Abolish bonuses in the financial sector, get regulators to approve new financial products and include social and environmental risks in the risk assessment calculations of bank assets. These are three of the nine recommendations made by the Sustainable Finance Lab in late November to help the finance sector make a contribution to a sustainable economy. SOMO researcher Rens van Tilburg is one of 13 members of this Think Tank of Dutch researchers and was the secretary of the group in 2011.
Rens van Tilburg was already involved with the Sustainable Finance Lab before he came to work for SOMO in January 2011. Other members include Herman Wijffels, co-chair of Worldconnectors and Professor of Sustainability and Social Change; Arnoud Boot, Professor of Economics and member of the Dutch Social Economic Council (SER); and Peter Blom, director of Triodos Bank. Van Tilburg has conducted research for the Dutch Advisory Council for Science and Technology Policy (AWT) on the relation between the financial sector and innovation policy: ‘Among other things it became clear that investments in sustainable plans of the R&D departments in companies were not taking off because impossible requirements were being placed on the financial yield of those investments. Financial professionals have been working for and with themselves for far too long. If you ban bonuses, you remove the stimulus to solely target financial profits. Professionals then will regain the space in their mind to see how they can be of service to the real sector of the economy.’
At SOMO, Rens van Tilburg is working on the reform of the financial sector. He thinks highly of the recommendation of the Sustainable Finance Lab to oblige banks to include social and environmental risks in their risk assessment of their assets. As this is not currently the case, unsustainable activities are being given relatively cheap credit. Loans to unsustainably performing companies should be weighted as a heavier risk. ‘If this were to receive sufficient attention, banks would focus more on sustainable development.’
On behalf of SOMO, Rens van Tilburg coordinates the execution of the various activities of the Sustainable Finance Lab. ‘We are now elaborating on the various recommendations and developing a research agenda. More research needs to be done on risk weighting, for example. Moreover, we are working on strengthening the platform for our ideas among politicians, the banking sector and regulators. We are receiving enthusiastic responses, especially from the middle level of banking; many banks currently state that they are no longer acting solely on their own account. Now is the time to make it official in legal terms!The nine recommendations of the Sustainable Finance Lab (only available in Dutch).