The Dutch Pension Federation has described plans by pensions supervisor DNB to compel pension funds to report annually on CO2 reduction as “unclear” and not corresponding to practice”.
“The current proposal completely misses its target,” the Federation said in its response to the DNB proposals, which was put out for consultation in mid-September.
DNB wants pension funds to report annually on the extent to which their CO2 reduction is in line with their reduction target. They must do this separately for each investment category.
The supervisor is seeking to gain more insight into the sustainability risks at pension funds and says it does not have sufficient information to be able to adequately supervise this.
The supervisor said it received eight “constructive” responses by the 20 October deadline, and expects to publish a substantive commentary on them within a few weeks.
Administrative burdens
The Pension Federation has submitted a laundry list of objections to the proposal and said the costs do not outweigh the benefits: “We therefore request DNB to reconsider or thoroughly revise the draft ESG quarterly statements.”
According to the Federation, there are better ways to monitor climate risks and this is already partly done on the basis of the European SFDR regulation. Much of the requested data is not yet available or would not be available in time, the Federation added. If it is available, costs are sometimes high.
The Pension Federation also warned that the way pension funds would have to report does not match the requirements of other regulations, such as the EU’s SFDR.
DNB also wants pension funds to report on the energy labels for their real estate investments. The Pension Federation notes that these labels are only used in Europe and that funds cannot provide this information for their holdings in the US and Asia.
Another obstacle is that the labels are not always available at building level. For example, a shopping centre may have a few hundred labels that are linked to the individual retail outlets.
The supervisor is also asking for energy labels for mortgage portfolios, which is usually available in the Netherlands. However, the Pension Federation questioned how the energy label of a portfolio should be determined if individual properties have different labels.
According to the Pension Federation, DNB should make better use of already existing data, and expects that the supervisor will be able to request such data in future via the European Single Access Point.
Concerns about definitions
At a more detailed level, there is uncertainty about the terms and definitions used by the DNB and some data is not yet available, such as on Scope 3 emissions, or will only be available at a later date.
The Pension Federation also questions reporting on CO2 reduction per investment category. Some funds use a reduction target for the entire portfolio, or do not have their own reduction target because they follow the objectives of their asset managers.
Another disadvantage of the emphasis on reducing financed CO2 emissions, according to the Federation, is that there is no reagard for other ways to reduce climate risks, such as by focusing on CO2 intensity. CO2 reduction is a ‘limited benchmark’, according to the organisation.
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