisions, make meaningful disclosures themselves, and be able to reliably apply the sustainability taxonomy.

Institutional investors are facing sustainability-related disclosure requirements under the EU’s sustainable finance action plan, with many arguing these necessitate improvements in corporate reporting. The EU’s Non-Financial Reporting Directive sets out recommendations for large companies, not binding requirements. Commission vice-president Valdis Dombrovskis has indicated the new Commission might revise the NFRD.

The Council today said a measure to be explored and assessed would be “to consider the development of an European non-financial reporting standard taking into account international initiatives, with specific attention for climate-related disclosures”.

Pensioen Federatie also said the Commission should ensure an adequate supply of suitable environmentally-friendly investment opportunities, for example by stepping up its InvestEU programme, while ensuring public support met strict additionality criteria.