By Alina Neculae, Senior Policy Analyst, EU and France, Policy, PRI


The European Insurance and Occupational Pensions Authority (EIOPA) consultation on the review of the Institutions for Occupational Retirement Provision (IORP) II Directive closes next month, on the 25 May.

What’s at stake here is significant – how to take account of preferences to invest sustainably, and how the law, and the overall policy landscape, can improve.

EIOPA’s technical consultation features a dedicated sustainability chapter. It suggests that pension funds should integrate members’ and beneficiaries’ sustainability preferences into investment decision-making while complying with the prudent person rule[1] and investing in their long-term best interests.

This is in line with the Legal Framework for Impact report (commissioned by the PRI, UNEP FI and the Generation Foundation and authored by Freshfields), which shows that investors’ ability to contribute to a better future rests, in part, on their understanding of how this serves the expectations and interests of beneficiaries.

We already know the sustainability aspirations of individual savers and investors are increasing, but are these reflected in investors’ investment activities?

The LFI view

The assets committed to sustainable investment approaches have been growing rapidly. However, they remain lower than might be expected when compared to the preferences expressed by individual investors.[2] There may be various reasons for this:

  • what people say when asked about their sustainability preferences and where they end up putting their money can differ;
  • in initial conversations with pension providers or investment managers, beneficiaries and clients are not prompted to consider whether their money could be managed in ways that would achieve positive sustainability impacts; or
  • investment decision-makers are not given adequate information about end-investors’ sustainability preferences, nor prompted to consider end-investors’ sustainability aspirations when selecting investments.

So how should pension funds and other institutional investors ensure they understand what beneficiaries expect and take these preferences into consideration in their investment decisions?

Clarifying sustainability preferences

There are several ways in which EU policy makers could improve financial regulations to better connect increasing sustainability preferences to real-world outcomes.

Firstly, they should ensure that investment products marketed as sustainable do actually lead to real-world impact. For example, individual investors should get to choose, when possible, whether their money is managed to intentionally contribute to assessable, positive sustainability impacts, including through stewardship.

Secondly, pension funds should be encouraged to consider the sustainability preferences of their beneficiaries, according to their size and specific characteristics.

EU regulators can encourage this by revising the IORP II Directive, or by developing EIOPA guidance to explain when and how pension funds can do this.

It is also important to explore ways to address market impediments and the challenges that pension funds may face in establishing and considering the sustainability aspirations of beneficiaries.

Regulators could support the development of technology-based solutions to help investors establish and assess beneficiary views and preferences. They could also, for example, conduct surveys on beneficiaries’ sustainability preferences. Furthermore, improving the financial literacy[3] of beneficiaries could better enable them to decide and express their sustainability preferences, increasing the likelihood of them being considered by investors.

Respond to the IORP II consultation and get in touch

We would very much like to hear about your response to the IORP II consultation and how you collect and consider beneficiaries’ sustainability preferences – get in contact with us at to find out more.


The PRI blog aims to contribute to the debate around topical responsible investment issues. It is written by PRI staff members and occasionally guest contributors. Blog authors write in their individual capacity – posts do not necessarily represent a PRI view.