Finance in transition

The financial sector will have an important role to play in the transition to a sustainable economy. This will not happen by itself, however. Government direction is needed to ensure the financial sector actually prepares for and contributes more quickly to the transition.
illustration of a one euro rolling through the grass

Background and request for advice

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 will need to be phased out or converted. This will require significant investment. The challenge of becoming more sustainable will also involve risks that financial institutions and regulators must prepare for. The financial sector therefore has an active role to play in the transition to a sustainable economy.

The central question addressed in the advisory report ‘Finance in transition: Towards an active role for the financial sector in a sustainable economy’ is:

‘What options does the government have to steer financial institutions in such a way that they anticipate a sustainable economy and contribute to the transition towards it?’.


At present, there is far too little sustainable investment in the Netherlands. Although a great deal of money was available on the financial markets over the past decade, very little of it found its way into sustainable economic activities. The supply of (high-)risk capital for innovations and the supply of long-term finance were inadequate. Given the current macroeconomic environment, this situation is at risk of deteriorating further. There is a mismatch between the supply of and demand for sustainable finance and the Rli fears this gap is widening.

Furthermore, banks, pension funds, insurers and asset managers will need to redirect their financial flows to ensure they themselves get through the transition with as little damage as possible. It is important to escape the downward spiral and phase out funding for non-sustainable activities, while increasing financial flows channelled towards sustainable activities, such as circular business, renewable energy infrastructure and sustainable agriculture.

Measures such as the pricing or banning of negative sustainability impacts are important, but are not sufficient on their own to allow the financial sector to fulfil its role in the transition to a sustainable economy. In its advisory report the Rli therefore recommends that the government take targeted measures.

Although the financial sector has undertaken some initial steps in recent years, we can still see four barriers to progress within the sector:

  • The vast majority of parties remain focused on short-term returns.
  • Rules and supervision are not sufficiently geared towards sustainability.
  • Government bonds are overrepresented in pension fund portfolios, which means opportunities to invest in the transition to a sustainable economy are being passed up.
  • Government funding and support for sustainable projects are fragmented.

The Rli considers it unlikely that the financial sector will be able to take the necessary steps independently. It believes that additional government policies will be needed to achieve these steps: not only stimulating and facilitating policies, but also policies that force the sector to act. In other words, a carrot-and-stick approach. Broadly speaking, the Council’s advice is therefore as follows:

  • 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 rules and 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.

Date of publication and public meeting

The advisory report was handed over to the Minister of Finance, Sigrid Kaag, on 22 December 2022. A public meeting to discuss the report will follow on 14 February 2023.

More information

For more information about the advisory report or the meeting, please contact the project leader, Joris Stok:, tel. +31 (0)6 1324 6502.