AEIP and PensionsEurope joint response to EIOPA 2022 IORP Stress Test
This week AEIP and PensionsEurope have shared to EIOPA their joint response on the first climate stress test for IORPs.
In our position we thank EIOPA for the good communication and constructive dialogue during the preparations and exercise of EIOPA 2022 IORP stress test.
In general, we support a climate stress test with a focus on transition risks.
We welcome the fact that the scenario was not a double-hit scenario, which would have made it more unrealistic. Yet, this also contained some unnecessary complexity and burden for IORPs.
We recommend that a cash flow analysis would have been a better equipped methodology to fully capture the economic (climate change) scenario in a more meaningful way, since it takes into consideration the time factor.
To assess members’ and beneficiaries’ benefits, the long term expected return should be used as the basis, instead of the risk-free return.
In general, we appreciated that EIOPA asked qualitative questions on how IORPs consider ESG risks and investments, which made the exercise more interactive between EIOPA and participating IORPs than in the past.
There are many best practices and approaches of how pension funds consider sustainability factors, and therefore, it is important to note that having a high share of ESG assets under the taxonomy does not become synonymous with responsible investment.
We propose that next time EIOPA would provide the aggregated results both with the Dutch IORPs, and also without them.
To read our full joint position please see here.