San Lie: The new government will put the ball in our court

May 21, 2024

^{This column was originally written in Dutch. This is an English machine translation.}

By San Lie, Director of ASN Impact Investors

With its broad agreement, the incoming government is creating a new reality for the climate challenges facing the world. The ball is now in the court of the consumer and the business community. Fortunately, enough investors have a horizon that extends beyond 4 years.

Last week, the PVV, VVD, NSC and BBB factions reached an outline agreement for their 'program cabinet'. The good news for the climate: climate policy did not go 'through the shredder', as Geert Wilders had promised. The Netherlands will adhere to climate agreements. But no more than that: according to the European climate law, we must reduce net greenhouse gas emissions by at least 55% by 2030, the outgoing cabinet had set the bar at 60%.

I wonder how the next government will achieve that target when I see the trio of interventions that affect existing climate policy. The €20 billion nitrogen fund will be scrapped, anyone who replaces their central heating boiler will no longer be required to purchase at least a hybrid heat pump, the arrival of zero-emission zones will be postponed if possible, and we will soon be able to drive 130 km again.

One measure is more drastic than the other, but the message is clear: while the throttle can be stepped down again on the highways, the cabinet has opted for a standstill on the climate front. It is also literally stated in the agreement: the government is committed to climate adaptation instead of limiting the causes of the climate crisis as much as possible. The negotiators leave that mammoth task to others. And that's you and me.

Many consumers are already doing their best to make their (small) contribution: by consuming consciously or sometimes by consuming less themselves, separating their waste, using solar panels and flying less. But the frantic sustainable efforts that you and I make every day will - unfortunately - never get us to the sustainable and fair society of the future quickly enough.

There is an important role for the business community, which must also take real responsibility. Whether there is a right, left or center cabinet. CEOs' horizons generally extend beyond four years. And don't forget that you and I are employees of those companies, or of other organizations that have the ability to really make a difference.

The ball is therefore largely in the court of companies and investors. How worrying is it that climate ambitions seem to be fading there too? It has already been dubbed 'New Realism': Shell and Unilever, which last month reduced their targets in the field of climate and (at Unilever) also biodiversity.

Of course, their shareholders do not all weigh sustainability equally heavily in their strategy. Some are focused on profit maximization, and in the US a culture war has even erupted against ESG investing. Schools in the state of Texas want to cancel their billion-dollar contract with BlackRock because the asset manager would boycott fossil energy producers.

In the meantime, I take courage from the largest investors in my own country: the pension funds, who are taking their role to shape a sustainable, fair future for their participants. The five largest even sent a letter to the informants in which they declared their willingness to invest 'billions of euros' in the energy transition, especially in the expansion of heating and electricity networks.

These are the actions that really make a difference in the longer term on the way to the necessary transitions. They do not come from politicians and they are not the result of election promises. They are the result of investors with vision.

San Lie is director of ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.

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