green banking has become big business in the Netherlands. Two years ago, politically-correct banking and investment was limited to three small idealistic banks-Triodosbank (originated from the anthroposophic movement which sees human beings in relation to the cosmos), asn Bank (founded by the trade unions) and the Other Investment Fund (founded by, among others, the churches and the environmental movement). Savers who did not want their money invested in polluting business or in the weapons industry brought their money to these banks which, for example, invested the money in windmills or 'neat' companies. But for two years now, the biggest Dutch banks have set up their own green funds and are generating a tremendous response. So many savers want their money invested in these funds that the banks are competing for green projects now.

Earlier, savers who deposited their money with Triodosbank, one of the small green banks, got a lower interest rate than when they entrusted it to Rabobank, ing-group or the abn- amro-bank, the three biggest Dutch banks. This is because the returns on investments in organic agriculture or sustainable energy, for example, are less than when invested in the paying-but -polluting oil company, Shell. So only a minority of savers accepted a lower interest rate in exchange for having an easy conscience. Since January 1, 1995, however, this economic pattern has been changed by a government measure. The ministry of finance introduced the 'fiscal-green-measure', a regulation whereby revenues (interest and profit) from investments in approved green projects were declared tax-free. Green investing became financially more attractive.

The Rabobank was the first conventional bank to set up a green fund and within several days its fund was filled with us $265 million from eager investors. Soon the Postbank (part of the ing-group), the country's largest retailing bank, founded the Postbank Green and abn-Amro now has its own fund for environmentally sound investments.
Going green: returns galore The projects financed by the green funds are very diverse: wind, sun and biomass energy plants, sustainable construction, organic agriculture including the processing of organic products and nature reserves. "We are also trying to get approval for investments in canal touring boats, which are sailing on electric motors and the production of plastics and fuel from vegetable materials," said Bart Jan Krouwel, director of the recently-founded department of strategic sustainable development of the Rabobank. "I think green funding is a very positive development. Sustainable investing is the delivery room for a sustainable society. We want to boost sustainable development by stimulating green initiatives," he adds.

Rabobank is also supporting an enterprise that is planning to build new and safe zeppelins as an alternative to polluting aircraft. Krouwel admits that the Rabobank's main motive to create the green fund is to preserve its position in the financial markets. Explaining the bank's interest in financing organic agriculture, Krouwel states, "Big changes are taking place within agriculture: from mainstream to sustainable. We want to keep up with these developments."

Presently, 14 banks and financial institutions have created, or are planning to create, a green fund. Already, us $412 million has been earmarked for environmentally friendly investments and us $560 million is still waiting for approval. Each project that the banks want to undertake to profit from the 'fiscal-green-measure' has to be approved by the ministry of environment. Originally, only projects which started in 1994 or later got approval. So farmers who had been farming organically for years were excluded from being financed tax-free, although they spearheaded the concept of sustainable agriculture. Now, the unfairness has been corrected and older projects are also being included in the scheme. Sustainable construction has also been added to the list of fiscal-green projects, in order to create more opportunities for the enormous amount of investors interested in green funding.

Ecology: origin in the roots
A precondition for projects to be labeled fiscal-green is that they have to take shape within the Netherlands. The Rabobank, together with Triodosbank, finances international contracts for the imports of coffee, tea and cocoa, which have been grown in a farmer- and environmentally-friendly way. Normal tax rates have to be paid for financing these contracts. Krouwel would like to see such foreign projects also being financed by the green funds. "We are negotiating with the government to broaden the fiscal-green-measure and to accelerate the procedure of getting an approval for green projects," said Krouwel.

Accelerating the procedure for approval is very much in the interest of the banks because within two years after starting the green funds, 70 per cent of the funds should have been invested in approved green projects. If the banks do not succeed, they will be fined. The banks are free to choose how to use the remaining 30 per cent of the funds. "Of course we are not going to invest them into environmentally-unfriendly projects, but into neutrals like government bonds," Krouwel declares.

It is a moot point whether government bonds are neutral. The Dutch state is investing billions in new roads, tunnels, airports and other infrastructural projects, which are opposed by environmental organisations. There could also be public debates about the green calibre of different approved projects. The gigantic wind energy plants, which Rabobank is planning, will probably be opposed by people who fear that thousands of birds will be crushed by the vanes of the windmills and that the towering mills will spoil the beauty of the landscape.

So far, the fiscal-green-measures have generated a lot of goodwill among the environmental organisations. "It is a fantastic measure, but a measure with its limitations," remarked Arjen van Ketel of Friends of the Earth-the Netherlands. "It works when cheap money strengthens sustainable developments. If, for example, one wants to construct houses sustainably, there are more costs: sustainable materials, insulating the house properly in order to save energy for heating. All this makes the house more expensive. But if one can get cheap loans, due to the fiscal-green-measure, it becomes financially more attractive to construct in a sustainable manner." But van Ketel also adds that in other cases the bottleneck for sustainable development does not have anything to do with funding. "The cheapness and hence popularity of flying has to do with the lack of a value added tax on airline tickets and we are, therefore, fighting for the introduction of such a tax. The enormous amount of waste being produced in the Netherlands has to do with the refusal of businesses to recycle and we are pleading with Philips to recycle the electric machines they sold and which have broken down. These are really important issues and cannot be solved via green funding."

Limited option
While Krouwel from the Rabobank thinks that green funding is the road to sustainability, Piet Sprengers, director of the Association of Investors for Sustainable Development, founded last year, believes otherwise. "Green funding is great, but it is rather marginal: only one per cent of the money being invested in the Netherlands is called green." Therefore, Sprengers' attention is not directed at investments in green projects, but at mainstream enterprises. "Much more progress for the environment is made when a polluting company starts producing more efficiently and in an environmentally-friendly way than when a 'green' company improves its environmental record," explains Sprengers. He affirms that sustainable investing is in the interest of the investors as well as businesses. "It diminishes risks. The prices for raw materials are rising in general. So companies which are dependent on copper or fossil fuels run more risks." On behalf of investors who have long-term interests and pension funds among others, Sprengers tries to convince businesses that they should produce 10 times more efficiently in order to use less raw materials and, therefore, reduce risks. Currently, Sprengers' group is a small one. It invests around us $150 million now, but Sprengers expects to multiply it by 10, even though it does not profit from the fiscal-green-measure.

Investing in teak funds is another very popular, but rather dubious, 'green' way of saving that does not make use of the fiscal-green-measure. Thousands of people have bought or rented parts of teak-plantations in South America or Africa through financial institutions. The institutions who invest in these teak plantations argue that these funds would save the rainforests. However, the Dutch consumers association does not believe it to be a good idea, as the investments are not being supervised adequately. Their predictions about revenues are also far too optimistic. Furthermore, it is rather questionable whether the investments in teak plantations would save the rainforests after all. This is also the case with the teak plantation that the insurance company, Ohra is investing in, although its plantation complies with the criteria of the International Forest Stewardship Council, which deals with environmental aspects and the rights of the local people.

The real eco-lovers
Saving and investing via the fiscal-green-measure is more reliable. And it is more secure for the Dutch to bring their money to the three idealistic banks. These alternative banks comply not only with green criteria, but social criteria as well. Furthermore, all their money is invested 'clean' as opposed to 70 per cent of the money saved via the green funds of mainstream banks. In addition, these banks are interesting for people with a lot of ideals but little money: it only makes sense to invest money in the green funds if one has more than us $24,000 to spend, because the first us $600 of interest and profit on savings and investments is tax-free for everybody. One might expect that the three alternative banks are withering since the introduction of green funds in the big banks. But the opposite has happened: recently the Triodosbank even doubled its capital and multiplied its opportunities to invest in important green projects.

Michiel Bussink is a freelance journalist based in the Netherlands