In recent years, several Dutch pension funds have announced their increased focus on sustainability. In this way, the various pension funds strive for a positive long-term impact on the climate. In doing so, they are encouraged by changes in legislation that put more emphasis on sustainability reporting. In practice, we see that pension funds are looking for a balance: on the one hand, pension funds have to comply with laws and regulations, such as the Sustainable Finance Disclosure Regulation (SFDR), but on the other hand, they also want a certain degree of freedom in making statements about sustainability.
The most important legally required sustainability statements arise from the SFDR. The SFDR sets requirements for the information that pension funds provide, both in terms of content and form. The SFDR has a major impact on sustainability statements by pension funds. In short, pension funds must include the sustainability information prescribed by the SFDR on their website, in the pre-contractual information to members and in the annual report.
Furthermore, the SFDR also sets requirements on the content of other ‘non-SFDR’ information provided by pension funds. In this context, Article 13 of SFDR is relevant. This article requires that publicity communications by pension funds may not conflict with the information they provide under SFDR. There is little clarity about how strictly Article 13 of SFDR should be interpreted: does including a percentage of ‘sustainable investments’ within the meaning of SFDR in the pre-contractual information mean that the pension fund in question is subsequently in no way (any longer) restricted in its communication about ‘sustainable investments’? And does the level of the percentage impact the answer to this question? In our opinion, based on the current state of the legislation and available guidance, no one-size-fits-all answer can be given to this type of question. This would mean that pension funds will have to determine for each statement whether this statement is in line with the relevant laws and regulations.
In addition to the aforementioned Article 13 of the SFDR, the following elements, among others, are important in this context. In its most recent SFDR report, the Dutch Authority for the Financial Markets (AFM) emphasized that financial market participants, such as pension funds, take up their role in the sustainability transition by providing “accurate, clear and non-misleading/balanced information” on the sustainability of their financial products. This standard appears to be in line with the law’s requirements for pension funds to provide information: under Article 48(1) of the Pensions Act, the information provided or made available by a pension fund must be “accurate, clear and balanced”. This overarching standard applies to all information provided or made available by a pension fund, including sustainability statements. Based on the above, we believe that every sustainability statement should at least pass this ‘accurate, clear and non-misleading/balanced’ test.
Returning to the question posed above: does including a percentage of ‘sustainable investments’ within the meaning of the SFDR in the pre-contractual information lift the communication restrictions? In principle, this does not seem to us to be the case. It depends on the level of the committed percentage of ‘sustainable investments’. In any case, the pension fund should not suggest in its communication that it has more ‘sustainable investments’ in its investment portfolio than is actually the case. Of course, the ‘restriction’ of Article 13 of the SFDR would not apply if communication is made about a specific investment that actually qualifies as a ‘sustainable investment’ within the meaning of the SFDR. However, caution should be exercised in case of sustainability statements relating to the broader investment portfolio (which contains investments that are not ‘sustainable investments’). Above all, an assessment should be made for each statement in each case as to whether it passes the ‘accurate, clear and non-misleading/balanced’ test.
Want to know more? Feel free to contact Elise Stormmesand.
