Signing the Climate Commitment was a significant step forward for the financial sector in 2019, but it cannot stop there if we want to contribute to substantial change in our world. Under the theme “Environmental, Social, and Governance (ESG): Relief or Obligation?”, Turner FD invited three speakers: Rens van Tilburg, director of the Sustainable Finance Lab; Piet Sprengers, sustainability manager at ASN Bank; and Sandra Schoonhoven, Lead Climate Risk Initiative at ING. Each of them, from their own unique perspective, inspires our clients to take further action in this area.

“The Marker Wadden project came about by thinking differently, but also by collaborating with unexpected partners.” When Roel Posthoorn, the initiator and project director of the Marker Wadden, takes the floor, the line of thinking is clear: thinking differently, letting go of the old and familiar—the energy transition demands a lot, especially from the financial sector. Drawing on its own expertise, Turner FD is keenly aware of the importance of the associated ESG criteria and looks forward to exploring the opportunities this presents together with the invited guests. In the hold of the stately three-masted schooner Willem Barentsz—built in 1931 as a cargo ship that sailed the Baltic Sea, among other places—leading figures from the financial sector are discussing how the sector will contribute to the energy transition.

Rens van Tilburg: “It’s no longer business as usual”
As director of the Sustainable Finance Lab (SLB), which was founded 12 years ago by Herman Wijffels, Rens van Tilburg aims to bridge the gap between academia and decision-makers. With the SLB, he wants above all to look ahead to the energy transition and initiate the conversation.

“Does the financial sector really matter? That’s a crucial question today,” Van Tilburg begins. Traditionally, the prevailing view was that it did not. His goal is to “share a few thoughts with the audience, without offering any clear-cut answers.” “I’m not a politician or an NGO; I don’t know anything about sustainability,” he was often told by the sector in the past. But that has changed significantly in recent years. “It’s the place where decisions are made about who does or doesn’t get the money to make their dream a reality,” he explains. “So you are, in fact, steering the direction the world is heading.”

In this context, he refers to an in-depth study by economist Carlota Perez. She discovered that whenever a major new technology emerges, a certain pattern emerges. “The financial sector plays a crucial role in this. A new technology emerges, but existing companies have no interest in using it. They’re making plenty of money with the existing technology. But then it’s precisely the financial sector that recognizes that this new technology offers new opportunities.”

Van Tilburg believes the sector can take the lead now as well. “One thing we know for sure: the world isn’t going to stay the way it is. Either something drastic will change and we’ll face physical risks, or—let’s hope—it will begin the transition. But if you invest in the wrong direction, you’re going to lose a lot of money. There’s no such thing as business as usual. You can’t keep doing things the way you’ve been doing them. You have to think about how to do things differently.”

And that’s also what the legislature is calling for, he emphasizes. The CSRD (Corporate Sustainability Reporting Directive) and SFDR (Sustainable Finance Disclosure Regulation)—these are the regulations coming from Europe that I know many of you are already dreading. My prediction is: you haven’t seen anything yet. There’s much more on the way from Europe.” In this context, he points out the great importance of double materiality: examining sustainability issues from two perspectives under the CSRD. “How will these transitions affect me as a bank or insurer? That’s when you see the conversation shifting. How will your actions ultimately impact those transitions—and, by extension, systemic risk? That’s something regulators are going to be looking at more and more.”

Piet Sprengers: “Choices, choices, choices”
As a “sustainability advocate” at ASN Bank, Piet Sprengers is committed to ensuring that money has a positive impact on sustainability. As far as he’s concerned, the focus of sustainability efforts should be not on feasibility, but on what is necessary.

“The Marker Wadden is the metaphor for this day,” argues Piet Sprengers. As a biologist by training, he observes that with the construction of the Afsluitdijk, we once “destroyed a gigantic ecosystem, but that thanks to the creation of the Marker Wadden, we have at least made amends in some way.” That restoration of nature has everything to do with values and principles. In this context, he points to the 1987 report *A Common Future* by Gro Harlem Brundtland, which first introduced the concept of sustainability as we use it today. “Brundtland’s definition is: ‘It’s fine to ensure your own prosperity, but that must not come at the expense of others’ prosperity.’”

Because this is normative, Sprenger argues, it is not self-evident. “It’s a choice that’s been made. Sustainability is a definition of prosperity. Every form of prosperity we create comes with a negative impact. The fact that we’re sitting here on this boat—with pen and paper, sandwiches—all of that has a negative impact on the biosphere. The crux of the matter is: can nature bear that negative impact? Is it flexible enough to absorb it? We know that nature can indeed absorb that negative impact, but only within certain limits: the planetary boundaries.”

“It would therefore be great if we knew exactly when all economic activities fall within those limits,” says Sprengers. “That’s the challenge: to use methods to measure and calculate whether we, as financial institutions—with all the activities we finance—are staying within those limits.” He believes the financial sector has a major role to play in achieving this. “That sector holds the keys to how we could structure our society. I would like to see us—as banks, pension funds, and insurers—make those choices.” In my view, it’s first and foremost about making choices we’re not making right now. We’re profiting from things we know are bad for that normative framework. We really need to move away from that.”

To operate within that normative framework, we will need to set objectives. The question is whether we should aim for achievable or necessary objectives, Sprengers notes. “We really can’t say with certainty right now that we’ll actually achieve an objective we set for 2040 or 2050. But that’s not the point! Is it about achieving the objectives that are necessary to reach that normative framework of sustainable development, or is it about achieving objectives that are attainable? As in: we tried everything. The world has come to an end, but at least we achieved our attainable objectives.”

As far as he’s concerned, it’s not a dilemma at all—a term he doesn’t understand anyway. “A dilemma is nothing more than a choice that hasn’t been made. It remains a dilemma as long as you cling to two alternatives. I hear that word far too often. It illustrates that we aren’t making the choices. Choices, choices, choices—that will be the mantra of the future. And adapt, adapt, adapt. Because nature is getting tired of constantly adapting to us. It’s not going to do that, so we’ll have to adapt to nature. And to do that, we’ll have to make choices.”

Sandra Schoonhoven: “Enlightenment Through Obligation”
As head of sustainability and lead of the climate risk initiative, Sandra Schoonhoven works strategically at ING to help both employees and customers increase the impact of sustainability.

“Our theme is ‘Enlightenment or Obligation,’ but I see it differently,” says Sandra Schoonhoven, who, as the final speaker, wants to make the story “more relatable and pragmatic.” “I actually think it’s enlightenment through obligation. That the obligation imposed on the financial sector—but really on the whole world—will truly pave the way for that next step: enlightenment.” “But we still have to get through a crisis, one that is partly caused by that obligation,” she warns. “Once we’ve done that, we’ll understand much better what we need to do and how we can get there. I’m convinced that we’ll end up in a better world—both ecologically and socially.”

That obligation may be enshrined in law, which means everyone will be affected by ESG. “But also the transition itself—what you need to do to achieve it. How you can go from a ‘G’-rated home to an ‘A’-rated home. Or the carbon tax. But also the physical risks, such as the flooding in Limburg that we experienced firsthand two years ago. Those will have an increasingly significant impact on our lives.” Legislation, the transition itself, and physical risks—according to Schoonhoven, these are three elements that banks are already grappling with on a large scale.

A robust model for looking into the future and predicting what will happen to your risk profile does not yet exist, she explains. “That requires a massive effort on the part of the customers you work with as a bank. Because we don’t have that data, but the customers do. CSRD, which many companies must comply with, has quite a few criteria. The obligation under that framework is the transition plan. It’s not just the banks that have to do this; we depend on our clients’ transition plans. One of the most important criteria we’ll include in those plans is: are you at risk or not?

Nevertheless, ING has decided to start with a model based on available data, some of which was purchased. “In every sector we operate in, we’ve been looking at what we can find and how they’re exposed to transition and physical risks. We’ve developed a model based on that with 27 different risk drivers. Consider a physical risk like water scarcity, for example—that’s going to hit us very hard in the Netherlands.” The result is a massive heat map that shows where high- and medium-risk areas are located.

“We’ve come quite a long way in bringing the organization along on this transition,” Schoonhoven concludes. “In 2018, ING said: We want to measure our portfolio against the Paris Agreement goals. What methods are we going to develop for that, how should we go about it, and where do we need to go? We issued our first sustainability loan in 2017, so we’re truly pioneers in this area. In that regard, the mindset is already well established. I’ve noticed that, due to the obligations looming ahead of us, the process has really gained momentum. But it’s now a major focus not only in our sustainability department but across many other departments as well. It is my hope and ambition to one day make the sustainability department redundant and eventually dissolve it.”