Occupational Pension Funds (IORPs) & Sustainability: What does the Prudent Person Principle say?

TY - JOUR

T1 - Occupational Pension Funds (IORPs) & Sustainability: What does the Prudent Person Principle say?

AU - Horváthová, Alexandra

AU - Feldthusen, Rasmus Kristian

AU - Ulfbeck, Vibe Garf

PY - 2017

Y1 - 2017

N2 - The European Union encourages individuals to save in private and occupational pension funds to complement their state saving-plans. Throughout their lives, employers directly sponsor occupational retirement saving plans, so individual employees may top up their future pensions. While the European Union clearly supports the formation and cross-border participation in these financial vehicles by adopting EU regulatory framework, the EU has also decided to determine a common investment decision standard to be used in all Member States, called the Prudent Person Principle. According to this principle, the fund - the future retirement for many - shall be managed with care, the skill of an expert, prudence and due diligence. Under this principle, the pension fund’s governing body is given a broad authority to invest the pension assets in a prudent fashion in light of the particular investment plan of a fund. At the same time, the EU is also moving towards more Responsible Investment and inclusion of the ESG-principles (Environment, Social and Governance). The question we aim to answer in this paper is how these two principles co-exist and whether, due to the new Directive adopted by the occupational pension funds in 2016, all funds are obliged to make only responsible, environmentally and socially beneficial investments.

AB - The European Union encourages individuals to save in private and occupational pension funds to complement their state saving-plans. Throughout their lives, employers directly sponsor occupational retirement saving plans, so individual employees may top up their future pensions. While the European Union clearly supports the formation and cross-border participation in these financial vehicles by adopting EU regulatory framework, the EU has also decided to determine a common investment decision standard to be used in all Member States, called the Prudent Person Principle. According to this principle, the fund - the future retirement for many - shall be managed with care, the skill of an expert, prudence and due diligence. Under this principle, the pension fund’s governing body is given a broad authority to invest the pension assets in a prudent fashion in light of the particular investment plan of a fund. At the same time, the EU is also moving towards more Responsible Investment and inclusion of the ESG-principles (Environment, Social and Governance). The question we aim to answer in this paper is how these two principles co-exist and whether, due to the new Directive adopted by the occupational pension funds in 2016, all funds are obliged to make only responsible, environmentally and socially beneficial investments.

KW - Faculty of Law

KW - Prudent Person

KW - Occupational Pensions Funds

UR - https://journals.aau.dk/index.php/NJCL/article/download/1980/1535

M3 - Journal article

SN - 1459-9686

SP - 28

EP - 54

JO - Nordic Journal of Commercial Law

JF - Nordic Journal of Commercial Law

IS - 1

ER -