The impact of rainforests’ biodiversity loss on Vanguard’s pharmaceutical portfolio

By Melissa Nguyen, Paul Rösler, Adrian Nagy, Georgios Liakopoulos, and Kristof Hamann

Summary of a final paper written as part of the course Sustainable Finance held by Rients Galema during the summer term 2020 at Utrecht University.

In the mid of a global health crisis, while the whole world is looking to the pharmaceutical industry to find the vaccine for COVID-19, investing into this industry seems more attractive than ever. But is the future of the pharmaceutical industry really so bright? Isn’t there a blind spot from the financial sector with regard to the profitability of this industry? We, a group of Banking & Finance Master-students at Utrecht University, quantify the financial risk to investments in the pharmaceutical industry stemming from an overlooked source: the loss of biodiversity. To this end we estimate how much the pharmaceutical portfolio of the Vanguard Group, one of the largest asset management companies in the world, could devalue as a result of rainforest deforestation.

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Sustainable Finance Lab

Grant from INSPIRE

The Sustainable Finance Lab has won a grant for the third call of the International Network for Sustainable Financial Policy Insights, Research and Exchange (INSPIRE). INSPIRE is an academic partner of the supervisors and central banking Network for Greening the Financial System (NGFS). The research team (Dr. Moutaz Altaghlibi and Drs. Rens van Tilburg) will work on Energy transition intersectoral dependencies under different monetary and supervisory policy scenarios. The research aims to investigate the effectiveness and efficiency of central bank interventions in the transition towards a low carbon economy. A general equilibrium model is used that captures the feedback loops across sectors through energy prices channel, distinguishing between sectoral green and brown assets. We intend to track policy effects on sectoral cash flows, return on invested capital, along with their effects on price levels, inflation and financial stability under different transition scenarios. The results are expected to be delivered on June 30, 2021.

All funded projects for INSPIRE can be found via this link.

Moutaz Altaghlibi

Debt as a shared responsibility: A present-day application of the debt jubilee.

By Arjo Klamer, Dirk Bezemer, Vera Lubbersen, Michael Milo, Irene van Staveren, Thomas Steiner, and others.

Resume of a position paper written as part of the three-year programme Finance and the Common Good (2019-2021) of Socires and the Sustainable Finance Lab.

Debts have always been a moral issue. They are laden with norms and values. Being in debt brings value judgments. Creating debt creates responsibility. The question is: are we treating debt properly today? Do debts and the relationships they imply need to be reassessed?

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Arjo Klamer

What strings to attach to governments’ equity support?

By Aleksandar Simić and Rens van Tilburg

The European Commission is working on a framework for equity support, the next generation of government support measures for companies. This blog discusses the US experience with equity support for car manufacturers in 2008, the current developments with the airline industry, as well as current different proposals of this nature from the leading think tanks.

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Aleksandar Simić

Digital central bank money doesn’t need laundering

Money is dirty. Literally. Empirical findings (also here and here) show that various strains of bacteria, viruses, and fungi live on our banknotes and coins. This disease-transmission channel is especially relevant now with the COVID-19 pandemic that killed thousands of people worldwide.

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Aleksandar Simić

The Corona Test For The Euro Zone

COVID-19 will test the new financial architecture of the euro zone. Since the euro crisis, new instruments have been developed, such as the European Stability Mechanism (ESM) and the ECB’s Outright Monetary Transactions (OMT). OMT being the bazooka the ECB created, but never needed to use, after Mario Draghi in 2012 pledged to do “Whatever it takes to save the euro”. The question now is whether policymakers are willing to use them.

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Rens van Tilburg

What tracking assets can do for the circular economy

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Asset tracking, which includes monitoring the identity, location and condition of individual components or products, can effectively extend the economic lifetime of products, thereby bringing a host of benefits to companies. This is according to new results launched today by the Community of Practice (CoP) – consisting of Rabobank, Allen & Overy, Schiphol Group, Avery Dennison on behalf of the NBA (The Royal Netherlands Institute of Chartered Accountants), Circularise, Everledger, Fairphone, Sustainable Finance Lab and Circle Economy.

Looking at the benefits of asset tracking for Product-as-a-Service entrepreneurs, the CoP sets out to tackle the complexity of asset tracking by uncovering the best technologies and mapping the financial and legal implications of the process. To ensure that the research outcomes reflected reality they teamed up with Fairphone, who aims to launch a Fairphone-as-a-Service to businesses using their recently launched, easy to repair modular Fairphone 3.

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Elisa Achterberg

The Platform Economy

In the past decade, tech companies became ubiquitous not only in our daily lives but also in the global economy. By the beginning of the 2010’s the list of largest companies in the world as measured by market capitalisation was dominated by oil producing companies and financial services.[1]  In 2019 however, seven out of the ten largest companies in the world are tech companies.[2] Along with rising economic power, their public image has shifted.

Digitization and the ‘sharing economy’ once went hand in hand, promising a new and better society. Inspired by San Francisco’s hippie culture, the entrepreneurs of Silicon Valley portrayed an image of do-gooders. But how did we get from the cozy sharing platforms of the early days of the internet to the imposing and omni-present corporate platforms of today? We  show that they are a logical result of the forces at work in the platform economy.[3] And these same forces lead these tech companies into the financial sector in search for (personal) financial data.

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Max van Son

Where does the money come from? Sources of finance for the European energy transition

We analyse supply and demand in major scenarios for the European energy transition until 2050. We then contrast it to the available sources of finance. The good news is that the private money is – in principle – available to finance the investments. The bad news however is that does not (yet) come in the forms and shapes that the European energy sector would need it. Changing the situation requires action from both the private and the public sector in the coming years[1].

We know how much we need

Many studies highlight the large amounts of investment into energy supply and demand that is required. An innovation-led sustainability transition requires both investments in invention and innovation as well as diffusion in a diversified financial system (Polzin et al., 2017). Our review reveals that under the individual investment and lending mandates the money is available. Many of the scenario-based analyses explicitly or implicitly neglect the sources of finance rather focusing on aggregate investment needs. For example McCollum et al. (2018, p. 591) state that ‘[…] given the nature of these models, we expressly address the question of ‘Where are the investment needs?’, not ‘Who pays for them?’’.

The money is available, but…

Our analysis further shows, on the one hand, that the volumes are available in the order of magnitude needed for a successful energy transition, especially when it comes to institutional investors. On the other hand, the numbers also reveal a qualitative mismatch. There is ample capacity to invest in scaling mature technologies, but there are shortages in (upstream) innovation finance, especially research, development and demonstration (RD&D) as well as venture capital and private equity. There the amounts are smaller, but the downstream impacts are not. There is no quantitative issue in freeing up these resources and a little will go a long way in solving the most urgent bottlenecks. However typically the types of finance suitable for funding experimentation are not so easy to mobilize in Europe’s highly institutionalized, bank based and regulated financial sector (Elert et al., 2019).

Who can do what?

It becomes apparent from our review that there is plenty of financing available especially in the later stages of technology lifecycle (see Figure 1) when the risks involved are comparably low. That means even within the current composition of equities, bond and alternative investments, institutional investors could engage in financing large-scale (low-risk) renewable energy projects (Röttgers et al., 2018). An effective reform of regulation and governance to allow these investors to engage more in unlisted long-term equity and debt will make ample funding available to scale the necessary technologies. These could be realised through intermediate channels such as green bonds or YieldCos but institutional investors also heavily engage in public equity markets another underutilized source (La Monaca et al., 2018).

In the earlier stages of the technology lifecycle (with considerable risks) the problem is more urgent. Here only hardly scalable solutions such as small and distributed finance and venture capital are available. These are also able to address significant early stage risks (see Figure 1). Larger ticket sizes and higher risks can only be handled by (state) investment banks and some private equity funds. State investment banks have the potential to scale-up their investments significantly. However, their main role would be in mobilising private finance through co-investments, signalling and education (Geddes et al., 2018).

Figure 1: Sources of finance for the energy transition (framework adapted from (Criscuolo and Menon, 2015))

Unlocking the potential

Our review yields three major ways of unlocking the potential of different sources of finance. First, initiatives promoting socially responsible investments from within the sector (such as pension funds and sovereign wealth funds) that base their investments also on ESG criteria could be scaled up (G20 Green Finance Study Group, 2016) An innovation-led energy transition needs risk-carrying capital in smaller tickets (Owen et al., 2018; Polzin et al., 2018). That needs freeing equity from individual retail investors or institutional funding from pension funds, insurance companies or sovereign wealth funds (Polzin et al., 2017). Finally, a recurring recommendation is the urgent development expertise with technologies, investment vehicles and transition paths.


Criscuolo, C., Menon, C., 2015. Environmental policies and risk finance in the green sector: Cross-country evidence. Energy Policy 83, 38–56.

Elert, N., Henrekson, M., Sanders, M., 2019. Savings, Finance, and Capital for Entrepreneurial Ventures, in: Elert, N., Henrekson, M., Sanders, M. (Eds.), The Entrepreneurial Society: A Reform Strategy for the European Union, International Studies in Entrepreneurship. Springer, Berlin, Heidelberg, pp. 53–72.

G20 Green Finance Study Group, 2016. G20 green finance synthesis report. UNEP Inquiry.

Geddes, A., Schmidt, T.S., Steffen, B., 2018. The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany. Energy Policy 115, 158–170.

La Monaca, S., Assereto, M., Byrne, J., 2018. Clean energy investing in public capital markets: Portfolio benefits of yieldcos. Energy Policy 121, 383–393.

McCollum, D.L., Zhou, W., Bertram, C., Boer, H.-S. de, Bosetti, V., Busch, S., Després, J., Drouet, L., Emmerling, J., Fay, M., Fricko, O., Fujimori, S., Gidden, M., Harmsen, M., Huppmann, D., Iyer, G., Krey, V., Kriegler, E., Nicolas, C., Pachauri, S., Parkinson, S., Poblete-Cazenave, M., Rafaj, P., Rao, N., Rozenberg, J., Schmitz, A., Schoepp, W., Vuuren, D. van, Riahi, K., 2018. Energy investment needs for fulfilling the Paris Agreement and achieving the Sustainable Development Goals. Nature Energy 3, 589–599.

Owen, R., Brennan, G., Lyon, F., 2018. Enabling investment for the transition to a low carbon economy: government policy to finance early stage green innovation. Current Opinion in Environmental Sustainability, Sustainability governance and transformation 2018 31, 137–145.

Polzin, F., Sanders, M., Stavlöt, U., 2018. Mobilizing Early-Stage Investments for an Innovation-Led Sustainability Transition, in: Designing a Sustainable Financial System, Palgrave Studies in Sustainable Business In Association with Future Earth. Palgrave Macmillan, Cham, pp. 347–381.

Polzin, F., Sanders, M., Täube, F., 2017. A diverse and resilient financial system for investments in the energy transition. Current Opinion in Environmental Sustainability 28, 24–32.

Röttgers, D., Tandon, A., Kaminker, C., 2018. OECD Progress Update on Approaches to Mobilising Institutional Investment for Sustainable Infrastructure.


Friedemann Polzin is Assistant Professor of Sustainable Entrepreneurship and Innovation at Utrecht University School of Economics (U.S.E.) and associated researcher at the Sustainable Finance Lab (SFL) | |

Mark Sanders is Associate Professor Economics of Transition and Sustainability at Utrecht University School of Economics (U.S.E.) and member of the Sustainable Finance Lab (SFL) | |

[1] Polzin, F., Sanders, M., 2019. How to fill the ‘financing gap’ for the transition to low-carbon energy in Europe? USE Discussion paper series 19-18. Available at:

Friedemann Polzin