Arbeitsgemeinschaft kommunale und kirchliche Altersversorgung (AKA), the German association of municipal and church pension schemes, has joined forces with the occupational pension association Aba and PensionsEurope to lobby against the European deforestation regulation.
“Our goal is to prevent that the regulation on deforestation will be applied to institutions for occupational retirement provision (IORPs). The regulation would include financial institutions and possibly also pension institutions if the version of the EU parliament is finally adopted,” Hagen Hügelschäffer, AKA´s managing director, told IPE.
PensionsEurope and other seven stakeholders – European Savings and Retail Banking Group (ESBG), European Banking Federation (EBF), German investment management association BVI, EFAMA, Insurance Europe, Association for Financial Markets in Europe (AFME), and the Swiss Finance Council – have sent a letter to the European Parliament Committee on Environment, Public Health and Food Safety (ENVI). The document has been embraced by the European People’s Party (EPP) in parliament but has not gained a majority support.
The European parliament adopted its position in September on the proposal of the European Commission’s regulation on deforestation-free products requiring companies to verify through a due diligence process that goods sold in the EU are not produced on deforested or degraded land.
The EU parliament has approved the proposal of the ENVI committee expanding the scope of the draft regulation by including financial institutions and therefore also pension institutions, Hügelschäffer noted.
According to the amendments adopted by the European parliament in September, financial institutions fall under the new regulation on deforestation because their services could lead to support activities linked directly or indirectly to deforestation, forest degradation and forest conversion.
Banking, investment and insurance activities of financial institutions should therefore be included in the scope of this regulation to prevent them from supporting projects directly, according to the amendment 27a.
“The core problem of the deforestation regulation is that for IORPs it becomes difficult if not impossible to examine each investment and investment vehicles to see if they invest in activities linked to deforestation. It is also impossible to prove with certainty if big or small companies are linked to deforestation,” Hügelschäffer said.
The second problem, he added, is that ENVI’s regulation proposal foresees that pension funds have to assess the activities of sponsoring companies to determine whether they are in tune with the regulation on deforestation.
“There may be the case of pension funds asking a sponsoring company active, for example, in the paper industry working with wood to stop production, and that is impossible to imagine,” he said.
There are already rules in place to fight deforestation at European level that also apply to pension funds, and that pension funds have to follow – for example, the corporate sustainable due diligence directive draft – from February this year.
“We would face the topic of deforestation through the corporate sustainable due diligence directive draft or through the taxonomy on green investments. Pension funds can and will follow existing rules on sustainable investments,” Hügelschäffer said.
The EU Commission published a proposal for regulation on deforestation in November last year.
“It is still relatively young as a legislative process, as a project overall, and there is still the possibility to raise our voice in the trialogue proceeding (with the EU parliament, the European Council and the EU Commission),” Hügelschäffer said.
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