Pensions benefit from stronger EU capital market

In A capital markets union for people and businesses, the European Commission presents sixteen actions for a stronger capital market union that should make it easier for European savers, investors and businesses to invest and raise funds across national borders all over Europe.

The Commission wants to accelerate the digital and sustainable recovery of the economy by making private financing more accessible to European businesses. In addition, the European Union has to become a more secure place for saving and investing, and national capital markets need to be integrated further.

With the action plan, the Commission roughly adopts the advice of a High-Level Forum, in which PGGM Chief Investment Management, Eloy Lindeijer, served on behalf of the Dutch pension sector. In a previous blog, Eloy Lindeijer reacted to the final report of this Forum.

Relevance capital market union for PGGM
The relevance of a well-functioning European internal capital market is illustrated by the fact that about half of the 240 billion euros managed by PGGM for PFZW and other parties is invested within the EU. Therefore, it is crucial that a stable and secure market is created with certainty about the long-term policy on further development of the capital market union.

The European Commission closely links the action plan to the European Green Deal. An example is the intention of setting up a central database with sustainability data on companies for investors to use when making their capital more sustainable.

The European Commission also emphasises the importance of risk-bearing capital for European companies. For companies, it is still favourable to finance themselves through (bank) loans. The European Commission wants to make equity more attractive for companies and investors by removing transnational barriers.

Furthermore, the Commission wants to improve the securitisation market to make capital more available to small and medium-sized European businesses. PGGM has much expertise in this investment category, with respect to both the execution and the contribution to standards for a healthy and safe securitisation market.

The European Commission has embraced three specific recommendations of the High-Level Forum to enhance the adequacy of pensions throughout the EU. The Federation of Dutch Pension Funds has given its opinion on this in a reaction.

Active attitude looks promising
The choice of PGGM to contribute actively to the capital market union dossier is motivated by the fact that the Dutch pension sector has a prominent place in the European financial landscape. This calls for an open and constructive attitude toward the policymakers in Brussels.

PGGM is involved in several initiatives for strengthening the European capital market union, while we share our ideas with the regulators in the EU. Safeguarding the interest of pension fund participants is always our basic principle. As the end users in the financial system, they have to receive the benefits a capital market union can provide.

We provide input to European policy makers for regulating Balance Sheet Synthetic Securitisation, to enable pension funds to invest responsibly in loan portfolios with sufficient risk awareness. We collaborate with various European pension parties in an initiative to set up a European Pension Register (European Tracking Service), allowing employees with cross-border employment contracts an easy way to inspect their entire pension accrual. PGGM is also active in the EU Sustainable Finance
Platform, which will be taking new initiatives for investors and companies to promote sustainability.