The Dutch Federation of Pension Funds (Pensioenfederatie) has warned that the proposed simplification of the European Sustainability Reporting Standards (ESRS) must not “reduce the quality of the information investors need to assess sustainability-related risks”.

In its response to the European Commission (EC), the federation was largely positive of the EC’s efforts to simplify reporting requirements and align them more closely with other European and international sustainability rules.

It also welcomed the EC’s decision to largely follow the European Financial Reporting Advisory Group’s (EFRAG) technical advice.

However, it urged the commission to “show restraint” when introducing exemptions that allow companies to omit certain information or delay disclosure.

For example, it noted that the draft Delegated Act goes beyond EFRAG’s recommendations concerning disclosures on anticipated financial effects of sustainability risks and opportunities.

Under current proposals, organisations would be allowed to omit information considered seriously prejudicial to commercial interests and defer quantitative disclosures until the 2030 financial year.

The federation cautioned that cases where physical or transition risks are so elevated that disclosure could adversely affect an undertaking’s commercial position are “precisely the situations where transparency on anticipated financial effects would be most critical”.

In addition, Pensioenfederatie welcomed the clarification that financial institutions only need to report on investments held on their own account, not on investments they manage on behalf of clients.

“This clarification helps reduce legal uncertainty and supports a more proportionate and workable application of the ESRS for asset managers acting as agents on behalf of clients.

"Some pension asset managers in the Netherlands are owned by pension funds. We support appropriate disclosures by financial institutions through the Sustainable Finance Disclosure Regulation as well as the inclusion of IORPs in its scope,” it said.

However, it flagged that the wording of the newly introduced articles (17 and 37) could be further improved by removing the reference to ‘fiduciary duty’.

“This concept is not defined under the ESRS and could create interpretative uncertainty, particularly for third-party asset management activities that may not formally qualify as fiduciary management relationships in all jurisdictions or business models.

"A broader formulation referring to investments managed on behalf of clients would provide greater legal clarity and better reflect the intended scope exclusion,” it stated.

The federation also underlined the importance of keeping the European reporting standards closely aligned with international sustainability standards.

“We welcome the progress made in aligning the ESRS with the IFRS Sustainability Standards and note the strong willingness of both the Commission and the ISSB to enhance interoperability. We encourage continued efforts to further improve interoperability going forward,” it said.

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