The Dutch Federation of Pension Funds (Pensioenfederatie) has called on the European Commission (EC) to “better account for the unique position of pension funds in the legislation”.

In its response to the Sustainable Finance Disclosure Regulation (SFDR) review, and to recommendations from the European Supervisory Authorities (ESAs), the federation said the Dutch experience is that the current framework does not sufficiently align with pension funds’ specific characteristics and needs.

“Private financing can play a crucial role in the transition to a sustainable economy. At the same time, pension funds face practical limitations under the SFDR, which is more tailored to retail investment funds,” it said in its response.

The ESAs propose replacing the current product classification under Articles 8 and 9 with ‘categories’ that act as labels guaranteeing a specific level of sustainability. This is intended to address the issue of consumers interpreting the current product classifications as labels, which they were not intended to be.

“We welcome the proposal for a special category for transition financing, which could be suitable for long-term investors. However, the ESAs want to maintain a horizontal approach where the exact same rules apply to all market participants under the SFDR.

“In this context, it becomes highly challenging to establish relevant criteria for highly diverse products. Pension funds, with their significantly more complex and diversified portfolios compared to many retail investment funds, must therefore be able to continue communicating the sustainability characteristics of their investments, even if they do not apply a specific category,” it stated.

In addition, the federation urges that sovereign bonds be excluded when calculating ratios, such as the percentage of assets designated as transition financing for the transition category.

“Sovereign bonds are generally not classified as sustainable investments, yet pension funds are heavily invested in this category for diversification purposes, making it more difficult to achieve high percentages. This dilutes the sustainability of other investment categories,” it said.

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