Pension insurance might be affected!

The European Comission presented a package of measures for a "fair and sustainable economy" on February 23. The package included a Proposed directive about corporate due diligence in the area of sustainability (European supply chain law) and a Communication about a strategy for promoting decent working conditions worldwide. German pension funds are also included in the context of the scope of the proposed directive.

Strategy for promoting decent working conditions

With this communication the EU reaffirms its commitment to seeing decent global working conditions and it also emphasises its international responsibility. Decent working conditions should be promoted in all sectors and policy areas. All workers inside and outside the EU should have access to safe and healthy working conditions.

The focus here is on abolishing child labour and forced labour throughout the world. The Euopean Comession is preparing a legal framework, as announced by President Ursula von der Leyen in her 2021 State of the Union address. The aim is to ensure that any products that were manufactured through the use of forced labour can no longer enter the EU market.

European Supply Chain Act

As early as 2020, the EC announced a draft directive covering corporate due diligence and held a public consultation about "sustainable corporate governance" (a reported by DSV).

The proposed directive aims to create a legal framework for improving environmental protection, human rights and children's rights along the global supply chains. The due diligence obligations of companies should also cover production processes and the working conditions at suppliers outside Europe. Abuses should be identified, traced and prevented from the time they become known. Violations of the corporate duty of care will be punishable by fines or claims for damages.

Inclusion of pension insurance is unclear

The financial undertakings to which the proposed directive refers also include pension institutions within the meaning of EU Regulation No 883/2004 and (EU No 987/2009). Therefore German pension funds will also fall within the scope of the proposed directive.

However, the purpose of this inclusion must be questioned. German pension funds do not act in an entrepreneurial way here. Certainly they are players in the capital market. However, as in all of the EU member states, the financial resource investment options used by the German pension funds are subject to strict legal regulation as well as tight controls.

If German pension funds hold huge buffer assets, then they will act, - as in the case of Sweden, - as funds on the capital market. However, they will have to be listed separately as affected financial entities under the proposed directive. Therefore the need for additional involvement by the German pension funds is not apparent.

Rather, this will lead to uncertainty in how the proposed directive will be interpreted. Therefore there is an urgent need to specify or, better still, to delete the reference to the German pension funds in any further discussions.