Last week, AEIP and PensionsEurope submitted a joint response to EIOPA on the first climate stress test for IORPs.
In our position, we thanked EIOPA for maintaining good communication and engaging in constructive dialogue during the preparation and execution of the EIOPA 2022 IORP stress test.
Overall, we are supportive of a climate stress test that focuses on transition risks. We appreciate that the scenario was not a double-hit scenario, which would have made it more unrealistic.
However, we believe that the test also contained some unnecessary complexity and burden for IORPs.
We recommend using a cash flow analysis as a better methodology for fully capturing the economic (climate change) scenario in a more meaningful way, as it takes into account the time factor.
To assess members’ and beneficiaries’ benefits, the long-term expected return should be used as the basis, instead of the risk-free return.
We also appreciate that EIOPA asked qualitative questions on how IORPs consider ESG risks and investments, which made the exercise more interactive between EIOPA and participating IORPs than in the past.
There are many best practices and approaches for pension funds to consider sustainability factors, and having a high share of ESG assets under the taxonomy does not necessarily equate to responsible investment.
We propose that next time EIOPA would provide the aggregated results both with the Dutch IORPs, and also without them.
To read our full position paper, click here.
