SustainaWeekly - Investment needs for the Dutch energy transition
In this week’s SustainaWeekly, we start by presenting our estimates of the investment needs of Dutch energy transition required in a net zero scenario. Although similar exercises have been done on a global and European level, there are, to our knowledge, no comprehensive estimates for the Netherlands. We find that investment would need to more than double compared to previous decade. We go on to analyse the performance of green bond indices, as well as last week’s ESG bond issuance. Finally, we assess Dutch industry’s gas usage and scope to further improve its energy efficiency.
Economics Theme
A successful transition to Net Zero would need investment to more than double compared to previous decade. Our research indicates that additional annual investment needs may be in the order of magnitude of around EUR15bn per annum (1.5% GDP). Investment needs also remain elevated for an extended period.
Strategy Theme
Green bond indices have, since the outbreak of the Russia-Ukraine war, underperformed non-green bond counterparts. We attribute this to their overweight in underperforming sectors such as Financials and Real Estate. However, green bond indices have a significantly lower volatility and higher risk-adjusted returns.
ESG Bonds
Volkswagen issued a dual-tranche green bond at lower concessions than all other corporate deals last week. The car manufacturer’s greenium in the secondary market is not as consistent as that of its competitor Mercedes Benz. However, VW’s better carbon reduction proposition should justifies a higher greenium in our view.
Company & Sector news
Dutch industry is a large consumer of natural gas with a 40% share in total supply for business use. Within industry, the chemical industry accounts for more than half. Smarter heat use, electrification and maximising the circular use of raw materials is a good step towards greater energy efficiency.
ESG in figures
In a regular section of our weekly, we present a chart book on some of the key indicators for ESG financing and the energy transition.