How the Dutch central bank is putting its weight behind sustainable finance

Dutch central bank DNB plans to host a meeting of its Platform for Sustainable Finance in April – following a successful start last year – including the Dutch banking association presenting its recently signed covenant on human rights.

The Platform for Sustainable Finance, chaired by DNB, is a new initiative in which different stakeholders in the Dutch financial sector work together on various topics related to climate change and sustainability.

It comes as 18 Dutch financial institutions, collectively managing over €2.8trn in assets, have presented a report to their government and central bank outlining an action plan for investing along the themes from the Sustainable Development Goals (RI coverage).

Speaking to RI about the work, Maarten Vleeschhouwer, Deputy Programme lead on the DNB’s climate work and secretary of the DNB’s Platform for Sustainable Finance, said the initiative sprung from a meeting held last November with the financial sector spearheaded by the UNEP Financial Inquiry and the Dutch Sustainable Finance Lab in the run up to COP21.

“What we noticed back then, was that while a lot is happening, banks didn’t always know what pension funds were doing, and insurance companies did not always know what banks were doing, and so on” he explains.

He continues that as a result DNB decided to spearhead a “cross-sectorial” approach to the topic of sustainability and climate change “to develop and discover what were missing elements and what to could be done about them”.

Vleeschhouwer said the platform includes nine members – DNB, the Financial Market Authority; the Dutch Ministry of Finance; the Dutch Ministry of Infrastructure and the Environment, and NGO Sustainable Finance Lab. It also includes four financial industry associations: the Dutch Pension Federation, the Association of Insurers, the Dutch Society of Banks and the Dutch Asset and Fund Management Association.

It plans to meet twice a year – last year it had its first meeting in March, the second was in December.

At this event, the Dutch banking sector presented its recently signed covenant on human rights with its government.

It came on the tails of Lilianne Ploumen, Minister for Foreign Trade and Development Cooperation, Netherlands calling on the Dutch pension sector to follow suit at the Global Impact Investor Network Forum 2016.Speaking to RI, Herman Mulder, former director-general at ABN AMRO and former chair of the Global Reporting Initiative, told RI that there would be no difficulty for the Dutch government to reach an agreement with Dutch pension funds APG, PGGM or MN, but he said the other 50% in the pension sector were initially more cautious. “They do their own thing with limited accountability he said. The other 50% are slow and the appeal from Minister Ploumen was to them.”

In 2017, the Platform for Sustainable Finance’s first meeting will be held in April, and the second in October/November 2017.

While individual financial institutions will be represented by their relevant association on the Platform, they are able to set up so-called working groups that will feed into its work.

Vleeschhouwer said any Dutch financial institution could start a working group, providing they are sponsored by a board member and present their findings to the Platform. Each working group sets up their own mandate, timelines and deliverables.

He said there were currently five working groups. There’s a working group on measuring the impact of financial assets on the Sustainable Development Goals, on the circular economy, on sustainability and executive education, and one on climate risks, all sponsored by different financial institutions. Vleeschhouwer also said DNB itself was leading a working group on potential regulatory or supervisory barriers to sustainable finance.

Vleeschhouwer also stressed that its role with the Platform for Sustainable Finance was not as a supervisor, but as a facilitator and catalyzer, “when we invite people they tend to show up,” he said.

“By finding the platform it shows we take the topic seriously,” he said, adding that it had been in touch with other central banks on the issue.

On DNB’s supervisory work on climate change and sustainability, Vleeschhouwer said it had done two key things last year. The first was a paper on the carbon bubble, including a survey of institutions it oversees to find evidence of a ‘carbon bubble’, and the second was a paper on sustainable investing by Dutch pension funds.

He said the carbon bubble analysis found that collectively Dutch financial institutions had significant exposures to carbon intensive sector. For pension funds this amounts to around 10% of their balance sheet.

He also said the regulator was exploring a risk assessment and risk management tools, such as scenario analysis, to clarify how climate risks affects the financial sector.