The climate and biodiversity crisis is presenting the Dutch economy with a major challenge in the area of sustainability. New economic activities will have to be developed, while many existing activities need to be phased out or converted. This will require significant investment and will involve risks that financial institutions and regulators must prepare for. To get through the transition to a sustainable economy with as little damage as possible, it is important that flows of funds from banks, pension funds, insurers and asset managers are redirected more quickly than at present away from non-sustainable activities and towards activities such as sustainable agriculture, circular business and renewable energy infrastructure. Measures such as the pricing or banning of negative sustainability impacts are important here, but are not sufficient on their own. The financial sector will also have to play a major role in the transition to a sustainable economy. In its advisory report the Rli therefore recommends that the Minister of Finance take a number of concrete measures to prompt the financial sector to act more quickly. These measures are in addition to those that the Minister previously announced to the House of Representatives in her Sustainable Finance Policy Agenda of 7 July 2022.
Embed sustainable development in the business model of financial institutions
Make sure banks adjust their calculation models for assessing investment proposals to avoid impeding the transition to a sustainable economy and broaden the scope of reporting on sustainability policies so that this covers more than just CO2 emissions. Ensure, for example, that the impact of economic activities on biodiversity and resource consumption is also reported on.
Give sustainability greater prominence in financial sector supervision
Ensure that De Nederlandsche Bank and the Netherlands Authority for the Financial Markets also monitor the sustainability impact of finance and link the amount of tax that banks pay to their sustainability performance.
Encourage sustainable investments within the new pension system
The overhaul of the pension system can be used as an opportunity to ensure that pension funds can invest more in the Netherlands’ sustainable economy, while maintaining the expected return on their investments.
Create a fully-fledged national investment institution
Combine and strengthen existing institutions and instruments. Invest-NL and parts of the National Growth Fund and Climate Fund could form the basis for a new investment institution in which the government and business community could work together to significantly increase sustainable investment.
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