The rise of SRI in Holland

In the first of a series of articles examining the growth of SRI across Europe, Jessica McCallin focuses on the Netherlands.

There is no doubt that socially responsible investment (SRI) in Holland, like everywhere in the western world, is growing. Figures from the Dutch Association of Investors for Sustainable Development (VBDO) are indisputable. From NLG (Dutch/Netherlands guilders) 750 million invested in 1987, amounts invested jumped to NLG 10.2 billion in 2000, with the most rapid growth seen in the last few years.

Holland has a long history of ethical investment, going back to 1960 when ASN Bank was launched, offering ethical retail products. The Triodos Bank followed suit in 1980 and now all major Dutch banks and investment houses offer some kind of ethical vehicle encompassing all shapes and sizes of retail financial product.

The biggest single boost to the sector, however, is seen as the government’s 1995 Green Savings and Investment Plan, which works as a double tax incentive to investment according to very strict green investment categories such as wind energy, solar energy and organic farming. The Dutch tend to split the socially responsible investment sector into ‘green’, which are projects that qualify for the government tax breaks, and ‘social or ethical’, which are projects that might not qualify for the tax break but still have a wider social and environmental purpose.

Under the Plan, the government certifies whether a project meets the investment criteria and, if so, it can be financed below the prevailing market rate of interest. Further, investors don’t have to pay any income tax on any profits the project makes: a big bonus when you consider that Dutch income tax is anywhere between 30 and 60 percent.

Gradual extension

The idea was to boost investment in thoroughly green projects, projects that might be pioneering and find it hard to raise affordable capital in the open market. To balance out the financial risk of investment, legislation states that the ‘green intermediaries’, the financial institutions that actually lend money to these projects, can have a maximum of 30 percent of their assets in non-green projects, or projects which don’t meet the Green Savings and Investment Plan criteria. Since its launch, the Plan has been gradually extended. Since 1996 it has included sustainable building projects and since 1998 it has included projects abroad, namely in Eastern Europe, Aruba and the Dutch Antilles.

The Green Savings and Investment Plan’s success can be seen in the fact that, according to the VBDO, in 2000, just five years after its launch, 49 percent of all SRI savings and 45 percent of all SRI investments – over NLG 5 billion in total – met the government’s green criteria. There are now plans to roll out similar tax incentives to investments in social or ethical projects, not just green ones. Discussions at the moment centre on whether to offer tax and interest rate breaks to ‘ethical intermediaries’, financial intermediaries that make loans to banks in the developing world that, in turn, give microcredit loans to their communities. Microcredit has been a growing area in Holland, and banks such as Triodos already offer financial projects with a microcredit component.

The main problem with SRI in Holland is the same as elsewhere: unless it breaks into the institutional investor market it will remain a small, albeit growing, niche retail sector.

Robert Rubinstein of the Holland-based ethical consultancy Brooklyn Bridge says, “Sure the market is growing, but it’s still pathetically small. The big financial institutions all offer some kind of ethical product, but that’s it. Many of them don’t bother to promote or really sell it. They just seem to be offering them for the sake of it. Most big financial houses still have less than one percent of their assets in ethical vehicles, and the biggest market player is still ASN Bank, the oldest, with 35 percent market share. A long process of cultural change lies ahead. At the moment, big financial institutions see SRI as a reputational issue. They need to start seeing it as a strategic investment issue. Until they are convinced, SRI will not develop sufficiently.”

To that end, the Dutch SRI community is involved with educating the financial community. Brooklyn Bridge is looking to launch an SRI academy that will provide in-house training to companies. Meetings, conferences, roundtable discussions and such like have been taking place. The Social Venture Network, now with 150 members, was formed, organising trips, mini-academies, discussion groups and newsletters. In cooperation with the government it also launched the country’s first University Chair of Sustainable Entrepreneurship at the University of Nyenrode in 2000.


Shareholder engagement has been continuing to grow since VBDO first started raising questions about corporate responsibility at Royal Dutch Shell’s 1996 annual shareholder meeting. To date, engagement is being held back by shareholder-unfriendly legislation. Under Dutch law, shareholders cannot table resolutions at annual meetings. They can only vote for or against an agenda set by the board of directors. This may change as the government has recently formed an independent commission to look into shareholder rights – consultation papers have just been distributed to all stakeholders – but, according to the VBDO, it is unlikely to change within three years and therefore remains a hindrance to the amount of progress that can be made through engagement activities.

As such, the Dutch SRI community is taking some encouragement from the fact that large companies and institutional investors seem to be taking the SRI message on board anyway. A Recent report, Money and Morals: The Development of Socially Responsible Investing among Dutch Pension Funds, by the University of Nyenrode, found 62.8 percent of pension fund respondents agreeing that SRI is an important issue and around 60 percent saying they either had, were developing or were thinking of developing an SRI policy.

“Pension fund trustees are always worried about how SRI will affect their fiduciary responsibilities and the level of their reserves, especially at the moment when they have all seen their portfolios plummet with global stock downturns,” says Piet Sprengers, director of the VBDO. “But since we started looking at institutional investors in 2001, the impression is definitely that interest is growing. There is a lot happening. It’s just that at the moment it’s quite small scale and not properly coordinated. I would like to see the pension funds sharing information and research and developing initiatives together.”

Screening approach

To date, pension funds that do have SRI holdings adopt a predominantly negative screening approach. Positive screening and best-in-sector approaches are gaining ground, but the emphasis is still on leaving bad companies out rather than bringing them into the fold.

Similarly, when questioned about what comprises SRI, many focused on human rights and labour issues above environmental ones. This is perhaps because the government’s green savings plan is seen as covering the environmental board, but is nonetheless a little worrying – and SRI activists plan to encourage more environmental concern.

“The pensions report’s findings were encouraging. If we extrapolate from its findings we can safely say that SRI will continue to grow as the pension funds manage huge amounts of money. The real question will be how it grows, what direction it takes. That is very difficult to predict at the moment,” says Wendy Van Den Boogaard, SRI fund manager at ABN AMRO bank in Amsterdam.

Dutch SRI investors are thick skinned. During recent stock market tumbles the number of SRI investors grew and there was no mass sell-off of SRI stocks. Their task now is to make sure the institutional investors adopt their investment philosophy and start making the strategic changes necessary to make SRI a mainstream, rather than niche, approach to stock selection. Unless that happens, SRI has little chance of taking much more than the 1.2 percent of market share it currently controls. The signs, however, point only one way.

Jessica McCallin is a freelance journalist.

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