The European Association of Paritarian Institutions (AEIP) has called for a “significant revision” of the Sustainable Finance Disclosure Regulation (SFDR).

Its comments were made as part of its feedback to the European Commission’s consultation on rationalisation of reporting requirements.

“AEIP fully supports the Commission’s ambition of improving transparency in financial markets regarding sustainability. To best achieve this ambition, we suggest that a significant revision of the Sustainable Finance Disclosure Regulation (SFDR) is required,” it stated.

The association explained that its members observe that currently the SFDR is not used as a disclosure framework as intended but as a labelling and marketing tool (precisely Articles 8 and 9).

“Important concepts such as the ‘sustainable investment’, are not clearly defined, data gaps exist, and there are significant costs and reporting requirements. Therefore, in our input we suggest removing Article 8 and 9, and we support a categorisation system (if established), that can split categories in a different way than according to existing concepts used in Articles 8 and 9.

“Recognizing the inherent distinctions between paritarian institutions, such as occupational pension and healthcare funds, and pure financial market entities is crucial. Unlike retail clients who actively choose investment products, pension plan members and beneficiaries are not ‘customers’; they are automatically enrolled based on their employment relationship, making their engagement with information markedly different.”

The association noted that as SFDR is primarily designed for a pre-contractual phase, where information can be regularly checked, it does not align well with the unique dynamics of pension plan participants. AEIP said it strongly supports the aim of the Commission to further enhance the financing of the transition to a more sustainable economy. Currently, there is a substantial amount of legislation concerning sustainability, and the framework undergoes continuous modifications, AEIP said.

AEIP executive director, Simine Miotto, said: “We suggest that the way forward is to shift away from the horizontal approach, to realise the specificities of the different types of investors and respect that IORPs are not pure financial institutions.”

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