The revised Institutions for Occupational Retirement Provision (IORP II) Directive entered the Official Journal of the European Union on 14 December 2016.

Member states have 24 months to transpose the Directive into national law. The Directive requires occupational pension providers to evaluate Environmental, Social and Governance (ESG) risks and disclose information to current and prospective scheme members. This document summarises the key ESG-related clauses.

Who is affected?

Occupational pension funds with more than 100 members are subject to these clauses of the Directive. Member states may choose to apply the Directive to schemes with fewer than 100 members.

Summary of ESG requirements

In the Recital (introductory statements), the Directive emphasises the importance of good risk management, including risks associated with climate change, resource scarcity and stranded assets (recital 57, 58). The Directive describes ESG issues, as codified in the Principles for Responsible Investment, as important for investment policy and risk management of IORPs. As such, Member States should ensure that IORPs disclose the relevance and materiality of ESG factors, and how they are taken into account in their risk management system. Funds can comply by stating that such factors are not relevant, or the monitoring costs are disproportionate (Recital 41a).

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    Policy briefing: Institutions for Occupational Retirement Provision (IORP) Directive – ESG Clauses

    July 2016