‘Sustainability does not stand alone’

Is it feasible to pursue Europe's ambitious climate goals while competing with China and the US?

Baan: ‘If you read the Draghi report, the answer seems to be 'no.' Europe is already uncompetitive, and we are not sufficiently on track to achieve our sustainability ambitions. As for our competitive position, although Europe has seen less economic growth than the US over the past fifteen years, this is not the full picture. The economy in Europe is not per se struggling, and there are opportunities. It is precisely with sustainability that we can distinguish ourselves. Nevertheless, we must be realistic. There are other pressing issues in Europe, at least politically. Think of migration, defense, and the pursuit of greater cooperation and unity. It is possible that sustainability will lose out on certain fronts. Yet, it will not disappear from the agenda.’

Brinkman: ‘Abandoning Europe's sustainability ambitions is certainly not a solution. It is better to set realistic, achievable goals than no goals at all. Why should we not be able to take phased steps towards sustainability?’

Peters: ‘To achieve both ambitions, Europe must focus on the themes that can truly make an impact: innovation, circularity, and entrepreneurship. Implementation will never be without obstacles. But that does not mean we should abandon the long-term vision. Even though goals might not be immediately achievable, it remains important to stay the course.’

How do you see the role of private equity and venture capital in this dynamic?

Peters: ‘According to Draghi, Europe needs to invest in technologies of the future. The private equity and venture capital model is ideally suited for this: it combines risk-bearing capital with entrepreneurship, a strong network, and sector knowledge. This allows private equity and venture capital to finance innovation at an early stage and scale up quickly. The key to success lies in combining private and public resources, such as EU funds, national innovation programs, and guarantee frameworks.’

Baan: ‘At the same time, the sector needs consistent policy. With fluctuating government policy, making investment decisions become difficult. This also applies to private equity investors with an investment horizon of five to seven years. For some aspects of the energy transition, the course is clear, and investments will flow there naturally. But where that direction is lacking, stable policy is crucial.’

At the beginning of this year, the European Commission raised the threshold for CSRD reporting. As a result, fewer small and medium-sized companies (SMEs) are subject to the obligation. What are your thoughts on this change?

Baan: ‘Personally, I find it unfortunate. Many companies were prepared for the CSRD. They had set aside time, money, and capacity and were seriously working on ESG data, reporting structures, and governance. And now, because the European Commission has raised the threshold significantly, they are suddenly exempt from the obligation. The change also has a discouraging effect as entrepreneurs may react less enthusiastically to new regulations in future. In fact, companies have already been focusing on ESG in terms of content for some time where and to the extent that this was relevant. The challenge was mainly the uniform requirements and the extensive reporting procedures.’

Peters: ‘I find it a painful decision. We are noticing that companies are expending less energy on ESG data, simply because the urgency has disappeared. This is regrettable, as legislation and regulations actually helped to instil that discipline. Now, as investors, we must work hard to gain ESG insights – it is not tracked as standard.’

What would have been a better solution?

Baan: ‘In my opinion, the European Commission would have been better off simplifying the rules for all CSRD-regulated companies. That would have resulted in less regulatory pressure and less administrative hassle but still provided a clear basic obligation.’

Brinkman: ‘It would have been better if the reporting obligation had been relaxed with fewer requirements, simpler formats, and more room for proportionality. That would have allowed companies to get used to it and grow into it gradually.’

Peters: ‘This change risks ESG disappearing from the agenda at some companies. That would mean losing momentum. ESG needs to be gradually embedded in how we do business. That requires consistent policy, including from Europe.’

What do you think of the current regulatory burden?

Brinkman: ‘In my opinion, it is high. Regulations should not overshoot their goal – they should not result in ticking off lists. Currently, a huge amount of documentation must be submitted all at once. We try to explain to our companies why ESG is important, not only because it is mandatory, but also because it bears fruit and can lead to value creation. It helps if companies can focus on what is of relevance to their business activities specifically – what the legislation refers to as material issues.’

Do you consider sustainability a strategic competitive advantage?

Peters: ‘Absolutely. Sustainability is not something that stands alone; it is integrated into how we view value creation. It goes beyond saving energy or reducing CO₂ emissions. It is in risk management, in access to financing – think of sustainability-linked loans, where the interest rate on the loan depends on the borrower's ESG score – but also in how companies position themselves towards customers and employees.’

Brinkman: ‘Sustainability is nothing new. The United Nations introduced it 40 years ago. The definition at the time was: ‘We must meet the needs of the present without compromising the ability of future generations to meet their own needs.’ That is still relevant today. It is great when companies can actively contribute to sustainability, but that is not possible for every company. But understanding your own impact, such as emissions and how it can be reduced, is the minimum.’

Baan: ‘The same applies to every company: not paying attention to sustainability means you are falling behind. In Northwest Europe in particular, it has become a license to operate – without attention to sustainability, you will not be able to attract people, and ultimately, no customers or investors. That does not mean that sustainability is always a strategic competitive advantage, though. For some companies it can be, for example if sustainability is a core component of their proposition or if they actively contribute to the transition. But for most companies, it is a precondition. They must comply with legislation and regulations and with the social norms and values that we as investors also consider important.’

How does that translate into your investment decisions?

Baan: ‘ESG is now fully integrated into our investment process, from the initial memorandum to the exit. That also means that our investment team is responsible for it. My role as an ESG specialist is increasingly advisory. I often say that my position should eventually become redundant.’

Peters: ‘I completely agree. ESG is also an integral part of every investment decision we make. I sometimes compare it to other core functions within an organization, such as finance or legal. You do not hold separate meetings about those either.’

Brinkman: ‘We want everyone on the investment team to understand ESG and take it into account in their analysis. As the ESG team, we are there to brainstorm, provide insight, and give direction, but emphatically not to do all the work ourselves. That responsibility lies with the entire team. This also makes us more credible to entrepreneurs when it comes to ESG. We talk about opportunities, resilience, and value creation – not only about reporting or regulations.’

What impact do geopolitical developments such as armed conflicts, resource scarcity, and increasing European regulation have on your portfolios? And what are you noticing from the political shift in the US? In the first quarter of 2025, $8.6 billion flowed out of ESG funds globally, largely driven by the return of President Trump and his rejection of climate and social agendas.

Peters: ‘Of course, we are not very happy about the current developments. Yet, I want to take a positive approach. This outflow shows that investors are sensitive to marketing stories, while they need returns and results. It forces us to take a more business-like approach to investments, focusing on risks, opportunities, and long-term value. This makes ESG less ideological. You could see the political headwind as a catalyst for greater maturity. We are forced to act in a more focused and concrete manner. That is not necessarily a bad thing – on the contrary, it helps ESG move forward.’

Baan: ‘I notice that discussions about ESG sometimes do take a slightly different turn due to developments in the US. Some companies say: 'We might just ease off the pedal a little.' Fortunately, there are plenty of companies that are staying the course and that see sustainability as a structural core value. When it comes to issues such as diversity and inclusion, Europe has always been more level-headed than America. The polarization is less pronounced. Incidentally, the companies we invest in are mainly active nationally or in Europe. As a result, we do not notice much of this. For multinationals, of course, the situation is different.’

Brinkman: ‘Entrepreneurs are still enthusiastic about ESG. When we mention it, companies are usually positive. Some are further along than others. But there is a willingness to take steps. To support entrepreneurs, we recently held a webinar with ESG experts. We know that the value of ESG is sometimes difficult to express in financial figures. We provided concrete examples, such as how focusing on employee engagement can lead to a reduction in absenteeism of around three percent. Or that certain sustainability efforts can result in lower interest rates. Such insights are quite relevant to SMEs.’

Are you saying that Europe will stick to its sustainability course despite headwinds elsewhere in the world?

Baan: ‘Certainly, although you can see that a certain sensitivity has developed around some social issues. Think of diversity and inclusion, for example, which are more often discussed. Companies may be less explicit about these issues. But the fundamentals remain the same: caring for employees, supply chain partners, and other stakeholders remains important. At Waterland, we have always been cautious about ESG rhetoric. We prefer to show good results. That is also a better fit to our role as an investor.’

Peters: ‘I am convinced that Europe will maintain its leading position in the field of ESG. But the way we communicate will change. As I said, ESG will be approached in a more business-like manner. Increasingly, investors ask what concrete results ESG efforts deliver. Our own investment teams more often push for this too.’

Baan: ‘When it comes to sustainability and investing, there are two things at stake. First, as investors, we will always continue to seek value creation. Sustainability is playing an increasingly important role in this. It is becoming part of risk management, resilience, and strategy. In addition, as European organizations, we remain committed to our core values regarding responsible investing, of which sustainability is a part – even as the world around us changes.’

Matthijs Baan (born 1972)

has been head of ESG at Waterland Private Equity since 2022. He was co-founder and managing director of an ESG consultancy (now Holtara) for private equity firms. Previously, Baan founded Spring Associates, a consultancy and investment firm for energy and sustainability. His career began at Booz & Company, where he led strategy projects. Baan studied physics at the University of Amsterdam and earned an MBA from INSEAD.

Jet Brinkman (born 1982)

has been working as manager of investor relations and ESG at Holland Capital since 2021. Prior to that, she held various management positions at FloriWorld and Royal FloraHolland. Brinkman began her career at Schiphol Group, where she was, among other things, a strategic advisor. She studied Business Administration at Vrije Universiteit Amsterdam.

Jessica Peters (born 1983)

Jessica Peters is head of ESG at Argos Wityu, where she has been working since 2022. Prior to that, she was head of CSR & sustainability advisory practice at Accenture. She has worked at various companies where she was involved in sustainability and finance. Peters studied Political Science at Vrije Universiteit Amsterdam, where she also obtained a master's degree in Environment and Resource Management.