Pension funds should report annually about the progress they make in meeting their CO₂ reduction targets. They must also provide more insight into their sustainable investments, Dutch pension regulator DNB announced on its website.

DNB imposes the additional requirements to “enable itself to adequately supervise sustainability risks at pension funds.” This is because, in its own words, the regulator currently “does not have sufficient information to adequately supervise the management of sustainability risks”.

ESG characteristics

To address that problem, pension funds must once a year provide additional data on the ESG characteristics of their investment portfolios. These include the percentage of green investments, the CO₂ emissions of those investments (distinguishing between scope 1, 2 and 3 emissions), and the energy labels of their property portfolios.

Pension funds must also report annually on the progress made in achieving their CO₂ reduction targets.

DNB wants to make this mandatory in order to be able to check whether a fund is paying sufficient attention to climate and transition risks.

“Information on CO₂ reduction targets per asset class gives us insight into the extent to which the investments are characterised by a reduction target and, in addition, whether the institution thereby complies with its own policy on climate risks and reducing CO₂ emissions,” according to DNB.

Pension funds are not required to draw up CO₂ reduction targets if they do not yet have them. And if a fund only has a reduction target for its equity portfolio, for example, it only has to report on this.

“Funds are free to choose other control measures. In such cases, the proposed reporting statements are not entirely appropriate and DNB will have to use other, risk-based supervisory tools,” a DNB spokesperson said.

Pension funds and other market players can respond to the proposal to amend the so-called ESG reporting templates until 20 October.

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