Considerations on COM(2020)321 - Decision 2003/77/EC laying down multiannual financial guidelines for managing the assets of the ECSC in liquidation and the Assets of the Research Fund for Coal and Steel - Main contents
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| dossier | COM(2020)321 - Decision 2003/77/EC laying down multiannual financial guidelines for managing the assets of the ECSC in liquidation and the ... |
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| document | COM(2020)321  |
| date | July 19, 2021 |
| (2) | Pursuant to Council Decision 2003/76/EC (2), the Commission is to manage the assets of the European Coal and Steel Community (ECSC) in liquidation and, on completion of the liquidation, the assets of the Research Fund for Coal and Steel in such a manner as to ensure a long-term return. Council Decision 2003/77/EC (3) lays down the multiannual financial guidelines for managing those assets. Pursuant to Article 2 of Decision 2003/77/EC, the Commission is to review or supplement those guidelines and reassess their operation and effectiveness. |
| (3) | In order to provide meaningful support for worthwhile collaborative research projects that have the critical mass and Union added value for improving the sustainability, competitiveness, health, safety and working conditions in the sectors related to the coal and steel industry, there is a need to ensure that payments related to the annual allocation as defined and established in Article 2 of Decision 2003/76/EC until the year 2027 are provided to fund such projects. Such payments should be financed by the net revenue from the investments and by the revenues generated by selling part of the assets up to the annual amount set out by the designated service of the Commission based on Decision 2003/76/EC and Council Decision 2008/376/EC (4). |
| (4) | The experience gained over the most recent five-year period of implementation of the financial guidelines (2012–2017) and developments in financial market conditions show a need to adapt those guidelines. |
| (5) | The assets remaining after the withdrawals until 2027 related to the annual allocation established by Decision 2003/76/EC should be managed on the basis of a longer-term investment horizon, enabling further diversification. |
| (6) | On average, investing a large part of the assets over the longer term is consistent with higher expected returns, keeping in mind the possibility of increased fluctuations over the short term. Notwithstanding this, the investments should aim to ensure a sufficient amount of liquid assets for the annual payments requested by the designated service of the Commission based on Decisions 2003/76/EC and 2008/376/EC. |
| (7) | The financial guidelines should enable a more flexible approach as regards the technical aspects of implementation and should determine appropriate investment instruments to achieve the investment objectives. |
| (8) | Each asset class should not be considered alone, but by the role it plays in a diversified portfolio. Diversification between asset classes historically leads to increased returns for the same level of risk. The correlation between assets is important in making decisions related to the allocation of assets within the context of overall investment risk and return. |
| (9) | The assets of the ECSC in liquidation and, on completion of the liquidation, the assets of the Research Fund for Coal and Steel should be managed on the basis of an investment strategy expressed in the form of a strategic asset allocation and a strategic benchmark, reflecting the investment objectives and the risk tolerance of the assets. The benchmark provides long-term investment guidance to the portfolio managers, in the form of allocations to different asset classes. |
| (10) | The financial guidelines should allow investments in highly liquid bonds denominated in US dollars issued by sovereigns, supranationals, sub-sovereigns and government agencies in order to enhance diversification, while hedging – at an appropriate extent – the risks of losses due to the fluctuation of the foreign exchange rate. The Commission should be able to decide, subject to the agreement of the accounting officer of the Commission, on investments in other assets denominated in currencies of other advanced economies or other Member States. Such decisions should be based on a fully substantiated demonstration of the advantages of the investment in question for the performance of the assets. The financial guidelines should broaden the scope of eligible investments to offer the possibility of diversified exposure to broad market indices, certain geographic sectors and particular asset classes. |
| (11) | The financial guidelines should allow other financial instruments such as futures, forwards and swaps in order to manage risks and exposures such as interest rate and currency risk. |
| (12) | Environmental, social and governance (ESG) practices of an investment are becoming more and more important and should be taken into account for investment decisions. Decision 2003/77/EC should be amended so as to introduce ESG practices by including a positive screening, favouring the integration of ESG considerations in the selection of investments, and a negative screening, containing a list of activities excluded for treasury investment purposes on ethical or moral grounds. |
| (13) | The annual report from the Commission to the Member States on management operations carried out under the financial guidelines should provide information on the allocation to the different asset classes. The annual report should also explain any major change in the strategic asset allocation. |
| (14) | Decision 2003/77/EC should therefore be amended accordingly. |
| (15) | Given the structural linkage with Decision 2003/76/EC, this amendment should apply only from the date of application of Decision (EU) 2021/1208 (5), |