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ESG in the Netherlands

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For the last few years ESG has been a hot topic and it is expected that this will continue to be so in the coming years.

Environmental, social and governance (“ESG”) remains a hot topic for business and governments alike. Not only floods and heatwaves in Europe and record heat temperatures in North America have contributed to this, but also the IPCC report from last April (2022) and the importance given to the recent COP26 in Glasgow by all different stakeholders. In this context, certain contemporary ESG topics are discussed below that are relevant in or have an impact on the Netherlands. The outcome of COP26 in particular has shown that financial institutions and corporates face challenges in integrating ESG matters into business as usual. Ignoring ESG could impact businesses’ profitably and governments’ credibility. In any event, growing societal pressure is only one of the reasons for businesses and governments to act for their own good and act “Together for our Planet”.

Read more on these ESG topics:

This webpage was last updated in August 2022.

Climate policy and greenhouse gas emission reductions



Greenhouse gas emission reduction targets were first set in the National Climate Agreement (Klimaatakkoord), including a reduction by 49% in 2030 compared to 1990 levels.

At present, more ambitious goals are in place, aimed at achieving full climate neutrality by 2050 and a complete overhaul of the Dutch energy system (energiesysteem) which contributes to limiting the effects of climate change caused by greenhouse gas emissions.

In recent years the European Union (“EU”) has been sharply focused on climate policy and on the further reduction of greenhouse gas emissions. The European Green Deal is the EU's long-term growth plan to make Europe climate neutral by 2050. The EU Climate Law enshrines the EU’s new climate targets:

  • carbon neutrality (i.e. net zero) by 2050 with the aim of achieving “negative emissions thereafter”; and
  • a reduction in greenhouse gas emissions of at least 55% by 2030 compared to 1990 levels.

The “Fit for 55”-package sets the clear ambitions from an EU perspective to become a green and sustainable continent in the coming decades and to fully embrace the energy transition currently taking place. The REPowerEU plan (May 2022) (“REPowerEU”) puts forward an additional set of actions to: (i) save energy; (ii) diversify supplies; (iii) quickly substitute fossil fuels by accelerating Europe’s clean energy transition; and (iv) smartly combine investments and reforms.

In the National Climate Agreement (Klimaatakkoord) (“National Climate Agreement”), the central theme is to reduce greenhouse gas emissions in the Netherlands by 49% in 2030 compared to 1990 levels. This reduction target is laid down in the Dutch Climate Act (Klimaatwet) (“Climate Act”) along with the goal of arriving at a 95% reduction in CO2 by 2050. In its coalition agreement “Looking out for each other, look ahead to the future” (Omzien naar elkaar, vooruitkijken naar de toekomst), published on 15 December 2021 (the “Coalition Agreement”), the Dutch cabinet set more ambitious targets.

The CO2 emission reduction target in the Climate Act is set to increase to at least 55% by 2030 (but the Netherlands will focus its policy on a 60% CO2 emission reduction by 2030). Simultaneously, in the longer run, reductions of 70% by 2035 and 80% by 2040 are being targeted. The big hairy audacious goal is full climate neutrality by 2050. The current Climate Act will be amended to incorporate the new targets set in the Coalition Agreement and will also reflect the targets set at EU level.

Pursuant to the Climate Act the following mechanisms apply:

  • a climate plan which contains the key points of the government policy to be implemented in the next 10 years for which the Minister of Economic Affairs and Climate is responsible;
  • an annual climate and energy report (“KEV”) which provides a report of actual and forecast CO2 emissions in the Netherlands; and
  • a climate memorandum which contains an appraisal by the Dutch government regarding the targets, accompanied by any additional policy intentions to achieve those targets.

On 2 June 2022 the draft policy programme Climate (ontwerp-beleidsprogramma Klimaat) was published. It builds on the National Climate Agreement and the Coalition Agreement and complements the Climate Plan 2020. It will form part of the KEV for 2022. The Netherlands Environmental Assessment Agency (Planbureau voor de Leefomgeving) (“PBL”) will scrutinise the programme’s envisaged contributions in achieving a 55% emission reduction by 2030.

Since the inception of its climate policy, significant steps have been taken by the Dutch government to abide by the targets set out therein. This has partly been due to the Urgenda (“Urgenda”) court ruling in which the Dutch State was ordered to reduce greenhouse gas emissions by the end of 2020 by at least 25% compared to 1990. Among other things, the obligation on the Dutch government to comply with the Urgenda ruling resulted in the early closure of a coal-fired power plant in Amsterdam. 

In recent years further compliance with the Urgenda ruling has been achieved among other things by: (i) the Coal Phase Out Act (Wet verbod op kolen bij elektriciteitsproductie) which introduces a production cap for coal-fired power plants; (ii) a call for the owners of each of the three modern coal plants to close a plant voluntarily in consideration of a subsidy award; (iii) increased budgets under incentive schemes for renewables; and (iv) development of CO2 reduction projects in joint consultation with the industrial players. With regard to the latter, the Minister of Economic Affairs and Climate is working on the next phase of agreeing custom-made agreements with the 20 largest industrial emitters. These custom-made agreements will make the (heavy) industry more sustainable and will enable a further reduction of CO2 emissions.

Due to the Russian invasion of Ukraine and the gas crisis evolving from this in Europe, the Dutch cabinet has removed the average annual 35% production cap for coal-fired power plants. In addition, Riverstone pulled out of the deal with the Minister of Economic Affairs and Climate on a €212.5 million subsidy for the closure and dismantling of the Onyx coal-fired power plant in Rotterdam.

Despite these setbacks, the Dutch government will consider further suitable measures to comply with the Urgenda ruling, also in light of its long-term climate policy towards 2030 and 2050. Urgenda’s view is that the Dutch State does not (sufficiently) comply with the Urgenda ruling. Also, it publicly communicated that, on the basis of the draft CO2 emission figures for the calendar year 2021, the Netherlands fell short of its 25% reduction target (compared to 1990 levels). In light of its commitments pursuant to the Urgenda ruling, the Dutch government intends to accelerate its greenhouse gas emission reduction target and limit the impact of external factors on such emissions.

Despite the measures taken (and proposed to be taken), Urgenda announced in June 2021 that it will ask the court to impose a judicial penalty (dwangsom) on the Dutch State for its (alleged) non-compliance with the ruling. It is also considering starting new proceedings for the Dutch State’s alleged failure to meet the 2030 climate goals. 

Lastly, two Dutch levies related to CO2 have been introduced into Dutch law. With effect from 1 January 2021, the Dutch Government introduced a CO2 levy on emissions from industrial installations pursuant to the Act on a carbon levy for the industrial sector (Wet CO2-heffing industrie). The amount of the CO2 levy per tonne of CO2 depends on the European Emissions Trading Scheme (“EU ETS”) price, as it is calculated as the difference between the rate set out in the Environmental Taxes Act (Wet belastingen op milieugrondslag) and the EU ETS price.

In addition, a levy connected to a minimum carbon price to produce electricity came into effect on 5 April 2022 pursuant to the Act on a minimum carbon price for electricity production (Wet minimum CO2-prijs elektriciteitsopwekking). It applies to greenhouse gas emissions caused by companies under the EU ETS active in the electricity generation business. The minimum carbon price is based on the EU ETS carbon price and top-up national levy. 

Renewable Energy and Incentive Schemes




It is expected that offshore wind capacity in the North Sea should be between 38 and 72 GW in 2050.

The Regional Energy Strategies (Regionale Energiestratiegiëen) (“RES”) are a key feature of the National Climate Agreement. Currently, local governments, social partners, network operators, the private sector and residents collaborate on energy transition with the aim of becoming regionally supported choices for projects. In the RES, there is a particular focus on processing and creating local support as well as spatial implementation for future projects. On 1 July 2021, RES 1.0 (“RES 1.0”) was adopted for each of the 30 regions in the Netherlands. In the next decade, the RES will determine the development of renewables in the relevant regions as well as the pace of the implementation of the wider energy transition at a local level. At the end of 2022, the PBL will provide further detail on its appreciation of and the progress made with respect to RES 1.0. In the past year we have seen that grid capacity issues, the so-called Nevele-case and the formation of new coalition parties at the level of the Dutch municipalities following local elections in March 2022, have had an impact on further implementation of RES 1.0. That said, the primary goal of RES 1.0, i.e. the generation of 35 TWh of renewable energy onshore (wind/solar), is on track.

Since 2015, the Offshore Wind Energy Act (Wet windenergie op zee), as amended, has constituted the legal framework for the construction and operation of offshore wind farms. Most recent amendments demonstrate that the offshore wind market has matured. A more robust and future proof tender mechanism and an increase in the permitted operational period of offshore wind farms have been introduced.

On a national level, offshore wind is one of the key drivers to reduce CO2 emissions by 2030. In spring 2022, the Dutch government announced the doubling of its ambition for offshore wind to an installed capacity of approximately 21 gigawatts (GW) by 2030. The total investment costs are estimated at approximately EUR 26 billion. At least half of this must be used on site for the electrification of industrial processes and/or the production of green hydrogen. This ambition dovetails with the ambition of the European Commission laid down in its REPowerEU plan for an accelerated rollout of renewable energy. New offshore wind locations have been designated in connection with the North Sea Programme 2022 – 2027 (Programma Noordzee 2022-2027) as published on 18 March 2022.

The Offshore Wind Energy Road Map 2030 (Routekaart windenergie op zee 2030) for the period 2024 up to 2030 lays down the sequence for the development of the wind farms. In light of the developments set forth above, a supplement to the current 2030 Offshore Wind Energy Road Map was adopted at the end of June 2022. TenneT, the national transmission operator for the offshore grid, will install the grid connections for the new wind farms. TenneT’s formal appointment is the enclosed development framework for offshore wind. Clustering of offshore wind farms is envisaged. This would leave as much contiguous space as possible for other uses at sea. Consequently, there will be a power density equal to approximately 10 MW of wind capacity per square kilometre. This is about 2.5 times higher than the first large-scale wind farms built and currently operating in the Borssele wind energy area.

In order to give a boost to hydrogen production on land, the Minister for Climate and Energy is currently investigating a possible coupling of hydrogen production with offshore wind energy, for example in the form of combi-tenders. Study results will be made available in 2022. Similarly, later in 2022, plans and further details on growth of offshore wind energy in the period between 2030 and 2050 and the development of offshore hydrogen production at sea will be shared. In this context, the Dutch government will prepare an updated offshore wind roadmap up to 2040. It is expected that offshore wind capacity in the North Sea should be between 38 and 72 GW in 2050. It is not only the Netherlands that is committed to ambitious offshore wind targets. The same applies to our neighbouring countries. At the North Sea Summit in Esjberg, Denmark, held on 18 May 2022, the heads of government of Denmark, Germany, Belgium and the Netherlands jointly declared their intention to facilitate an exponential growth in offshore wind. The ambition is to quadruple the four countries’ total offshore wind capacity by 2030 and increase the total offshore wind capacity to at least 150 GW by 2050.

The Stimulation of Sustainable Energy Transition (the “SDE++”) subsidy scheme has replaced the SDE+ regime. Under the SDE++ subsidy scheme (“SDE++ subsidy scheme”), in addition to renewable energy, other CO2 reduction technologies have become eligible for incentives as well. Consequently, technologies no longer compete based on the amount of renewable energy produced, but rather on the amounts of CO2 that have been avoided. In fact, the SDE++ subsidy scheme offers an operating premium feed-in tariff subsidy for renewable energy and other CO2 reduction techniques compensating the difference between the cost price of the technology and the market price of avoided CO2. The SDE++ budget amounts to EUR 13 billion in 2022 and subsidy applications can be made in the period 28 June 2022 and 6 October 2022.  

Hydrogen





Ambition to have installed electrolysis production capacity in the Netherlands of 500 MW by 2025 and 3-4 GW by 2030.

Hydrogen policy

In its government strategy on Hydrogen (Kabinetvisie waterstof), published in March 2020, the Dutch government envisages that hydrogen will be an indispensable part of the sustainability strategy for industrial clusters, ports and the transport sector generally. Within all industrial clusters in the Netherlands, market parties are preparing for hydrogen to play a growing role, including through feasibility studies, the development of business cases and proposed investments. The Dutch government recently reiterated its ambition of having an installed electrolysis production capacity in the Netherlands of 500 MW by 2025 and 3-4 GW by 2030. Certain political parties (Liberals and Democrats) have launched plans to increase these numbers to 8 GW by 2030.

In January 2021 a National Hydrogen Programme (Nationaal Waterstof Programma) was launched. A work plan was published and handed over to the Minister of Economic Affairs and Climate on 9 July 2021. It describes in further detail the activities to be undertaken by the National Hydrogen Programme to facilitate and realise the potential of hydrogen as part of the energy transition in the Netherlands for the period 2022-2025 with a further view towards 2030.

Currently, a hydrogen road map is being drafted. It is expected that a hydrogen roadmap will be published by the end of September 2022, outlining the planned developments in this particular sector for the coming years.

The Dutch Minister for Climate and Energy has stated that 2022 will be an important year for the Netherlands’ hydrogen policy. Publication of further details on the anticipated market regulation for hydrogen, HyNetwork Service’s (“HNS”) (provisional) appointment as hydrogen network operator and the introduction of specific incentive schemes targeted at the upscaling of hydrogen production are a testament to this.

In its REPowerEU plan, the European Commission has outlined a “hydrogen accelerator” concept to scale up the deployment of renewable hydrogen. This plan demonstrates that the ambition is to produce 10 million tonnes and import 10 million tonnes of renewable hydrogen in the EU by 2030.

On top of this, in early July 2022, Shell Nederland and Shell Overseas Investments took the Final Investment Decision (FID) to build the Holland Hydrogen I renewable hydrogen plant. This electrolyser of 200 MW will be constructed on the Tweede Maasvlakte in the Port of Rotterdam. The renewable hydrogen produced will supply the Shell Energy and Chemicals Park Rotterdam, by way of the HyTransPort pipeline, where it will replace some of the grey hydrogen usage in the Shell refinery.

Market regulation

Greater urgency is attached to the development of the Netherlands’ hydrogen policy given the Dutch cabinet’s desire to become independent from Russian fossil fuels as soon as possible. The market regulation of hydrogen will have the following characteristics:

  • Production of hydrogen through electrolysis will be a market activity. That said, large-scale electrolysis production could use steering and guidance (locatiebeslissingen) from the Dutch government. Therefore, the Minister for Climate and Energy intends to influence the location of large-scale electrolysis production sites by means of: (i) spatial regulations; (ii) network planning; and (iii) establishing detailed policy frameworks (i.e. Energy Strategy Plans (Energiestrategieën) and the National Plan Energy System (Nationaal Plan Energyiesysteem)).
  • Current private hydrogen networks and new geographically limited private hydrogen networks remain private but newly-developed large-scale private hydrogen networks may become part of the national hydrogen transport network (see below).
  • In the event of market failures Dutch network companies (netwerkbedrijven) could play a role in developing underground storage facilities and import terminals for hydrogen. At a later development stage this should be a market activity and the Minister for Climate and Energy foresees a system of negotiated third party access regarding hydrogen import terminals and, subject to an EU Member State’s preference, either negotiated or regulated third party access with respect to hydrogen storage facilities.

Scaling up and incentivising parts of the hydrogen value chain

The Dutch government will release further details of an upscaling instrument for smaller electrolysis projects up to 50MW. A public consultation on the subsidy scheme scaling up renewable hydrogen production via electrolysis (Subsidieregeling opschaling hernieuwbare waterstofproductie via elektrolyse) is open over the summer. A subsidy budget of EUR 250 million is being made available. It is expected that the tender will open in the autumn of 2022. Other incentivising measures consist of: (i) using renewable hydrogen in refineries; (ii) budgets for innovative pilots and demonstration projects pursuant to the specific funding programmes (Groeifondsprogramma GroenvermogenNL); and (iii) subsidy programmes (i.e. DEI and SDE++).

Hydrogen transport network

The Dutch government envisages re-using the existing gas infrastructure and the rollout plan for the hydrogen transport network will include details where (and where not) hydrogen transport infrastructure will be developed. In June 2022 the Minister for Climate and Energy informed the public that a flexible, adaptive and phased rollout of the hydrogen transport network is necessary given the current uncertainties on the development of a hydrogen market as well as the interdependency of production, demand and infrastructure of hydrogen.

Gasunie’s subsidiary HyNetwork Services (“HNS”) will in due course become the designated regulated hydrogen network operator. For now, HNS will take the lead in the development and management of the Netherlands’ hydrogen transport network. First, HNS is working on standard hydrogen connection and transportation agreements and has received indications from the market on expected use of the transport network. Secondly, other than the demand and supply side, there are other system elements that will impact the development of a hydrogen network. In this context, a hydrogen transport network is a prerequisite for transporting hydrogen (produced at and/or near the sea) to inland customers and (underground) storage locations. Both system elements are subject to ongoing further studies on behalf of the Dutch government. Finally, the Netherlands intends to function as a pivot in the developing hydrogen chain. The latter requires close collaboration and co-ordination with Belgium and Germany.

HNS must develop the hydrogen transport network at the right place and at the right time. Governmental conditions, which will be attached to HNS as a provider of a general service of economic interest (Dienst van Algemeen Economisch Belang), must ensure reasonable tariffs, non-discriminatory access and a reduction in the maturity risk (vollooprisico) for any governmental investments.

The Dutch state co-ordination scheme (Rijkscoördinatieregeling) will apply to the construction of the hydrogen transport network. This will enable a more time efficient and centrally co-ordinated spatial permitting process. The Dutch Minister for Climate and Energy has noted the hydrogen and gas market decarbonisation package (December 2021) and has indicated appreciaton of the proposals made by the European Commission, including the delegated acts clarifying EU rules applicable to renewable hydrogen under the Renewable Energy Directive (RED) (May 2022). Between 2025 and 2030 the Minister for Climate and Energy and the Dutch Authority for Consumers and Market (Autoriteit Consument & Markt) will work towards a system of regulated third party access with regard to the hydrogen transport network.

The overall investment costs of a hydrogen transport network are currently estimated at EUR 1.5 billion. The Dutch government intends to employ a subsidy of EUR 750 million to deal with low transport volumes and not being able to fully compensate market costs during the rollout phase. The Netherlands foresees a three phase rollout of the hydrogen transport network:

  • Phase 1 – large industrial clusters near the Dutch coast (including Belgium and Germany) and connections with storage locations in the northern part of the Netherlands (Groningen and Drenthe) (2025-2026);
  • Phase 2 – further expansion of the hydrogen network (primarily north-south connections) (2027/2028); and
  • Phase 3 – final rollout of the hydrogen network, in particular connecting the province of Zeeland with the Chemelot chemical cluster in Limburg (by 2030).

Specialists have advised the Dutch government to apply a minimum quality of hydrogen equal to 98 mol%. This minimum quality requirement will be evaluated three years following the commercial operations date of the hydrogen network.

Import

The Dutch government will create viable conditions for the import of hydrogen. On this basis market participants can work on business plans to develop (vertical) hydrogen supply chains. Further research is being undertaken regarding the expected import volumes for hydrogen and LOHC products. The sustainability criteria for renewable hydrogen will take the lead with regard to the importing of hydrogen.

Currently, the Netherlands has (various forms of) co-operation agreements with Portugal, Chile, Uruguay, Namibia, Canada and the United Arab Emirates on the import and export of (renewable) hydrogen. Noteworthy in this respect is that the Minister for Climate and Energy confirmed to the Dutch parliament that it will perform a corporate social responsibility risk analysis (Maatschappelijk Verantwoord Ondernemen risico-analyse) regarding hydrogen imports.

Sustainable companies and collaboration by companies for sustainable objectives



Businesses will have more scope to enter into agreements, particularly to achieve climate objectives such as a reduction in carbon emissions.

The Netherlands is considering the introduction of a legal framework for social enterprises (besloten vennootschap met maatschappelijk doel (BVm)). Social enterprises will have a specific social purpose as set out in their articles of association (statuten). The managing directors of such enterprises will need to consider and act in accordance with such a social purpose. A social purpose is likely to include one or more ESG elements. Social enterprises must report their purpose in their management reports. Being transparent and disclosing the impact of business activities on people, the environment and society are key to a sustainable future.

Currently, no national or international framework on sustainable standards exists but the EU is rolling out its Taxonomy rules. Also the International Financial Reporting Standards (IFRS) Foundation announced in November 2021 the formation of a new International Sustainability Standards Board (“ISSB”) which will develop international sustainability disclosure standards. In March 2022 a draft on general requirements and a draft on climate-related requirements were published. The ISSB has announced that it aims to finalise the international sustainability disclosure standards by the end of 2022. The Dutch government supports a global harmonisation of sustainability standards.

The Netherlands Authority for Consumers and Markets (“ACM”) wants to increase the opportunities for competing businesses to collaborate in pursuit of sustainability objectives. Businesses will have more scope to enter into agreements, particularly to achieve climate objectives such as a reduction in carbon emissions. The ACM proposes to allow this in cases where the benefits for society as a whole outweigh the disadvantages of any restriction in competition. For this reason, the ACM’s revised ‘Sustainability Agreements’ Guidelines, which include examples illustrating the opportunities for business collaboration that contributes to a sustainable society, have been drawn up. In this context, the ACM supports the proposal of the European Commission dated 1 March 2022 on the revision of the so-called “Horizontal Guidelines”. This proposal introduces specific guidelines on the application of competition law to sustainability agreements and recognises that certain sustainability agreements must not be limited by competition law. In practice, the ACM for example has allowed Shell and TotalEnergies, being competitors, to co-operate on CO2 storage given its importance from a sustainability point of view and to serve the energy transition.

It is noteworthy that the ACM takes a firm stance on misleading sustainability claims. Investigations have been conducted into the practices of several companies in the clothing, energy and dairy sectors. The ACM has also published guidelines on making reliable sustainability claims.

Corporate governance





Listed companies must include in their annual reports information on environment, workforce, social matters, human rights and anti-corruption and bribery policies.

In the Netherlands a debate is ongoing on the introduction in Dutch law of a duty of care on management board members and supervisory board members to participate responsibly in social and economic life. This would involve, among other matters, climate change, tax ethics, pay ratios within the business and diversity. Alternatively, scholars have proposed an explicit elaboration of the corporate purpose in the articles of association. The Dutch government will further analyse how these proposals could be enshrined in Dutch law. In addition, certain members of the Dutch parliament have pro-actively prepared a legislative proposal that would create an explicit duty of care for Dutch entities with regard to the negative impact the activities of such entities have on human rights, employment rights or the environment outside the Netherlands (wetsvoorstel verantwoord en duurzaam internationaal ondernemen). It is currently being reconsidered and will be updated to take into account the comments from the Dutch Council of State (Raad van State), the Dutch advisory body on legislative proposals and the proposals of the European Directive on Corporate Sustainability Due Diligence.

With regard to board diversity, since 1 January 2022, Dutch-listed companies have been required to meet a quota of at least one-third women and one-third men on their supervisory boards or one-tier boards . Appointments that are not in accordance with this quota should be regarded as null and void (nietig), without affecting the validity of passed (supervisory) board resolutions. In addition, all “large” public and limited liability companies must formulate a plan including appropriate and ambitious target figures for their supervisory boards, management boards and their junior management. This plan must be reported to the Socio-Economic Council (Sociaal Economische Raad) (“SER”) and the management report (bestuursverslag) shall include a description thereof. The SER will publish reports on the progress of these companies’ achievements of the targets set. These obligations are envisaged to apply for a period of eight years and will be evaluated after a period of five years.

There are also more transparency developments regarding ESG. In June 2022, the European Parliament and Council reached political agreement on a new framework for the EU Corporate Sustainability Reporting Directive (“CSRD”). It will completely replace and significantly expand the scope of the current EU Non-Financial Reporting Directive. Listed companies, including certain non-European entities, must include in their annual reports information on environment, workforce, social matters, human rights and anti-corruption and bribery policies. A less rigid regime will apply to small- and medium-sized enterprises (“SMEs”). Upon its implementation, the CSRD not only extends the number of companies which will need to report on ESG matters but also significantly widens the scope of the reporting obligation itself. The CSRD will become effective in four stages. Large public interest entities already subject to the EU Non-Financial Reporting Directive must report on the CSRD with effect from 1 January 2024. Finally, on 1 January 2028 certain non-EU companies must report in accordance with the CSRD standards. In the Netherlands, action with regard to the CSRD is yet to be proposed.

Accountants recognise the importance of ESG matters for business continuity reasons. For example, the accountant of Shell plc noted the financial impact of climate change and wider energy transition as a key audit matter and the accountant of Royal DSM N.V. noted the same regarding the sustainability indicator on Royal DSM’s sustainable solutions line. We expect companies to feel obliged to account for their ESG policy. The Royal Netherlands Institute of Chartered Accountants (Koninklijke Nederlandse Beroepsorganisatie van Accountants (“NBA“)) is further defining the role of accountants regarding analysing, verifying and auditing climate targets and objectives of Dutch-listed companies. The NBA has taken the stance that every annual report should contain a report on climate performance and has published a sustainability manual containing guidance for accountants relating to both existing and future standards and regulations, including the forthcoming CSRD. In addition, according to the NBA, the Dutch Corporate Governance Code (see below) should require companies to include a risk management statement in their annual reporting including a material ESG risk management.

In February 2022, a proposal to revise the Dutch Corporate Governance Code was published. The proposed amendments inter alia include obligations for Dutch-listed companies to: (i) formulate a clear strategy on ESG with concrete objectives; (ii) report on the culture, values and ESG behaviour within the company in the management report; (iii) have a policy on diversity and inclusion for the entire business of the company; and (iv) report on the inflow, outflow and retention of diversity talent within the company when reporting on the diversity and inclusion policy. The current goal is that a revised Dutch Corporate Governance Code will enter into force on 1 January 2023. Part of the feedback during the consultation on the proposed revised Dutch Corporate Governance Code included commentary that the Dutch Corporate Governance Code could entail more ambitions on the ESG front, also in light of the increased importance of ESG for various stakeholders in the Netherlands.

A significant shift has also been taking place in the stance of investors, trade unions and other stakeholders in the Netherlands on companies’ responsibilities in relation to ESG. Eumedion, a representative body of institutional investors in Dutch-listed companies, has set out its focus points for 2022: (1) the establishment of Net Zero Emission Transition Plans; (2) transparency on the implementation of the diversity and inclusion policy within the total workforce; and (3) transparency on human rights due diligence. Furthermore, ABP and other pension funds have announced that they will stop investing in producers of fossil fuels.  

Sustainable Finance Sources: survival guide




It can be hard to find in one place the legal, regulatory and industry sources you need when navigating the fast-moving and ever-developing sustainable finance landscape.

Our document provides you with a one-stop shop for this. The document is updated on a quarterly basis. Starting with the EU legislative package, working through the Level 2 technical details and impacts on related sectoral legislation like MiFID II or UCITS, moving to local developments in the UK, and always with an eye to our UK future regulatory framework post-Brexit transition, this document brings all of the key sources and resources together with answers for each:

Netherlands ESG

With an upfront timeline that is kept regularly updated, this resource will help you keep an eye on what is on the horizon in sustainable finance.

Please click here for the latest edition. Of course, if you would like to discuss any of the sources or issues identified in this publication, please do get in contact with us.

Green loans and sustainability linked loans




Rather than environmental change, social projects would be aimed at bettering society through a focus on affordable infrastructure, essential services, affordable housing or food security.

Certain Dutch banks led the initial charge in developing ESG products for their clients and, as a result, several Dutch lenders have considerable experience in the field. Many of these lenders go out of their way to encourage their clients to make use of ESG products and develop sustainability key performance indicators (“KPIs”). Some act as sustainability co-ordinators, with specialist teams advising on ESG elements, such as selecting and auditing KPIs, and there are also a range of third-party providers offering similar services.

Perhaps partly as a result of their lenders’ enthusiasm, green loans and sustainable loans are both popular options for Dutch borrowers. An increasing number of Dutch SMEs borrow green loans in order to finance a range of relevant projects, and larger businesses are following suit. With the encouragement of Dutch banks, and a growing awareness among borrowers of the available products, sustainability-linked pricing is also increasingly popular in large syndicated loans. As in other European jurisdictions, sustainability has mostly been integrated into investment grade lending, but there is growing interest in incorporating sustainability KPIs into leveraged finance transactions and the mid-market as well.

The Loan Market Association (“LMA”) publishes Green Loan Principles (“GLPs”), Sustainability-Linked Loan Principles (“SLLPs”) and Social Loan Principles (“SLPs”). As a reminder:

  • green loans are loans allocated for “green” projects such as energy efficiency upgrades or replacing gasoline-driven vehicles with electric ones;
  • sustainability-linked loans are loans for a general purpose where the pricing is linked to the borrower’s performance against certain ESG-related KPIs, such as a target to reduce carbon emissions; and
  • like green loans, social loans are loans allocated for a specific purpose, but they go towards bettering society through a focus on matters such as affordable infrastructure, essential services, affordable housing or food security.

All three of the Principles also have associated guidance that provides additional detail on the suggestions contained in the Principles. The guidance typically focuses on the documentation and administration of the loans, as well as the ways to ensure that such products are not “greenwashing”, by aiming for goals that are material and impactful.

In addition, the LMA provides a range of best practice guidance including a Best Practice Guide to Sustainability-Linked Leveraged Loans, produced in conjunction with the European Leveraged Finance Association and a working group consisting of various financial institutions and law firms (including Linklaters). Along with our report on the subject (linked below), this represents the increasing interest in ESG from the leveraged market – particularly sustainability-linked loans. We have held discussions with several financial institutions (in the Netherlands and elsewhere) to discuss the emerging market practices and how to implement them in the unique, often challenging, context of leveraged finance.

Social loans have not been a focus in the Dutch market to date, but the publication of the SLPs may provide the necessary framework to encourage lenders and borrowers to begin developing those products – if only to agree a path for change with borrowers active in sectors with less of a sustainability footprint. However, socially-oriented KPIs (such as staff volunteering hours, employee diversity and training programmes) have become much more common in investment grade sustainability-linked loans over the last year. 

The LMA also published three thought pieces on ESG in the loan market. The first, “A Matter of Materiality”, highlighted the importance of setting KPIs that are material – which is often a particular challenge when looking at more socially-focused KPIs. Another publication, “Fear of Failure”, set out the importance of KPIs which are genuinely challenging to the business, rather than simply codifying objectives that the borrower already expects to achieve. And the last, “A Matter of Time”, discussed the time pressures that often apply to setting KPIs during the negotiation of a deal, rather than in advance or during the term sheet stage.

Recap on ESG loan market standards

The SLLP were originally published by a joint working group of the LMA, the Asia Pacific Loan Market Association and the Loan Syndications & Trading Association in 2019. They benefit from supplementary guidance published in 2020 and set out voluntary market standards for what constitutes a sustainability-linked loan. Over time, sustainability-linked loans have evolved increasingly sophisticated features. The updates made to the SLLP and SLLP Guidance reflect the evolution of the product and more closely align with the Sustainability-Linked Bond Principles published by the International Capital Market Association (“ICMA”).

The GLP were published in 2018 and set out voluntary market standards for what constitutes a green loan. The February 2021 changes to the GLP are less extensive than those made in relation to the SLLP, and focus on how borrowers communicate certain eligibility criteria for a green loan to lenders.

The Social LP represent a new product for the loan markets, but one which builds on the concept of a green loan. The key characteristic of a green loan is that it finances a green activity. In a similar way, a social loan is made to finance activity which mitigates or improves social challenges. The publication of the new Social LP reflects a desire among market participants that such loans be recognised as a separate loan product.

Sustainability-linked lending in the European leveraged loan market

Sustainability-linked loans continue to attract attention in the European loan market. Until recently, activity has focused on investment grade loans. However, sustainability features are increasingly being incorporated into leveraged loan agreements, signalling that the European leveraged loan market is beginning to embrace ESG issues.

The pressure to give greater emphasis to ESG considerations comes not just from legal and regulatory change, but also from investors who incorporate these factors into their credit analysis and from financial sponsors' own funds and investors prioritising commitments to ESG when allocating capital. With market participants generally aligned on the importance of these issues, the prevalence of sustainability features in leveraged loan agreements, together with an increased focus on disclosure and reporting, are themes that are expected to continue and develop in the leveraged loan market.

Defining sustainability-linked loans

A sustainability-linked loan should be distinguished from a green loan. Unlike green loans, sustainability-linked loans are not conditional on the loan proceeds being used for a green purpose. Instead, the defining characteristic is that the terms of the loan incentivise the borrower to improve its performance against certain predetermined ESG criteria.

In documentary terms, the core feature is a sustainability-linked pricing ratchet – if the borrower satisfies certain predetermined sustainability targets, the margin on the loan is adjusted. There will also likely be other provisions, for example, a requirement to provide supporting information which relates to, and evidences, the group's sustainability performance.

Key features of sustainability-linked leveraged loans

Over the past few years there have been several green and sustainable finance initiatives in the loan market designed to encourage the integration of ESG factors into loan documentation and to promote consistency and best practice across these products. A joint working group consisting of the LMA, the Asia Pacific Loan Market Association and the Loan Syndications & Trading Association, published a set of GLP in 2018, followed by the SLLPs in 2019, both of which were supplemented by further guidance published in 2020. The SLLP and supplementary Guidance (“SLLP Guidance”) are voluntary standards setting out the characteristics of a sustainability-linked loan. They do not have the force of law but are widely followed internationally.

There is currently no market standard drafting for the sustainability-linked loan provisions in a loan agreement. Naturally, this means that documentation varies between transactions, but some key themes are emerging.

One-way or two-way pricing ratchets

Sustainability-linked pricing ratchets can operate on either a “one-way” or a “two-way“ basis. The “one-way” basis means that, if the borrower satisfies the predetermined sustainability targets, the margin on the loan is reduced. If the sustainability targets are not met, the margin does not change.

The alternative “two-way” basis retains the margin discount upon satisfying predetermined sustainability targets, and introduces a margin premium which is triggered where sustainability performance falls below certain predetermined levels. Since the underlying objective is to incentivise borrowers to improve ESG performance, it is perhaps not a surprise that the majority of sustainability-linked leveraged loans have adopted a “two-way” rather than “one-way” mechanism.

The size of the reduction or increase to the margin varies but might typically be in the range of 0.02% to 0.075%.

Sustainability criteria

The sustainability-linked pricing ratchet relies on setting targets for improvements in ESG performance. In practice, ESG performance is measured either by reference to an overall ESG score or through more specific KPIs.

Overall ESG score: An overall ESG score is assigned to the group by an external third party rating agency, with the group’s overall ESG score at either the date of the loan agreement or the first utilisation date being used as a “baseline”. The group’s ESG score is reassessed annually and, if the overall ESG score improves above a threshold determined by reference to the baseline, the target is achieved.

Specific KPIs: Performance is assessed across a selection of KPIs, with the number and type varying depending on the nature of the group’s underlying business. The SLLP include an indicative list of criteria which can be used to develop KPIs and are clear that the KPIs should be appropriate in the context of the group’s business. Examples of specific KPIs in recent facilities include KPIs relating to carbon emissions and wind power.

The approach adopted on sustainability-linked leveraged loans is mixed and there are examples of transactions that measure ESG performance based on an overall ESG score, as well as those that rely on specific KPIs.

ICMA Green, Social and Sustainability Linked-Bond Principles



The updated 2021 GBP does not change the mandatory “core components” around use of proceeds, project evaluation and selection, proceeds management or reporting.

On 10 June 2021, the ICMA published the 2021 edition of the Green Bond Principles (“GBP”), which are voluntary process guidelines that recommend transparency and disclosure in the Green Bond market by clarifying the approach for issuance of a Green Bond. This is the first update to the GBP since 2018.

The 2021 edition of the GBP features:

  • Two key recommendations on the Bond Framework and External Reviews designed to increase transparency alongside the four core components (Use of Proceeds, Process for Project Evaluation and Selection, Management of Proceeds and Reporting);
  • A recommendation of heightened transparency for issuer-level sustainability strategies and commitments;
  • Encouragement to supply information, if relevant, on the degree of alignment of projects with official or market-based taxonomies;
  • Promotion of transparency on issuer processes to identify and manage perceived and known social and/or environmental risks; and
  • Links and references to the complementary guidance of the Climate Transition Finance Handbook, the Harmonised Framework for Impact Reporting and the Guidelines for External Reviews, which are supplemented by the Guidance Handbook.

The 2021 editions of the Social Bond Principles and Sustainability Bond Guidelines have been similarly revised.

The updated GBP does not change the mandatory “core components” around use of proceeds, project evaluation and selection, proceeds management or reporting. Nonetheless, it has added two “key recommendations” to these core requirements for issuers to encourage “heightened transparency”. These key recommendations are the use of: (i) Green Bond Frameworks and (ii) External Reviews. In respect of (i), the updated GBP considers that issuers should explain the alignment of their Green Bond or Green Bond programme with the four core components of the GBP in a Green Bond Framework or in their legal documentation. In respect of (ii), it is recommended that issuers appoint (an) external review provider(s) to assess through a pre-issuance external review the alignment of their Green Bond or Green Bond programme and/or Green Bond Framework with the four core components of the GBP.

In June 2022, Appendix 1 of the GBP was updated to make a distinction between “Standard Green Use of Proceeds Bonds” (unsecured debt obligation) and “Secured Green Bonds”, as well as to provide further guidance on green covered bonds, securitisations, asset-backed commercial paper, secured notes and other secured structures. Additional Q&As related to Secured Green Bonds complement the updated June 2022 Appendix 1.

The following new guidance has also been issued by the ICMA:

The Sustainability-Linked Bond Principles, first published in June 2020, have not been updated.

EBA recommendations for ESG-linked capital issuances




On 24 June 2021, the EBA published its updated Report on the monitoring of Additional Tier 1 instruments.

On 24 June 2021, the European Banking Authority (“EBA”) published its updated Report on the monitoring of Additional Tier 1 instruments. The Report included the EBA’s considerations on ESG capital bonds. The EBA has identified differences in the clauses of the ESG issuances made for capital/loss absorbency purposes. In this regard, the EBA has issued recommendations which in particular impact the disclosure of risks associated with the ESG elements in relevant documentation. In respect of sustainability-linked features, the EBA currently takes the view that step-up and/or fees based on missing ESG targets or other performance indicators should not be allowed or encouraged. The EBA will continue to monitor developments in this area and may provide further guidance in the future.

EBA publishes binding standards on Pillar 3 disclosures on ESG risks



On 24 January 2022, the EBA published its binding standards on Pillar 3 disclosures on ESG risks

On 24 January 2022, the EBA published its final draft implementing technical standards (“ITS”) on Pillar 3 disclosures on ESG risks. The final draft ITS put forward comparable disclosures to show how climate change may exacerbate other risks within institutions’ balance sheets, how institutions are mitigating those risks, and their ratios, including the green asset ratio (“GAR”), on exposures financing taxonomy-aligned activities, such as those consistent with the Paris agreement (“Paris Agreement”) goals.

The technical standards aim to ensure that stakeholders are well-informed about institutions’ ESG exposures, risks, and strategies and can make informed decisions and exercise market discipline. The standards put forward comparable disclosures and KPIs, including a GAR and a banking book taxonomy alignment ratio (BTAR), as a tool to show how institutions are embedding sustainability considerations in their risk management, business models and strategy on their pathway towards the Paris Agreement goals. In developing this framework, the EBA has built on the recommendations of existing initiatives, such as those of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB), but has gone beyond this by defining binding granular templates, tables and instructions, to ensure enhanced consistency, comparability and meaningfulness of institutions’ disclosures.

European Parliament publishes its report with respect to the proposed EU Green Bond Standard



On 16 May 2022, the European Parliament published its report on the proposed EU Green Bond Regulation

The proposed European Green Bonds Regulation is part of the broader European Commission agenda on sustainable finance and lays the foundation for a common framework of rules regarding the use of the designation “European green bond” or “EuGB” for bonds that pursue environmentally sustainable objectives within the meaning of the Taxonomy Regulation.

A key change between the original proposal by the European Commission and the European Parliament’s amended version is an increase in the scope of the regulation to all bonds marketed as environmentally sustainable and sustainability-linked bonds in the EU. In the European Parliament’s report, for all bonds that are marketed as environmentally sustainable in the EU, including sustainability-linked bonds, transparency requirements are introduced, including disclosure in accordance with the EU taxonomy legislation. This would allow investors to compare EuGBs with other green bonds. In addition, all issuers of green bonds must have safeguards in place to ensure they do not harm people or the planet. The requirement to have environmentally sustainable use of proceeds remains unchanged, however, and sustainability-linked bonds can therefore not obtain an EuGB label.

Some other noteworthy amendments proposed by the European Parliament are:

  • the requirement that issuers of EuGBs and sustainability-linked bonds have an auditor-verified transition plan with the objective of achieving climate neutrality by 2050 at the latest if disclosure by the issuer of sustainability reporting is required under the Accounting Directive (as amended by the CSRD);
  • issuers from countries that are on the EU’s grey or blacklist of tax havens are prohibited from issuing EuGBs; and
  • if applicable, a prominent statement on the required factsheet that use of proceeds are intended to be allocated to nuclear energy or fossil gas-related activities.

The next step is the trilogue negotiation between the European Commission, European Parliament and the Council of the EU during which inter alia the topics above will be discussed.

ECB takes further steps to incorporate climate change into its monetary policy operations



On 4 July 2022, the European Central Bank (“ECB”) announced the taking of further steps to include climate change considerations in the Eurosystem’s monetary policy framework. It decided to adjust corporate bond holdings in the Eurosystem’s monetary policy portfolios and its collateral framework, to introduce climate-related disclosure requirements and to enhance its risk management practices.

These measures are designed in full accordance with the Eurosystem’s primary objective of maintaining price stability. They aim to better take into account climate-related financial risk in the Eurosystem balance sheet and, with reference to its secondary objective, support the green transition of the economy in line with the EU’s climate neutrality objectives. Moreover, its measures provide incentives to companies and financial institutions to be more transparent about their carbon emissions and to reduce them.

In respect of corporate bond holdings, the ECB aims to gradually decarbonise its corporate bond holdings, on a path aligned with the goals of the Paris Agreement. To that end, the ECB will tilt these holdings towards issuers with better climate performance through the reinvestment of the sizeable redemptions expected over the coming years. Better climate performance will be measured with reference to lower greenhouse gas emissions, more ambitious carbon reduction targets and better climate-related disclosures.

Tilting means that the share of assets on the Eurosystem’s balance sheet issued by companies with a better climate performance will be increased compared to that of companies with a poorer climate performance. This aims to mitigate climate-related financial risks on the Eurosystem balance sheet. It also provides incentives to issuers to improve their disclosures and reduce their carbon emissions in the future. The ECB expects the measures to apply from October 2022, and further details will follow shortly before then. The ECB will start publishing climate-related information on corporate bond holdings regularly as of the first quarter of 2023.

Regulatory





Requirements for periodic reporting to investors are applicable and apply as of January 2022.

Prudential supervision of banks

The Dutch Central Bank (De Nederlandsche Bank) (“DNB”) promotes a sustainable economic development and is committed to promoting financial stability and sustainable prosperity.

DNB advocates accelerating and scaling up climate investment. DNB expects financial institutions to incorporate climate risks into their operations. DNB’s Sustainable Finance Platform is a co-operative venture which brings together the Dutch financial sector, the Dutch government and the supervisory authorities to find ways of preventing or overcoming constraints for sustainable funding and to boost sustainability by working together.

A key priority of DNB’s supervision is the financial sector's management of climate-related and environmental risks. Financial institutions should be aware of sustainability risks and be able to manage them. Commitment to sustainability and future orientation is one of three focus areas in DNB’s Supervisory Strategy 2021 – 2024. For 2022, DNB will specifically focus on embedding sustainability in its supervisory methodology, making sustainability risks an integral part of regular supervision and the frameworks it uses for its supervision. DNB will, among other issues, include climate risks in periodic risk assessments and will use supervisory interviews, deep dives and on-site investigations to get a better picture of how institutions manage climate risks.

Climate-related risks are already part of DNB’s fit and proper assessments of (co)policymakers of banks, insurers and pension funds. The financial undertaking in question must include in its screening application the candidate’s knowledge and experience with regard to such risks. DNB has amended its suitability matrices to explicitly include this. Moreover, climate-related and environmental risks take a more prominent role in DNB’s screening interviews. When conducting its assessment, DNB takes a proportional approach. This means that DNB takes into account the candidate’s proposed position, the financial undertaking’s nature, size, complexity and risk profile, and the composition and functioning of the board as a whole. On 15 July 2022, DNB and the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten) (“AFM”) launched a consultation to seek views on the draft of an amendment to the Suitability Policy Rule 2012 (Beleidsregel geschiktheid 2012). The Suitability Policy Rule 2012 describes the framework that DNB and the AFM use when assessing the suitability of policymakers in the financial sector. The explanatory notes of the draft amendment to the Suitability Policy Rule stipulate that a management body should also have sufficient knowledge of the effects of climate change and the relevant regulations applicable in the financial sector aimed at sustainability (e.g. the Sustainable Finance Disclosure Regulation (“SFDR”)). The consultation closes on 15 September 2022.

DNB has published guidance documents on climate-related and environmental risks, inter alia:

Conduct of business supervision

The AFM is committed to promoting fair and transparent financial markets. Contributing to sustainable financial well-being in the Netherlands is part of the AFM’s mission as reflected in its Strategy 2020 – 2022. In this context, among other things, the AFM supervises the reporting of sustainable developments, climate-related issues and oversees that sustainability principles are being adhered to in an honest and transparent manner. In the AFM Agenda 2022, the AFM emphasised, among other matters, that it will: (i) in 2022, continue to assist the financial sector in implementing new legislation and regulations in order to achieve (greater) transparency on the degree of sustainability of investments; (ii) review compliance with the SFDR; and (iii) contribute to the development of sustainability reporting, especially the CSRD.

Finally, the SFDR has required financial service providers to be transparent since 10 March 2021 about investment decisions and advice with negative impacts on sustainability factors. Requirements for periodic reporting to investors have been applicable since January 2022. Primarily, SFDR is a set of EU rules which aim to make the sustainability profile of funds more comparable and better understood by end-investors. This will focus on pre-defined metrics for assessing the ESG outcomes of the investment process. Among the SFDR’s key parts is its focus on preventing “greenwashing”. The AFM also expects market parties to prepare for compliance with the SFDR Regulatory Technical Standards (“RTS”), which aims to provide additional detail on the content and presentation of the disclosure requirements under the SFDR. On 25 July 2022 the final RTS under the SFDR and its Annexes were published on the OJEU. The RTS will apply from 1 January 2023.

In September 2021, the AFM published a report on the implementation of the requirements of the SFDR by managers of Dutch collective investment schemes (funds). Fund managers must disclose how they integrate sustainability risks in their investment policy and describe the likely effects of sustainability risks on the returns of the Funds concerned. On the basis of its review, the AFM established that all managers of funds with sustainability characteristics or objectives on the date that the SFDR came into effect had included information on this in their prospectuses. Among the 46 funds that were selected for the review, the AFM sees room for improvement in the quality of this information and has queries regarding the sustainability classification for a significant proportion of the selected group. The AFM’s findings concern the following three points: (i) the integration of sustainability risks in investment policies could be more clearly stated; (ii) observance of the transparency obligations in Article 8 or 9 of the SFDR could be clearer; and (iii) the objectives of Funds are frequently too vaguely defined.

On 12 April 2022, the AFM presented its conclusions of a preliminary review of a number of sustainable funds offered by Dutch fund managers. The AFM noted that funds interpret “sustainable” in a different manner. It found that, for example, many shares in funds that are advertised as “sustainable” are also part of “regular” funds. As the AFM wonders whether this corresponds with the expectations of retail investors, it will start conducting research into the expectations of retail investors when it comes to sustainable investments.  

Supply chain due diligence and human rights




Fines for breaches under the Child Labour Due Diligence Act could be up to EUR 900,000 or 10% of the company’s total worldwide revenue.

In 2019, the Child Labour Due Diligence Act (Wet Zorgplicht Kinderarbeid) was adopted by the Dutch Senate (Eerste Kamer der Staten-Generaal) and published in the Dutch State Gazette (Staatsblad). The Act compels companies to perform due diligence to their supply chains and to investigate whether their goods or services have been produced using child labour. Also, companies must develop a plan to prevent child labour in their supply chains. The obligations arising from the Act will apply to all companies that sell or supply goods or services to Dutch consumers, regardless of where those companies are based or registered, without exemptions for legal form or size. In addition, companies must affirm to a regulator, yet to be appointed, that they have exercised an appropriate level of supply chain due diligence to prevent child labour. Fines for breaching the Child Labour Due Diligence Act could be up to €900,000 or 10% of the company’s total worldwide revenue.

Members of the Dutch Senate indicated in 2019 that it was not envisaged that the Child Labour Due Diligence Act would enter into force before mid-2022. With the legislative proposal “Act on responsible and sustainable international operations” (Wet verantwoord en duurzaam internationaal ondernemen), which will be discussed below in more detail, it has become uncertain whether the Child Labour Due Diligence Act will actually enter into force. The core elements of the Child Labour Due Diligence Act are covered in the current legislative proposal and it is therefore expected that the Child Labour Due Diligence Act will be revoked.

On 11 March 2021, four members of the Dutch House of Representatives (Tweede Kamer der Staten-Generaal) submitted a legislative proposal that aims to oblige all Dutch incorporated companies that conduct international operations to comply, on a minimum-basis, with the OECD guidelines for multinational companies and the UN Guiding Principles on Business and Human Rights (“UNGPs”). If this bill is ratified by the Dutch legislator, it will mean that all qualifying companies pursuant to the Act on responsible and sustainable international operations will by law be required to take measures to prevent their supply chain from employing child and/or forced labour or from having unsafe working conditions or from being involved in any kind of slavery, discrimination or exploitation, or from creating environmental damage or from breaching freedom regarding the right to form trade unions.

The Dutch Council of State adopted a critical (non-legally binding) stance in respect of the legislative proposal in July 2021. By letter to the chairman of the Dutch House of Representatives on 16 June 2022, the initiators confirmed that the bill is currently being amended, taking into account the advice of the Dutch Council of State and the proposal for a corporate sustainability due diligence directive issued by the European Commission on 23 February 2022.  

Climate litigation





On 26 May 2021, the District Court in The Hague ordered Shell to reduce its global carbon emissions by 45% by 2030 compared with 2019 levels – that is, the emissions of the Shell group, its suppliers and its customers.

This was considered a ground-breaking decision as, for the first time, a court has intervened to force a company to reduce its carbon emissions and bring its strategy in line with the goals of the Paris Agreement. For the Netherlands, this decision was as important as the Urgenda case (see above).

Undoubtedly, this is another important decision in the field of climate litigation that is on the rise on a global scale. Commentators have stated that the Shell decision is a “tipping point” in climate litigation but time will tell if that is indeed the case. However, this decision is the latest in a series of cases and investor decisions that, together, have very significant implications for companies’ climate strategies, not just in the oil and gas or energy sector.

On 20 July 2021 Shell confirmed that it would appeal the judgment, starting appeal proceedings on 23 August 2021. On 22 March 2022, Shell filed its statement of appeal with the Hague Court of Appeal.

The next step in the proceedings is that Milieudefensie will file its statement of defence, ultimately on 18 October 2022. An oral hearing is expected to take place in early 2023 or, if Milieudefensie files a cross-appeal on certain elements of the judgment, in early 2024. A decision is expected to be rendered at least five months after the hearing.

It is likely that the case will then progress to the Dutch Supreme Court, similar to the Urgenda case. It is also possible that the case will be referred to the Court of Justice of the European Union in Luxembourg by either the court of appeal or the supreme court for a prejudicial ruling on the EU law issues raised by Shell (Article 267 TFEU).

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