The Dutch Banking Association (NVB) has called for a significant overhaul of financial regulations to accelerate investments in the energy transition, potentially marking a pivotal shift in how European financial institutions approach climate finance.
In a position paper released yesterday, the association representing 42 Dutch banks argued that current financial frameworks create unnecessary obstacles for funding critical green projects. This comes at a time when estimates suggest the Netherlands alone needs approximately €240 billion in sustainable investments by 2050 to meet climate targets.
“The regulatory landscape has become too complex and fragmented,” said Chris Buijink, chairman of the NVB, during a panel discussion in Amsterdam. “We need smarter, more streamlined approaches that maintain stability while enabling the massive capital flows required for decarbonization.”
The banking group’s intervention arrives amid growing recognition that the European financial system must undergo substantial transformation to support climate goals. According to data from the European Investment Bank, the EU faces an annual investment gap of nearly €350 billion to achieve its 2030 climate and energy targets.
At the heart of the Dutch proposal lies a call to recalibrate capital requirements for sustainable investments. The association suggests creating a “green supporting factor” that would reduce capital buffers required for verifiably sustainable projects. The European Banking Authority has previously expressed skepticism about such measures, citing concerns about undermining financial stability.
“We’re not asking for a free pass on risk assessment,” explained Kees van Dijkhuizen, former CEO of ABN AMRO and advisor to the NVB. “Rather, we believe the current framework fails to properly account for the systemic risk of climate inaction, which ultimately poses greater threats to financial stability than measured regulatory flexibility.”
The Dutch push highlights tensions between prudential regulation and climate policy objectives. Following the 2008 financial crisis, Basel III regulations significantly increased capital requirements for banks, enhancing system resilience but potentially constraining lending capacity for long-term projects like renewable energy infrastructure.
Data from the Climate Policy Initiative shows global climate finance reached $632 billion in 2019-2020, far below the estimated $4.5-5 trillion needed annually by 2030 to achieve global climate goals. Banking regulations are increasingly viewed as one piece of this financing puzzle.
The European Commission has acknowledged these challenges. As part of its Sustainable Finance Strategy, it promised to examine whether capital requirements accurately reflect sustainability risks. However, progress has been slow, with banking authorities emphasizing that prudential rules should remain risk-based rather than policy-driven.
The Dutch proposal also targets the EU’s complex sustainability reporting requirements. While supporting transparency, the association argues that current disclosure frameworks—including the EU Taxonomy and Corporate Sustainability Reporting Directive—create excessive compliance burdens that divert resources from actual sustainable investments.
“A medium-sized Dutch bank now has to navigate over 25 different sustainability-related reporting frameworks,” noted Marieke van Berkel, head of sustainable finance at the Dutch Banking Association. “This regulatory maze consumes enormous resources that could otherwise fund clean energy projects.”
Financial experts appear divided on the Dutch approach. “We need to be careful about weakening capital requirements,” warned Nicolas Véron, senior fellow at Bruegel, the Brussels-based economic think tank. “The last thing we want is another financial crisis triggered by well-intentioned but poorly designed green finance incentives.”
Others see merit in the proposal. “The transition to a low-carbon economy requires unprecedented capital mobilization,” said Irene Heemskerk, former member of the ECB’s climate center. “Traditional risk assessments often fail to capture the transformative nature of these investments and their long-term benefits.”
Beyond regulatory reform, the Dutch banks advocate for greater public-private collaboration. The position paper calls for expanded risk-sharing mechanisms where governments provide partial guarantees for innovative green technologies, enabling banks to finance projects that might otherwise be deemed too risky.
The Netherlands, with its vulnerable position to climate change and strong financial sector, has emerged as a natural testing ground for climate finance innovation. Dutch banks have already committed to the Climate Commitment of the Financial Sector, pledging to measure and report the carbon footprint of their loan portfolios.
As Europe faces dual imperatives of maintaining financial stability while funding an unprecedented economic transformation, the Dutch proposal could inform broader EU discussions on sustainable finance. The European Commission is expected to review key financial regulations in the coming years, creating an opportunity to address these tensions.
Whether European policymakers will embrace the Dutch call for regulatory flexibility remains uncertain. What’s clear, however, is that financing the transition to a low-carbon economy will require innovative approaches that balance prudential concerns with climate urgency—a balancing act that will define financial regulation for decades to come.
