The European Insurance and Occupational Pensions Authority (EIOPA) will analyse the exposure of European pension funds’ to “ESG” factors in next year’s stress test of the sector, a spokeswoman has confirmed. She added that the analysis will involve a qualitative assessment of how occupational pension funds incorporate environmental, social and corporate governance (ESG) factors into their processes and assess the exposures of their investment portfolio. According to EIOPA, incorporating ESG factors will ensure financial stability “thereby making financial markets activity more consistent with sustainable objectives”.
The importance of ESG has also been noted by Amundi, Europe’s largest investment manager, as it has evidence that ESG ensures higher returns. According to its research, investing along ESG lines became a source of outperformance between 2014 and 2017 in Europe and North America. The increasing demand for ESG is set to continue, due to the intrinsic added value of ESG screening.