AFM takes a closer look at green demand companies

Are green investments really green? Do companies comply with sustainability laws? Can you be sustainable as a company if you plant trees in exchange for CO2 emissions? The Dutch Financial Markets Authority (AFM) will monitor these matters more closely. AFM writes in its new annual report that even big companies have to be environmentalist and follow the rules.

“Our research shows that companies are doing their best, but that still isn’t good enough,” says AFM director Laura van Geest. “They can better evaluate the risks they take over the risks they create. They can talk better about themselves than what’s going on with their suppliers and customers.”

AFM can hold companies accountable for this, but cannot act yet as legislation is not strong enough to do so. This could change with the entry into force of the Corporate Sustainability Reporting Directive (CSRD) in 2024, requiring more and more companies to report on their impacts on people and the climate.

tree planting

One of the questions AFM will watch is the rationale for companies’ green claims. Some companies claim they are green because they offset their emissions with carbon credits. Then, for example, trees that bind CO2 are planted. This market is still relatively small, but growing rapidly.

According to the authority, such claims are often not adequately substantiated. The market in which such loans are bought and sold is not transparent. AFM also points out that compensation cannot continue indefinitely: You cannot plant trees all over the world. Only companies that cannot truly bring their emissions to zero should benefit from voluntary offset. AFM is yet to see this awareness among companies.

“Panic football rarely brings good goals”

In doing so, the Agency recognizes that these long-term issues can be difficult in times of crisis. AFM stands for the end of Corona, the war in Ukraine and inflation. The latter has also led, for example, to higher interest rates, forcing companies to reassess their risks.

Van Geest understands that this can be difficult in the long run, but this is crucial: “Panic football rarely brings good goals. But if you want to set a clear course, you need a point on the horizon.”

special insurance

Other issues that the institution touched upon in its annual report are digitalization and old-age coverage.

For example, AFM has explored the role that digitalization will play in personalizing insurance policies, which means that insurance policies can be tailored more closely to the data. The authority sees the benefits of a tailor-made offer, more choice and better service, but also warns of the need for consumer protection and the risks of harder scrutiny of foreigners.

As for pensions, the AFM refers to the new pension system the Senate will vote on shortly. According to the agency, next year will be devoted to monitoring the transition to the new system.

Source: NOS

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