Concern mounts over ESAs' ESG product disclosures

PensionsEurope has voiced concerns over the European Supervisory Authorities’ (ESAs) attempt to create templates for ESG products.

The lobby group, which represents national associations of pension funds, said the product templates are too complicated for pension fund members and seem designed for classic investment products.

The ESAs want to standardise the disclosure of information for financial products that promote ESG characteristics or have a sustainable objective under the Sustainable Finance Disclosure Regulation (SFDR).

The group hopes that the use of mandatory templates will make it easier to compare different financial products in EU Member States. They are intended to be included in existing disclosures provided by Alternative Investment Fund Managers, Undertakings for Collective Investment in Transferable Securities (UCITSs), insurance undertakings, Institutions for Occupational Retirement Provision (IORPs) or providers of pan-European Personal Pensions Products (PEPPs).

However, PensionsEurope said by strictly standardising the presentation of information in product disclosures, the templates ended up fitting classic investment products and were therefore “not adequate” for most pension plans.

“The proposed ‘one-size-fits-all’ approach would not fit with the information needs of pension funds’ members and beneficiaries,” it said.

It pointed out that the proposed draft regulatory technical standards and templates do not provide any differentiation between the various types of financial products. This is despite SFDR requiring the ESAs to take this into account, along with their characteristics, when designing the new disclosure requirements and templates.

PensionsEurope also noted that the proposed templates do not fit in with how many IORPs operate.

The group is calling for templates to be written in clear, easy to understand language so that they are accessible to pension fund members.

It says: “Most pension funds’ members do not have the skills and knowledge required to have a good understanding of the illustrative mock-ups as they often have limited financial literacy relating to the functioning of capital markets, corporate governance and sustainable finance.

“Therefore, the templates for pre-contractual and product ESG disclosures should be made much simpler and the information should be written in a more accessible wording.”