Response to EIOPA on technical advice for the review of the IORP II Directive

EFAMA has responded to EIOPA regarding the technical advice for the review of the IORP II Directive, highlighting the following two statements:
“EFAMA believes that IORPs should be able to invest in financial instruments traded in all third country markets where the latter meet certain conditions, regardless of the adoption of an equivalence decision by the Commission (…).“
“On Sustainability: (…) EFAMA agrees that IORPs should consider ESG risks if they want to acquire a holistic view of their exposure to overall risks, in particular because of the long-term investment horizon of IORPs. This view is consistent with the prudent person principle and the requirement that IORPs must ensure safety, quality, liquidity and profitability of the portfolio as a whole.“
A short summary of their other answers, structured by chapters:
Chapter 2: Governance and Prudential Standards
EFAMA notes that the principle of proportionality is not uniformly applied across member states in the IORP II Directive, they agree that the threshold for small IORP exemption could be increased, but caution that small IORPs may still have significant risk profiles.
EFAMA supports the removal of the „size“ and „internal organization“ criteria in favor of proportionality formulations based on the nature, scale, and complexity of IORPs‘ activities, they express concerns about the creation of a low-risk category of IORPs, as it may have unintended consequences and lead to a perception of high-quality IORPs that may not be accurate.
Chapter 3: Cross-border Activities and Transfers
EFAMA believes that regulatory arbitrage should be addressed differently for defined benefit (DB) and defined contribution (DC) IORPs, they support a uniform EU definition for the majority required for cross-border transfers or the removal of the majority requirement.
EFAMA emphasizes the need to develop an internal market for cross-border IORPs, as it would benefit members and beneficiaries by providing scale and potential savings.
Chapter 4: Information to Members and Beneficiaries and Other Business Conduct Requirements
EFAMA agrees that there should be measures in place to manage potential conflicts of interest between IORPs and service providers, they suggest providing more guidance to supervisors on overseeing potential conflicts of interest.
EFAMA supports the strengthening of conditions for the proper functioning of the internal market but has reservations about the proposed amendment to article 9, which prescribes elements to be covered in the business plan.
Chapter 5: Shift from Defined Benefit to Defined Contributions
EFAMA emphasizes the importance of long-term risk assessments, member choice in investments, disclosure, and reporting in the context of the shift from defined benefit to defined contributions.
Chapter 6: Sustainability
EFAMA agrees that IORPs should consider ESG risks in their investment decisions, they believe that taking into account ESG risks aligns with the prudent person principle and the requirement to ensure the safety, quality, liquidity, and profitability of the portfolio as a whole.
Chapter 7: Diversity and Inclusion
EFAMA believes transparency is important in this area and would support recommendations and disclosures.