Two sides of the story: The Green Deal

In a monthly correspondence, Caspar Snijders and Ruud Hadders - each from their own perspective - highlight a topical issue.

Caspar Snijders

Caspar Snijders
Portfolio Manager Equities


Hi Ruud,

Frans Timmermans made a great fuss at the end of last year about presenting the European Green Deal on behalf of the European Commission: the master plan for turning Europe into a forerunner and booster for sustainability. This would not be done with a pioneering CO2 tax or "green" fiscal measures, but rather with around about €1 billion in cash. This amount is to be used for investment in risky businesses working in the field of sustainability. The notion behind this is that the risk is removed from the investments with these public funds, thus mobilising the private sector for further investment. So is this the way to change course radically? I doubt it.

Let me make it clear that I certainly believe we have to do address climate issues, but the Green Deal seems to amount to money-lending in a saturated market. Private equity players are going to be awash with cash, with €2 trillion at the end of 2018, with everyone in the market on the lookout for returns while large sections of the bond market have negative interest rates. What we can also see is that "green" equities have done exceptionally well in recent times, so you might say there's enough demand for sustainability.

We've even seen lots of investors jumping on the bandwagon of the riskier investments in smaller listed "green" companies recently. This is why I don't think it's necessary for specially devised investment funds, like EU Invest and Invest-NL, to have to facilitate these investments and remove risk in the private sector. It also seems that there's more money heading into a saturated market, so that it's becoming even cheaper to raise capital. This could be overkill in a market where capital is already virtually free.

Green Deal

"I certainly believe we have to address climate issues, but the Green Deal seems to amount to money-lending in a saturated market."

I also wonder whether the Green Deal is really aimed at private citizens. Support is fairly important when it comes to the climate. The cost of insulating homes is a fine example: making a home climate-neutral costs between €30,000 and €60,000. The European Union could, for instance, award grants for this. The total insulation costs? The Dutch Ecconomic Institute for Construction (Economisch Instituut voor de Bouw - EIB) has said that this might cost up to €235 billion for the Netherlands alone. What you'll have in any case is good isolated homes, while the effects of investing in unproven new technologies cannot be predicted with any accuracy in advance (so achieving targets will be just as uncertain!).

So, I ask you: can you agree to the Green Deal? Or do you have some reservations about it as well?

Regards, Caspar


Ruud Hadders
Responsible Investment Officer


Hi Caspar,

It was clear from the outset that significant new investment would be needed to achieve the ambitions in the Paris Agreement. Last year, there was a heated debate in the Dutch Parliament about how large the investment gap would be for the Netherlands to end up climate-neutral, and who would pay the price for this. It's important that we should look together – both public and private sectors – for ways to bridge this investment gap. It's even more important for us to realise that innovation is crucial for reducing both the level of the investment required and the time we need to achieve results.

"Innovation is a topic that permeates the Paris Agreement, because new applications will be needed in every sector to achieve the targets and bring about the transition to a sustainable society."


Essentially, a climate-neutral economy will need technologies that simply don't exist right now. But these technologies will have to sustain our economy in thirty years' time. This means that innovation is a topic that permeates the Paris Agreement, because new applications will be needed in every sector to achieve the targets and bring about the transition to a sustainable society. Start-ups help out with this by developing new technologies, for instance to increase the efficiency of solar panels or make it cheaper to maintain wind turbines. These are ideas that can be applied around the world, but the entrepreneurs run into a brick wall for their financing options after making a successful start. Invest-NL wants to make an active contribution here by investing €1.7 billion of government funds in innovative Dutch start-ups.

Windmolens en zonnepanelen

I think you're right in saying that the government adds zero value as an investor in innovations that can already be financed by the market. This is why Invest-NL must stick close to its assigned task: broadening the venture capital market for innovations that don't yet meet traditional capital requirements (like liquidity and scale). To achieve the maximum effect, it's crucial for Invest-NL to confine itself to the role of a catalyst for attracting private finance. It's essential for it to assess whether a business will be able to raise private funding independently in the long term. Wouter Bos (CEO of Invest-NL) recently said, for instance, that the financing of IT start-ups was highly unlikely, the reason being that they can already be readily financed in the market. However, this raises the question of whether this isn't also the case for technologies that will enable an energy transition, given the flows you describe. Would the impact not be much greater if Invest-NL were to focus on the next sustainable revolution? The circular economy, for instance. That sector is at the point where energy transition was ten years ago as far as investment is concerned. Invest-NL can also help to speed up that transition with investments that not only lead to savings for citizens that isolates their houses, but also make important contributions to the economic growth of the Netherlands!!

Regards, Ruud