Netherlands#3.9#4.9#5.0
RESULTS AND SCORES

Netherlands as of May 2019

Enabling Environment

The enabling environment for a Paris-compliant financial system is robust in the Netherlands. The Dutch government offers a wide range of green financial support instruments mostly in the form of grants and tax reliefs. These instruments should primarily increase the deployment of renewable energy and energy efficiency. In addition, the Netherlands is about to issue a green government bond this year. The DNB shows a strong commitment to greening the financial industry in the Netherlands, which it has manifested by setting up the Sustainable Finance Platform, co-initiating and chairing the international Network on Greening the Financial System (NGFS) and becoming the first central bank to sign the UN Principles on Responsible Investment (PRI). The state-supported green investment vehicle Invest-NL is expected to start financing green projects in the Netherlands later this year.

The explicit commitment of the financial sector to the Climate Agreement has to materialize in the coming years. Some state-owned entities and municipalities have already developed their own climate related criteria and divestment goals, which can grow into a nation-wide strategy. The further development of sustainable public procurement will help the Netherlands to make sure that public spending drives the Dutch Paris commitments.

Supervision, Risk Management & System Stability

The supervisory authorities in the Netherlands take on a position as catalysers for integrating climate related risks in the Dutch financial industry. De Nederlandsche Bank (DNB), the Dutch Authority for the Financial Market (AFM) and the Ministry of Finance all state their support for climate finance and outline concrete actions to accelerate its usage in their strategic plans. This is reflected in the advanced integration of climate related risks in stress testing and the supervisory review process in the Dutch supervisory system. Banks are asked to do a self-assessment on the impact of climate change on their portfolio.

Potential next steps for a deeper integration of climate finance in the Dutch supervisory system are the structural inclusion of climate related factors in stress testing at financial institutions and an industry wide implementation of climate risks in the supervisory review. In 2019, asset managers are expected to have integrated climate risks in their governance, strategy, risk measurement and disclosure.

Transparency and Disclosure

On transparency, the Dutch efforts to greening the financial system show distinct progress. The Dutch Corporate Governance Code requires (financial) institutions to engage in long-term value creation with their business activities. Under a comply-or-explain approach, this should imply a further push for financial market actors to support green and sustainable investments. PCAF is eveloping a methodology for measuring the carbon footprint of investments and loans. This private initiative has progressed substantially in developing a granular methodology and has the potential for international rollout. The Dutch government has set up a mechanism in the regeling groenprojecten, which allows banks to establish green funds under a comprehensive catalogue of green activities. This allows for investment in greening the Dutch economy.

Green financial market regulation in the Netherlands could improve on requirements for disclosure on risk management and climate metrics and targets. Furthermore, Dutch accounting regulation could increase its focus on accounting for physical and transitional climate risks. Finally, consumers could have more transparency on climate exposure of their PRIIP or retail fund investments.

  • ENABLING ENVIRONMENT

    The enabling environment for a Paris-compliant financial system is robust in the Netherlands. The Dutch government offers a wide range of green financial support instruments mostly in the form of grants and tax reliefs. These instruments should primarily increase the deployment of renewable energy and energy efficiency. In addition, the Netherlands is about to issue a green government bond this year. The DNB shows a strong commitment to greening the financial industry in the Netherlands, which it has manifested by setting up the Sustainable Finance Platform, co-initiating and chairing the international Network on Greening the Financial System (NGFS) and becoming the first central bank to sign the UN Principles on Responsible Investment (PRI). The state-supported green investment vehicle Invest-NL is expected to start financing green projects in the Netherlands later this year.
    The explicit commitment of the financial sector to the Climate Agreement has to materialize in the coming years. Some state-owned entities and municipalities have already developed their own climate related criteria and divestment goals, which can grow into a nation-wide strategy. The further development of sustainable public procurement will help the Netherlands to make sure that public spending drives the Dutch Paris commitments.

  • SUPERVISION, RISK MANAGEMENT AND SYSTEM STABILITY

    The supervisory authorities in the Netherlands take on a position as catalysers for integrating climate related risks in the Dutch financial industry. De Nederlandsche Bank (DNB), the Dutch Authority for the Financial Market (AFM) and the Ministry of Finance all state their support for climate finance and outline concrete actions to accelerate its usage in their strategic plans. This is reflected in the advanced integration of climate related risks in stress testing and the supervisory review process in the Dutch supervisory system. Banks are asked to do a self-assessment on the impact of climate change on their portfolio.
    Potential next steps for a deeper integration of climate finance in the Dutch supervisory system are the structural inclusion of climate related factors in stress testing at financial institutions and an industry wide implementation of climate risks in the supervisory review. In 2019, asset managers are expected to have integrated climate risks in their governance, strategy, risk measurement and disclosure.

  • TRANSPARENCY AND DISCLOSURE

    On transparency, the Dutch efforts to greening the financial system show distinct progress. The Dutch Corporate Governance Code requires (financial) institutions to engage in long-term value creation with their business activities. Under a comply-or-explain approach, this should imply a further push for financial market actors to support green and sustainable investments. PCAF is developing a methodology for measuring the carbon footprint of investments and loans. This private initiative has progressed substantially in developing a granular methodology and has the potential for international rollout. The Dutch government has set up a mechanism in the regeling groenprojecten, which allows banks to establish green funds under a comprehensive catalogue of green activities. This allows for investment in greening the Dutch economy.
    Green financial market regulation in the Netherlands could improve on requirements for disclosure on risk management and climate metrics and targets. Furthermore, Dutch accounting regulation could increase its focus on accounting for physical and transitional climate risks. Finally, consumers could have more transparency on climate exposure of their PRIIP or retail fund investments.

Transparency and Disclosure

Common disclosure framework32%
32%
Investor's fiduciary duties55%
55%
Consumer transparency30%
30%

Supervision, Risk Management & System Stability

Supervisory authority positioning80%
80%
Regulation/Supervision of banks48%
48%
Regulation /Supervision of insurance companies34%
34%
Regulation /Supervision of pension funds45%
45%
Regulation /Supervision of asset management and investment funds30%
30%

Enabling Environment

Established and maintained common taxonomy40%
40%
Supporting green finance with public incentives65%
65%
2-Degree consistency of public sector acting52%
52%
Public capacity building and awareness on green finance30%
30%
Green public-private initiatives of financial centers60%
60%

The Netherlands achieve relatively good results on all three dimensions of the 3fP-Tracker with a particular strength on the enabling environment closely followed by strong system stability. However, as with all jurisdictions considered, ample room for improvement exists in Dutch financial market regulation to become fully fit for Paris. Hence, the Dutch transition to a low-carbon economy could receive stronger support by Dutch financial markets.

In the Netherlands, a rather unique and potentially highly effective interplay between public and private actors is in place. Green initiatives reinforce this interplay and allow for guidance and knowledge sharing. Initiatives include the Dutch Corporate Governance Code, the Platform for Sustainable Finance and the iMVO-covenants initiated by the Ministry of Foreign Affairs. Empowered through such initiatives, Dutch private financial institutions drive progress on climate finance through their commitment to the Dutch Climate Act and the Platform for Carbon Accounting Financials (PCAF).

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