PensionsEurope has urged European Union (EU) policymakers to maintain the current framework under the Shareholder Rights Directive II (SRD II) review, warning that any expansion of disclosure requirements would create unnecessary burdens for pension funds.

In its answer to the call for evidence on SRD II, the association argued that preserving the current approach is “essential to ensure flexibility across different investment models, avoid duplication of functions within the investment chain, and maintain a clear allocation of responsibilities between pension funds and their asset managers”.

It stressed that any revised framework must “properly reflect” how pension funds invest, which varies across the EU. For example, some pension funds invest directly in equities, while many invest indirectly through investment funds and asset managers.

“These structural differences fundamentally shape how shareholder rights are exercised. Applying identical or overly prescriptive requirements to all pension funds, regardless of how they access equity markets, risks creating inefficiencies and unnecessary administrative burdens, without improving engagement outcomes,” the association warned.

It explained that direct investors are able to exercise voting rights and engage with investee companies, while indirect investors, such as pension funds investing via Undertakings for Collective Investment in Transferable Securities (UCITS) or Alternative Investment Funds (AIFs), do not hold shares directly.

In this case, engagement and voting are carried out by the asset manager, while the pension fund’s role is to select, mandate, and monitor managers.

“The approach already reflected in Article 3h SRD II, which focuses on investment strategy alignment and arrangements with asset managers, is well calibrated for indirect investment models and should be preserved,” PensionsEurope said.

It further argued that extensive public disclosure of internal policies is not appropriate for occupational pension funds, including IORPs, which are not active in a commercial retail market but implement pension promises on behalf of sponsoring undertakings and beneficiaries, who are their primary stakeholders.

In addition, PensionsEurope noted that pension funds operate under specific regulatory and operational constraints, including diversification requirements and liquidity management obligations, which may limit their ability to build significant positions or exercise influence over investee companies.

It highlighted that pension funds may not be able to “adjust or exit positions rapidly where engagement does not deliver results, due to liquidity considerations and long-term investment horizons”.

“These structural features should be duly reflected when considering engagement expectations,” it said.

In stating why this matters for Europe, PensionsEurope argued that pension funds are a key source of long-term capital for European companies, supporting investment, growth and wider economic stability.

While SRD II is designed to encourage shareholder engagement, it noted there is no clear evidence that strengthening engagement requirements would automatically improve long-term investment outcomes or increase the provision of long-term capital to the European economy.

“In the absence of clear evidence that short-termism is driven by insufficient engagement, additional obligations risk creating unnecessary burdens without delivering tangible benefits.

"An appropriate SRD II framework is therefore essential to ensure that pension funds can continue investing efficiently, without unnecessary complexity, while supporting long-term corporate performance,” it concluded.

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