01 April 2016

PensionsEurope response to the Commission consultation on long term and sustainable investments

The variety, in both type and scale, of pension funds does lead to a large diversity of responsible investment policies. Social returns are not a substitute for financial returns, but many funds express an ambition to generate social returns without compromising financial returns.

PensionsEurope noted that pension funds should retain their freedom of investment, as to adhere to their own investment beliefs and policies. Only then can they achieve their core objective: to provide adequate pensions at relatively low costs. European initiatives or regulation should take into account the characteristics of pension funds as institutional investors in order to stimulate investments and turn the EU into a smart, sustainable and inclusive economy delivering high levels of employment, productivity and social cohesion.

European pension funds recognise that with their long-term investment horizons, a key consideration must be to look both at both the returns on their investments and any associated risks. The variety, in both type and scale, of pension funds does however lead to a large diversity of responsible investment policies. Social returns are not a substitute for financial returns, but many funds express an ambition to generate social returns without compromising financial returns.

The role that ESG factors play in the investment decisions of investors can be diverse as there is a wide interpretation of what ‘ESG’ means across pension funds and the wider investment community. Including ESG factors in investment decisions can take different forms, e.g. screening, integration, engagement.

The role ESG factors play in investment decisions also depends on the asset class. ESG factors play a larger role in equities, fixed-income corporate bonds and real assets. When pension funds outsource their investment management, the level of consideration of ESG factors also depends on the agreed mandate and its governance, as well as the asset managers’ policy and expertise.

Full response

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