CMU and sustainable finance

Capital Markets Union

On 24 September 2020 the European Commission adopted a new Capital Markets Union (CMU) action plan. Increasing long term investments in the real European economy is the core policy of the CMU, and this means it is vital that the CMU works for pension funds.

Many pension funds currently encounter barriers in the form of a mismatch between their own long-term investment horizons and the short-term focus of much of the regulatory framework. 

Furthermore, political and regulatory risks are a key source of uncertainty for investors and can undermine pension funds’ willingness to invest.


PensionsEurope supports the Commission’s initiative to develop an EU framework for simple, transparent and standardized securitization.

First and foremost, we believe that a new EU securitization framework should be internationally consistent. Hence, we suggest to align any future EU legislative measure with the Basel Committee/IOSCO recommendations and to harmonize the regulatory definitions of securitizations typologies existing across the EU.

The standardization of definitions, of information disclosure and of performance metrics across the EU could have a positive impact on the development of EU securitization markets, help ease investors’ analysis and increase the comparability of securitization instruments across the EU. The development of high quality securitization should not prevent however the development of other, non-standardized, securitized products.


In January 2018, the High-Level Expert Group (HLEG) on Sustainable Finance delivered a set of recommendations on how to align the financial system with the broader values of society. The European Commission followed up with an Action Plan in March 2018.

Over the last years there has been a clear trend in the pensions sector towards responsible investments. PensionsEurope therefore welcomes the Action Plan, as it contains many recommendations that will improve the scope of sustainable investments and expand the amount of information available to institutional investors on environmental, social and governance (ESG) aspects of investments. For example, the EU will establish a classification system for environmentally sustainable economic activities. This ‘taxonomy’ should be used for national and EU labels and providers offering products as environmentally sustainable investments should disclose how and to what extend they use the taxonomy.

At the same time, the European Commission has decided to review the IORPII Directive to implement the HLEG’s recommendation to clarify the fiduciary duty of institutional investors in relation to ESG investments. The proposal seeks to introduce harmonised disclosures across different types of institutional investors and asset managers. It would also allow the Commission to propose delegated acts under the IOPRII Directive to ensure that ESG risk are taken into account under the ‘prudent person rule’ and that ESG factors are included in investment decisions and risk management processes.

In July 2021, the EC published the new Sustainable Finance strategy. The new strategy is calling for the publication of a brown taxonomy and a social taxonomy. While a brown taxonomy would provide further indications concerning environmental risks, its development might produce negative consequences, especially if not complemented by consistent indicators promoting the greening of enterprises. In addition to respecting human rights businesses, social taxonomy can promote the right to an adequate standard of living through related goods and services. The adequate standard of living is a fundamental human right based on the UN declarations. Pension funds believe that social cohesion is key for economic growth and societal stability.

Moreover,  PensionsEurope recognises the need to create consistency between the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR) on the one hand and the Corporate Sustainability Reporting Directive and the future sustainable reporting standards on the other. Broadening the scope of the IFRS to include non-financial / sustainable reporting standards is a step in the right direction both from the perspective of international companies as well as pension funds. Considering that the IFRS sets international accounting and reporting standards, this can ensure comparability in this area between different Jurisdictions

Finally, an open issue is how the concept of double materiality may be regulated. The IORP II Directive clarifies that the measures should be proportionate to the nature, scale and complexity of the IORP. Any EU action has to be in accordance with the principle of proportionality and it would also be preferable for any action to take first into consideration the upcoming revision of the IORP II Directive.


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