‘The Public-Private Partnership Has Evolved Into an Ecosystem’

Our discussion centers on how public-private collaboration can aid the sustainability transition. How important is this transition to your organizations?
Zonneveld: ‘At Invest-NL, the sustainability transition is deeply embedded in our organization. It is our raison d'être. We primarily invest in companies that can accelerate societal transitions in the Netherlands. Our goal is to create impact through our investments; achieving returns is merely a means to that end.’
Labe: ‘BNG has been investing in sustainability for over a century, though it was not called that 100 years ago. We were even then already financing sewer systems in the Netherlands. During World War I, we financially assisted municipalities with support for Belgian refugees. A century later, we are essentially still doing the same. We continue to support municipalities with societal challenges, such as caring for Ukrainian war refugees by offering municipalities, for example, a prepaid debit card to provide living expenses for refugees. We also finance sustainability projects for housing corporations, healthcare institutions, and other public entities.’
Voppen: ‘For ProRail, the sustainability agenda is also crucial. Rail transport represents sustainable mobility. Trains have a much lower emissions footprint compared to the average car. We also have a social role, for example combating transportation poverty. Many people do not own cars, and partly through our efforts, gain access to transportation.’

All three of you have extensive experience in public-private collaboration. How do you see your role in this, starting with Invest-NL.
Zonneveld: ‘Invest-NL operates as a public player in a private environment. We assess with every investment decision whether we indeed have a role to play. We step in when private funding is insufficient. We have developed a range of criteria that organizations must meet when approaching us. They, for example, need to show that they have been turned down by private financiers. But ultimately, you know very well when it is worth pursuing a deal and when not. Increasingly, strategic or even geopolitical considerations also play a role.’

Can you give an example of this?
Zonneveld: ‘We got involved with Mosa Meat, a company producing cultured meat in Maastricht, mainly for strategic reasons. A few years ago, they had a successful funding round that attracted significant attention, with actor Leonardo DiCaprio and Google founder Sergey Brin participating. At that time, Invest-NL did not join in because there was enough private money. However, because of European regulations, Mosa Meat’s go-to-market strategy involved accessing the United States via Singapore. In Singapore, the first question the company faced was: why is the Dutch state investment fund not involved? They found that suspicious. They see participation from us as a kind of stamp of approval. Another example of a strategic or geopolitical consideration: if a Dutch company has a funding offer from an American investor, we might need to participate to prevent the risk of the company moving to the U.S. We also observe that China is particularly keen to access Dutch technological knowledge. We now have a dedicated fund to intervene when foreign entities attempt to acquire Dutch tech companies.’

And the role of BNG? Could you expand on that?
Labe: ‘At BNG, our business model straddles the line between public and private sectors. As an intermediary between the international capital market and the Dutch public domain, we attract many private investors through our bonds, ultimately driving the transition in the public sector. We have excellent access to global private investors and are in constant dialogue with, for example, private asset managers. They have huge interest in sustainable investments but also have many questions. We assist them with these.
We listen to the private sector, who have clear demands, to facilitate the public sector through BNG’s bonds. For instance, we regularly update our ESG bond framework to meet the expectations and demands of private investors. Our framework is now designed so that there is an immediate link between available capital and the United Nations Sustainable Development Goals. This transparency shows how investor funds are invested in achieving these SDG targets. We are currently updating our framework because the world is constantly evolving, requirements change, and regulations are rightly becoming stricter.’

Can you provide an example of a successful public-private collaboration for ProRail?Voppen: ‘One notable example is a large-scale project we have in Vught, where we are working on deepening the rail tracks. Such projects require a huge number of heavy equipment—trucks, excavators, and so on. We wanted to operate this machinery electrically, which necessitates a massive charging station. Setting this up was quite a challenge. Technically, it is not particularly complicated, but from a regulatory perspective, it proved to be enormously complex. Ultimately, we achieved it through public-private collaboration. I should mention that this was only possible because we turned it into a pilot project. Framed as a pilot, suddenly many things became feasible. On the one hand, this is positive, but on the other hand, it is frustrating. Ideally, I did not want a pilot; I would have preferred specifically to be able to scale up and roll out successful projects in multiple locations.’

There are of course obstacles that hinder successful public-private partnerships. Could you share any examples?
Voppen: ‘A major challenge in public-private partnerships is finding the balance between standardization and fostering innovation. As an organization, we need standardization to scale up. For example, we do not want a different system for charging trucks every time. However, we also want to give companies the opportunity to innovate. So, it is a constant struggle to align innovative potential with the need for standardization.’
Zonneveld: ‘The law often lags behind what is happening in society. For instance, the current legislation hampers the acceleration towards a circular economy. Certain products cannot be reused after a certain point, also, plastic recyclers face financial difficulties due to competition from Asian plastic producers. Legal restrictions are set to be implemented in 2027, but for those recycling companies, that is going to be far too late.’
Labe: ‘The Netherlands has a very clear-cut division of roles, with the government on one side setting the rules and private parties on the other side having to comply. There is not enough genuine collaboration. In my home country of France, it is different. There, collaboration with the national interest in mind is much more common. The French government is very good at mobilizing and supporting the private sector, which often leads to faster regulation. I think we could learn a lot from that approach.’
Voppen: ‘Another issue I find challenging is navigating shifting political interests. While I can easily conduct a cost-benefit analysis to determine the best investment, I cannot always predict the political landscape. For example, should we invest inside or outside the Randstad, or prioritize freight lines over passenger lines? There often are different political interests at play in these decisions.’

Can you identify where progress has recently been made in the field of public-private partnerships?
Zonneveld: 'What I am pleased about is that we have taken steps to allow institutional capital, in other words money from pension funds specifically, to benefit the Dutch economy. The Dutch pension fund is enormous, but relatively little of it is invested domestically. We have managed to change that now. The pension funds have committed to substantially increasing their investments in the Netherlands, and we are going to assist them in doing so.’

Are there more opportunities to explore?
Voppen: ‘It is an interesting idea, for example, to finance infrastructure privately, thereby turning infrastructure into a revenue model. We in the Netherlands are more cautious about this than in other countries. We once suggested funding the extension of the North-South metro line with a surcharge on the ticket to the airport—a common practice in many countries—but it faced enormous criticism. In the Netherlands many of these topics are politically taboo.
We Dutch do not want to pay for toll roads, we do not want to pay extra to travel to Schiphol, and we do not want price differentiation... But I think there is potential for acceleration in these areas.’
Labe: ‘What I see lacking is a broad, systematic approach. We stopped financing small-scale projects because they were not the most effective way to create scale and maximize impact. One successful approach is the systematic handling of the social housing market, where there are clear national rules and guarantees. It is straightforward and broadly applicable, allowing for scale and impact. We suggested to the ministry that we need to adopt – for the energy transition – this model more widely, with clear frameworks and rules.’
Voppen: ‘In our day-to-day operations, we run into security of supply issues. If we put maintenance contracts out to tender and no one responds, trains in the Netherlands will stop running. There is often no market in the Netherlands, but the regulator assumes there is. In this industry, there often is only one customer and a limited number of suppliers, the result: first a price decrease, but then the price increases and the quality declines. It is not easy to break out of that spiral. What I would like is for us to be able to form strategic alliances to enable us to share the risks more easily.'

Your organizations all have a national profile, but of course the sustainability transition does not stop at the border. Does international cooperation of any scale exist?
Labe: ‘I believe we need to leverage each other’s knowledge internationally far more than we currently do. There is still a tendency to think nationally, but we have so much to learn from one another. For instance, we recently went on a study trip to Denmark, where they are quite advanced in the development and financing of local heating networks. We want to learn from them. On the flip side, we have our own insights to share internationally. A great example is our project with the municipal transport company in Amsterdam. We agreed on clear sustainability targets in the most recent funding round for the GVB. This is a great system that could work just as well abroad.’
Voppen: ‘Railways are starting to think more and more internationally. We cannot optimize the railway within a single country only; we need to think beyond borders. This is a significant shift. We have a fantastic railroad line to London, but it requires a great deal of international cooperation. The Eurostar could, without any additional investment, travel 20 minutes faster, but that would mean accepting that domestic trains in the Netherlands, Belgium, and France might have to run slightly slower.’

Executives are increasingly under public scrutiny. How do you handle this?
Labe: ‘The role of an executive has become more multidimensional, and it keeps expanding. For several years now it has no longer been solely about the number of loans extended; but about the impact you have. Governance, being a good employer, and customer satisfaction have all grown in importance. During the roadshows I often conduct, I have witnessed a shift from focusing exclusively on the financial part to focusing more on the purpose part. Personally, I welcome this change. It is much more interesting and fulfilling. I believe it is our duty as leaders to leave the world in a better state than what we found it.’
Zonneveld: ‘For me, the currently increased spotlight to an extent even adds to the fun of the job. I believe transparency and accountability are key traits for an executive. I also try to use the spotlights to spread the story of the organization. I purposefully seek out the media and the political forum to communicate what we are doing. So, I see it primarily as a tool to achieve our goals. On the other hand, high-profile positions attract attention and increase personal risk. But that is simply part of the job.’
Voppen: ‘What I find interesting is that the role of an executive has expanded. The entire public-private partnership has become an ecosystem with many different parties. As an executive, your responsibility now extends beyond just your own organization. It is about ensuring the entire ecosystem functions well. I see it as my responsibility to ensure there are enough technicians at the contractors and that inspections are done properly. If those elements do not work, the ecosystem does not function, and neither does our company. This expanded view of responsibility has been a real mind shift for me, highlighting how much more influence we now have.’
Labe: ‘I think we face more dilemmas than our predecessors did. Our clients have their own challenges too, like whether a housing corporation should prioritize building new homes or upgrading existing ones for sustainability. Both are pressing societal issues. These are complex dilemmas and I see it as our role to help them navigate towards the best solution.’

This article was published in Management Scope 07 2024.