Benne van Popta has been named the new chair of the European Insurance and Occupational Pensions Authority’s (EIOPA) pensions stakeholder group, IPE has learned.The 30-strong Occupational Pensions Stakeholder Group (OPSG) also elected Matti Leppälä, currently secretary general of PensionsEurope, as vice-chair during yesterday’s first meeting of the new OPSG in Frankfurt.Van Popta was previously vice-chair during the inaugural term of the OPSG chaired by Chris Verhaegen.Verhaegen remains a member of the group, to which 14 new members were appointed at the beginning of October, representing employee interests. The source added that the first meeting of the new OPGS discussed the workload for the coming two and a half years, covering expected further consultations initiated by EIOPA on the holistic balance sheet.The source also cited “recognition” of the need to focus on defined contribution funds and personal pensions – falling under the banner of consumer protection.New chair Van Popta is a former co-chairman of the VB, the Dutch industry-wide pension fund association and, since 2011, has acted as employers’ chairman at the €47.1bn mechanical engineering scheme PMT.Previously, he was chairman of the retail sector pension fund.He spent 13 years working at the Dutch Ministry of Finance, after studying macroeconomics and public finance.
Separately, the €153bn PGGM said it divested from five Israeli banks after it realised its engagement efforts would be unsuccessful.The five financial institutions – Bank Hapoalim, Bank Leumi, First International Bank of Israel, Israel Discount Bank and Mizrahi Tefahot Bank – had been speaking with the pension manager for a number of years, it said in a statement.“The dialogue showed, however, that, given the day-to-day reality and domestic legal framework they operate in, the banks have limited to no possibilities to end their involvement in the financing of settlements in the occupied Palestinian territories,” it said.It added that, as no changes to the current environment were predicted for the “foreseeable future”, it decided to divest its holdings at the beginning of the year. Dutch pension manager ABP has divested from Japan’s Tokyo Electric Power Company (TEPCO), the firm responsible for the nuclear power plant in Fukushima, over concerns it has little regard for public safety.The announcement came as PGGM, the pension manager responsible for assets of healthcare sector fund PFZW, said it would divest from five Israeli banks over their involvement in settlement activities in Palestinian territories.The €293bn ABP said in a statement it had sold its stake in TEPCO, which at the end of September 2013 was valued at €18m, after attempts to engage with the company failed.The manager said the Japanese firm violated its responsible investment guidelines during and after the incident at the Fukushima Daiichi power plant, which saw several explosions occur after it was damaged during the 2011 tsunami.
APG and Cohen & Steers are investing in Hispania Activos Inmobiliarios as it looks to raise €500m in gross proceeds from its listing on a number of Spanish stock exchanges this month.In addition to the two firms, Paulson and Co, Quantum Strategic Partners, the Canepa Group and Moore Capital Management will also back the listing, with €314m so far committed by the initial pool.Hispania will target Spanish multi-family residential, office and hotel real estate investments over the next three years.Once listed, Hispania will be managed by Azora Gestión and listed on the Madrid, Barcelona, Bilbao and Valencia stock exchanges by the end of this month. At the end of the three-year period, Hispania will liquidate the portfolio.
It recommended that the government amend private sector pension investment guidelines to “distinguish more clearly between financial and non-financial factors”, adding that the current mention of ESG matters should therefore be closely examined.Additionally, it said the government should require that a scheme’s Statement of Investment Principles (SIPs) disclose whether trustees have a stewardship policy.It also said the Pensions Regulator should seek to give the commission’s recommendations weight by promoting them and eventually incorporating them into a forthcoming code of practice.The National Association of Pension Funds said it welcomed the “clarity and certainty” following the commission’s report.The association’s head of investment affairs Paul Lee said: “While many pension fund trustees have always had a good grasp of their fiduciary duties to act in scheme members’ broad interests, it is extremely helpful to have the reassurance that trustees should indeed use their judgement as to what is in the beneficiaries’ interests over the appropriate time horizon.”However, Catherine Howarth of campaign group ShareAction took issue with the decision not to introduce a statutory definition of fiduciary duty.“Codification in a permissive form would retain the flexibility for fiduciary duties to evolve and respect the discretion of trustees while providing the legal clarity the Law Commission acknowledges is much needed,” she said.Simon Howard, chief executive of sustainable investment association UKSIF, said he was happy the guidance acknowledged the room for trustees to consider ESG – although the report stressed that, instead, it should be an issue of examining financial and non-financial factors.Howard also sided with Howarth in lamenting the absence of a statutory underpinning for fiduciary duties.“Whilst we would have liked statutory clarification on this matter, we look forward to working with the Pensions Regulator and the [Financial Conduct Authority] in ensuring they provide rapid, comprehensible and accessible guidance in this area,” he said.The report also has implications for the UK’s forthcoming charge cap for defined contribution (DC) funds.The 0.75% cap, which affects default funds of auto-enrolment compliant DC schemes, should be reviewed in 2017 to assess whether the cap is hampering the ability to commit to long-term investments, according to the report.,WebsitesWe are not responsible for the content of external sitesLink to Law Commission’s full report and guidance for pension trustees Trustees could soon be subject to a new code of conduct governing long-term investment behaviour, and should be required to disclose their approach to stewardship, according to the UK’s Law Commission.The commission’s report, ‘Fiduciary duties of investment intermediaries’ – triggered by the 2012 Kay Review – also rejected calls to introduce a legal definition of fiduciary duties, instead drafting detailed guidance for trustees on whether they can consider factors beyond simple short-term investment returns.In detailed guidance for pension trustees, the commission said it was not helpful for trustees to be obliged to take account of environmental, social and governance (ESG) matters, as these were often “ill-defined” and covered a number of risks.Instead, trustees were urged to consider the risks to a company’s long-term sustainability, and weigh the impact of financial and non-financial matters against each other.
There should be a Europe-wide framework governing occupational defined contribution (DC) pension funds, Gabriel Bernardino has suggested.Speaking at the European Insurance and Occupational Pensions Authority’s annual conference in Frankfurt, the supervisor’s chairman said any such framework would be able to reduce costs by operating on a cross-border level.“At an EU level, while recognising the high sensitivity around pensions discussions, a further important step would be to design a simple and transparent EU framework for defined contribution occupational schemes.“This framework should be capable to take full advantage of the potential of the EU internal market by providing a cross-border platform that would reduce costs, support long-term funding of the EU economy and ultimately deliver better pension outcomes.” The new plan would be in addition to EIOPA’s vision for a pan-European personal pension product, which has been criticised by the Dutch government.The chairman’s comments come after PensionsEurope released a paper outlining key design principles for what it regards as modern DC, focusing on member behaviour, adequacy of the accrued pension pot’s size and risk-sharing.Bernardino also suggested new tools might be needed to ensure constructive dialogue between social partners involved in defined benefit (DB) funds, and that DB was becoming “more and more a legacy issue”“There is a need to build appropriate incentives for a proper dialogue between employers and employees on their long-term sustainability,” he said. However, not wishing to underplay the importance of properly valuing liabilities, he added: “This important dialogue should not be based on valuations and risk assessments that deny economic reality.“It will not contribute to a better risk management, will fail to reflect the true risks the different stakeholders are running and will help to preserve schemes that are clearly unsustainable, postponing the taking up of measures in due time.”He warned that maintaining such unsustainable schemes risked leading to a reduction in benefits and intergenerational conflict, and could cause reputational damage to the pensions sector.
It will soon be approaching market participants for information and data to look into the above areas, in addition to hosting roundtables and meetings.The FCA is launching the study because it wants to ensure competition is working properly in what is such a vital sector to the UK economy.The wholesale sector competition review, which it carried out last year, flagged up a number of areas where competition was not working effectively.The UK’s £6.6trn (€9.4trn) asset management market – the largest in Europe – covers around £2.1trn of pension fund investments, and £1trn each of insurance products and non-mainstream asset management products, both of which include pension fund investments.A further £400bn is invested by charities and the public sector.The FCA believes that, given the size of the market and the long-term nature of investments, even a small improvement in the effectiveness of competition could be of substantial benefit for investors.Christopher Woolard, director of strategy and competition at the FCA, said: “Asset managers provide an important economic function, bringing together those with money to invest and companies and governments that need capital. Given the significant role they play in the economy, it is essential that competition work effectively for these services.”He added: “Our market study aims to ensure both retail and institutional investors can get value for money when purchasing these services – which we expect to further strengthen the UK’s position as a major centre for asset management.”The study will be carried out over the next year.Interim findings are expected to be published in summer 2016 and will indicate any areas of concern, with an explanation of what they are and how the FCA proposes to address them.The FCA will also set out any areas where few or no problems have been found.The final report should be published by early 2017. The Financial Conduct Authority (FCA) has set out the terms for reference for its market study into competition in the UK asset management industry. The study was first signalled in March this year when the FCA published its 2015-16 business plan.The study, to include both retail and institutional investors, will assess how asset managers compete to deliver value; whether asset managers are motivated and able to control costs along the value chain; and what effect investment consultants have on competition for institutional asset management.In addition, the FCA will look at whether there are any barriers to innovation and/or technological advances in asset management.
Sibylle Kampschulte, senior international consultant at Willis Towers Watson in Vienna, said DB benefits would be used “selectively” by employers to position themselves to attract workers.However, Ziegelbecker added: “Employees often are not aware of the contributions employers are making to DB plans as only the future pension payout is seen. In defined contribution [DC] plans, the level of contributions is more visible.”In the German civil servant segment it is exactly this future pension promise which people expect, explained Hagen Hügelschäffer, managing director at the German AKA, the association for supplementary pension systems in the municipal and church sector.“We are facing a major retirement boom in the public sector and with it a severe shortage of skilled workers,” he said. “As the salary level in the public sector will never be very high, a DB pension promise can be the ‘goody’ to get skilled workers.”According to the latest collective bargaining agreements, supplementary pensions in the public sector in Germany have to guarantee 3.25% interest during the active phase and 5.25% plus an additional 1% “dynamisation” during the retirement phase.Hügelschäffer added it would be “impossible to introduce DC to the German public sector”.The high costs of public sector pensions in Germany were recently found by the think tank ESISC to be one of the major weaknesses of the system. In a briefing, the authors proposed to “erase the privileges of the civil servants”.A Dutch exampleOn the panel at the summit in Vienna, Sibylle Reichert, representative of the Dutch pension federation in Brussels, reported on the current debate on a transition to a hybrid pension system.“The Netherlands is currently moving towards an ‘individual collective DC’ with higher transparency and more security in the pay-out phase,” she said.She added the long-awaited proposal should be presented “before summer”, by the not-yet-formed new government. Coalition talks are continuing after the general elections in March. However, the transition phase from the current DB to the new hybrid system “will take 20 to 30 years,” Reichert said.“We should end the system debates of DB versus DC as people are only interested in what they can expect in the end,” she said.But she added: “It has to be a hybrid system because it is an illusion to make promises when we have no idea what happens in 40 years.”DB’s power remainsHügelschäffer presented some statistics on the major weight old DB promises still carry in European pensions: “57% of all pension assets in Europe are still in DB systems, while only 9% are pure DC and 34% in hybrid systems. However, looking at occupational pension plans, it shows that only a minority is still DB.”Overall, the delegates at the conference believed the future lay in DC or hybrid pensions with collective risk taking. In addition, they agreed that communication with members was vital to the success of DC and hybrid plans. Despite a clear trend to the contrary, defined benefit (DB) pension plans will still have a role to play even in 30 to 40 years, German and Austrian pension experts have said.This was the consensus among delegates at a panel discussion during the Institutional Retirement and Investor Summit in Vienna this week.Johannes Ziegelbecker, board member at the €700m Austrian Bundespensionskasse for federal employees, said: “I do not think there will be any new DB plans set up within the Pensionskassen but employers will still be using DB in direct pension promises to employees in higher positions.”Therefore defined benefit obligations might still be added to Austrian companies’ balance sheets decades from now, he said.
Jankovic previously chaired the association’s responsible investment roundtable. She told IPE it was the first time that Invest Europe had as its chair someone who specialised in responsible investment.She said much had been achieved in the field, such as the development of an ESG due diligence questionnaire for general partners (GPs).One of her goals is to push climate change higher up the agenda at the association.“We need to ensure that this growing trend from the limited partner base to engage with GPs on climate change is made visible and that GPs get more and more comfortable with having a systematic approach to climate change risk assessment,” she said. Marta Jankovic, senior responsible investment and governance specialist, APGPrivate equity is in strong demand and APG’s Jankovic said this was positive for the European economy. At the same time, she added, it was important to have an association supporting the growth of private equity that brings together GPs and limited partners (LPs).According to Invest Europe data, private equity fundraising reached an eight-year high in 2016, with pension funds contributing one-third of the capital raised. Data firm Preqin recently said fundraising periods were becoming shorter as a result of the strong demand.APG has a strong commitment to private equity as an asset class, Jankovic said, and recognised the importance of having a voice in the industry association.“The symbolic value is very high and I really hope personally that the fact APG is chairing Invest Europe this year sends a signal to institutional investors more broadly in Europe about the value of being part of the association,” she said.Having an institutional investor in the role of chair “shows institutional investors are comfortable with private equity as an asset class and believe in it”, she added.“We also believe that it needs to be transparent about how it operates in the market and needs to continue to adhere to high professional standards.”As chair of Invest Europe Jankovic succeeds Gerry Murphy, senior managing director and chairman of Blackstone Europe. Under his tenure, Invest Europe launched a pan-European private equity activity database, in partnership with national venture capital associations, announced new EU venture capital funding initiatives and launched Invest Week, a series of events for policymakers.The chair of Invest Europe is selected from one of four different industry segments – venture capital, mid-market, large buy-out and LPs – on strict rotation. Jankovic was selected by the members in the LP platform.Michael Collins, chief executive of Invest Europe, said: “Marta’s contribution to Invest Europe’s work on professional standards, investor reporting guidelines and responsible investment is invaluable and we are delighted that she has agreed to step into the role of chair for the coming year.” Dutch pension asset manager APG is fielding the new chair of Invest Europe, marking the first time a major institutional investor has the role at the European private equity and venture capital association. Marta Jankovic, senior responsible investment and governance specialist at APG, has been appointed to the role, effective immediately. She will hold the position for one year.At APG, Jankovic oversees the integration of environmental, social, and governance (ESG) considerations into the €452bn manager’s private equity allocations and investment solutions that contribute to the UN Sustainable Development Goals.“I want to highlight the important role private equity can have on the environment and society at large and look forward to helping to shape this key work,” she said.
The lobbying organisation urged pension funds to speed up the expansion of their responsible investments, and to focus in particular on tackling climate change.The top performer in VBDO’s rankings was again healthcare scheme PFZW, with civil service pension fund ABP trailing closely. PFZW has come top of the rankings for 11 years in a row.The industry-wide schemes for the agricultural sector (BPL Pensioen), the building industry (BpfBouw) and housing corporations (SPW) were also among the best performers.In contrast, the three large KLM schemes, the pension fund for pharmacy staff (PMA) and the pension fund of steelworks Hoogovens ended up at the lowest end of the scale.In its latest report, the VBDO replaced its ranking system with a star rating, at the request of the pensions sector.“According to the pension funds, the traditional ranking system triggered too much competition, while, in their opinion, the sector would better be served with co-operation,” explained Rudy Verstappen, one of the authors of the VBDO report.The VBDO assessed pension funds for governance, policy, their accounting for sustainable investment as well as implementation, with a focus on the latter.Angélique Laskewitz, VBDO’s director, said that nine pension funds have joined the association. Until recently, its membership chiefly comprised asset managers, insurers and banks. Sustainable investment is still not seen as an obligation by many Dutch pension funds, according to the Netherlands’ Association for Investors in Sustainable Development (VBDO).In the 11th edition of its annual benchmarking report, it highlighted that, despite a continuing increase of pension funds factoring in environmental, social and governance (ESG) criteria into their investment policies, 56% of the surveyed 50 largest schemes still hadn’t set sustainability targets.It found that the ESG performance had primarily improved at the mid-section of the monitored pension funds, with the best- and weakest-performing schemes hardly making progress in 2016.However, the VBDO reported improvements on transparency, while noting that large differences remained on quality and depth of sustainability reporting.
With the exclusion of Lloyds and HBOS, an updated version of the list of “less engaged” now includes the £32bn (€36.7bn) Electricity Pensions Trustee (EPT), the £25bn BP Pension Fund (BPPF), the £15bn Aviva Staff Pension Scheme and the £12bn Ford Pension Fund. The EAC said a revised assessment was likely to be made over the next few days, including a further publication of its findings.Aviva and Lloyds declined to make any further comment, as did a spokesperson for Mary Creagh, chair of the EAC.Ford, BPPF and EPT did not respond to requests for comment. The UK parliament’s Environmental Audit Committee (EAC) has rowed back on its initial assessment of pension funds’ investment attitudes towards climate change risk following an administrative blunder that failed to fully take account of the submission by Lloyds Banking Group’s pension scheme trustees.The EAC, a committee of politicians and effectively the parliament’s green watchdog, published its findings last week. It deemed six of the UK’s 25 largest pension funds to be “less engaged” with environmental risks – or not having “formally considered climate change as a strategic risk”, according to the committee.However, over the weekend the EAC admitted that, due to an “administrative error”, the assessment of the response from the Lloyds and HBOS schemes’ trustee board had been “based on an incomplete version”.Last week, Lloyds had asked that “the EAC publishes our full response to its request for information, rather than the covering letter, which is currently all that is available on its website”.