Matkakertomukset 2024
Vuoden 2024 matkakertomukset.
Abstract
The Paris climate agreement has led to a global commitment to sustainability. While the primary focus has been on climate change mitigation, there is now pressure for other environmental, social and governance sustainability considerations, known as ESG. Generally speaking, the term sustainable finance is used when referring to financial market participants. At the European Union (EU) level, various regulations and directives in this area impose or guide the national legislation.
As of 2019, regulations related to sustainable finance have made it mandatory for financial market participants in particular to provide their clients with information related to sustainable finance. Of course, even before this, large and public interest entities (PIE) have been required toreport on these issues in their non-financial reporting. The activities of current pension insurance companies are not covered by the regulation, however.
In principle, EU legislation does not apply to the Finnish occupational pension scheme and in this respect the sustainable funding regulation does not extend to it. This paper examines a situation in which sustainable funding regulation would nevertheless become part of our pension system, and in particular of our occupational pension insurance companies.
Of course, pension insurance companies are already indirectly taking into account sustainable finance in their activities. Indeed, under existing national legislation, pension insurance companies must ensure the long-term profitability and security of their investments. It should be noted, however, that occupational pension insurance is part of social security and, in principle, is not linked to any other activity. This is also reflected in the current premiums paid to occupational pension insurance companies: the premiums for the funded part of occupational pension insurance, i.e. the future-proof part, are based on the average mortality and disability rates of the insured. The sustainability of the pension insurance companies is therefore influenced by the development of the premiums in line with the mortality and disability assumptions, as well as by the good investment returns.
This paper considers the possibility of including sustainable financing legislation for financial market participants as part of the legislation that would be binding on pension companies. If this were the case, actuaries of occupational pension companies would have to take into account the changes of the environment in which they operate. As a tool for this, this paper presents the Bayesian method. The Bayesian method is a stochastic method and is based on conditional probability. This work briefly introduces the Bayesian model, how to facilitate calculations and how to estimate the error of the output of the model. It also presents two studies that have successfully used Bayesian methods to estimate mortality and disability rates and suggests further use of these research methods if sustainable financing issues become more widely integrated into the field of occupational pensions insurance.
