Paul Tang is known as a colourful man in Brussels. He does not hide his opinion and is best known for his fight against the tax avoidance of large companies.
Since 2018, Tang has pushed his boundaries and in Europe, in addition to taxes, he is also concerned about data (protection) and sustainable financing. In July, the so-called Renewed Sustainable Finance Strategy (see also box) was published. In short, the European Commission is raising the bar for sustainable finance with this strategy. Tang asked why, but we also talk about the role of Europe and that of insurers.
The conversation will take place at the beginning of this week via Teams. After a 'summer' Sunday on which more than 100 mm of rain fell in one Frisian village, the first question arises whether he has mastered the art of good timing.

Does a summer full of floods, heat, forest fires and all kinds of other misery help to put strict measures on the agenda via the Renewed Sustainable Finance Strategy?

"Don't get me wrong, I'd rather see it differently, but it's good that people are becoming more aware of the impact of climate change on our economy and on our well-being. In the latest IPCC report of the United Nations, there is also a whole range of possible changes that do not make me happy. We don't just have to deal with more rainfall and that's not good news for insurers."

How was this new strategy received?

"Good. The plan has a lot of impact in the financial world. It is a renewed strategy. This means that we started earlier (in 2018) with the idea of making the financial sector more sustainable. We do not only focus on the environment, but also on people. Both the business community and the financial sector understand very well that they are part of a society and have an impact on their environment."

Is that awareness increasing?

"Yes, that awareness is growing. Nice in itself, but the translation into practice is often a completely different story. And that is exactly what the renewed strategy responds to. The financial sector can contribute to a better world, but also asks itself how. We started this strategy three years ago with more openness. Just show what the impact of your company is on people and the environment. An important initiative, but it cannot stop there. The so-called credit rating agencies must also include sustainability in their work. How do they do that? Are they doing that enough? Are there better comparisons possible? The same applies to insurers and banks. Do they take sufficient account of the financial consequences of sustainability? They will have to calculate what the effect of sustainability is on their business, but also what the effect of their company is on sustainability. It's about both sides and that's still relatively new. It has to get hands and feet."

What is needed is no longer words, but deeds?

"Indeed. Words without deeds eventually become cynical. Two years ago, a roundtable of American CEOs made a nice statement. They said that it is no longer the shareholder who is in charge: not the shareholder, but a stakeholder is now leading. All in all, they were many fine words, but for the time being they remain words. I have re-read what these American companies have done with that statement. The short summary is 'nothing'. But make no mistake, we too need to take a closer look at how we can really get these changes done. I think that's a great role for insurers. After all, they are very much concerned with the changes in our climate and shouldn't we expect them to try to prevent these changes as much as possible, for example in their investment policy?"

Don't insurers do that?

"Certainly. Some of them are even ahead of the curve, but we all have to run much faster."

Why does Europe want to be the best boy in the class?

"I don't know if you can say that. We have to deal with people and the environment differently. Europe therefore wants to operate sustainably in a broad sense. Our companies are no longer just profit machines. At the moment, Europe is at the forefront, but frankly, all climate change also requires action and power blocs such as China and America will have to go along with that."

You started the EU Action Plan on Sustainable Finance in 2018. Is it going fast enough?

"No, it never goes fast enough. We have known for more than twenty years that human actions have an impact on our climate. It's very slow, but better late than never I'll just say. Moreover, in politics you also have to be patient. Especially when it comes to a system change. We come from a time when the CEO led a company where profit was paramount, while now we are back on the road to companies that are a part of society. When we started in 2018, we already knew we had to have a long breath and honestly I'm quite optimistic. ESG (Environmental, Social & Govnernance), impact investment and all those terms are hugely popular at the moment. The willingness is great and that has pleasantly surprised me. We don't have to hit a wall. In America, the changes are much slower. The CEO of Black Rock writes a letter to other CEOs every year about what they should do, but Black Rock itself is still quite behind in its thinking and doing. They're not very progressive, I'll just say."

What is the biggest challenge when it comes to sustainability in Europe?

"Can it be two? The first is to give substance to financial reporting. There must be data that is comparable, so that consumers and investors know what they are buying. In other words, the impact of a company must be immediately clear, so that you as an investor can be sure that there is no child labour in your chain. In addition, the companies themselves must of course also know what their mission is and implement it. Such a mission is not about money – that is a condition – but about the contribution that a company has to society. I myself look at the remuneration structure when implementing it. If there is still rewarding in shares, I know enough. There are plenty of other ways of rewarding possible. Why can't you charge a CEO for the company's CO2 emissions?"

You are originally an economist. What do you have with sustainability?

"The same as many others. I believe that as humans we are responsible for leaving the planet in a decent way for our (grand)children. I can't do that alone. I can separate my papers at home, but if we really want to change something, we have to do it together."

What do you care about the most?

"Make it practical. We have been living in our current house since 2015. There is still gas in there and although I would like to get rid of it, I also wonder how? How are we going to get people off the gas? People should not be overwhelmed. I don't like a pointing finger. I believe more in an outstretched hand."

Under the Renewed Sustainable Finance Strategy , the rules for the financial sector will in any case be a lot more detailed and expanded (to environmental objectives such as water, a circular economy and biodiversity). Is that an outstretched hand or a pointing finger?

"An outstretched hand, without a doubt. As I sit with my house, so are the financial sector and the business community with their role. Companies and financial institutions have more impact than you and I do. That is why the strategy has been put in place to give the sector tools. Many companies are aware that things have to change, but the fact that you are aware does not mean that you immediately take action. That's why I gave the example of my house. I also don't know how and where to start. The other side of the coin is that we want to break with the 'not deeds, but only words'. How many investments in the fossil fuel industry does an insurer still have on its balance sheet? What is Shell's actual market value if oil fields have to be written off to meet the Paris targets? Measuring is knowing, but preferably through that outstretched hand."

One of the objectives of the strategy is to prevent green washing . Does it often happen that companies present their products more sustainably than they actually are?

"There are plenty of examples. No doubt about that. Yet I choose that this is not done on purpose. Of course there are bad guys, but I also see a lot of good will. I'd much rather focus on that."

What can Europe do? Any more legislation?

"I believe more in diversity. I see a number of frontrunners in the field of sustainability. Also among insurers. They can show other companies the right way. That works better than legislation, whether national or European. The task of legislation is to get the laggards to join the frontrunners. In short, we in Europe are focusing on two things. The first is focused on data. Just show what you have in house. If we can't measure, we can't know. The second is more in the field of taxonomy. What is sustainability? I will not bore you with details, but that regularly leads to a lot of discussion in Europe, especially between countries themselves. What is sustainable forestry? Does nuclear energy also fall under sustainability? Yes, those kinds of discussions also pass by, but that's part of it. I am often impatient, but not pessimistic. In the end, steps are taken."

Do you see a lot of difference between banks and insurers?

"Both are of good will, but insurers are more in the investment corner and banks also provide loans. They can play a much greater role in supporting SMEs. My baker on the corner, like me, doesn't really know where to start to become sustainable. His bank can help him with that."

And insurers?

"Like no other, they have to deal with sometimes unexpected changes in the climate. As with the floods in Limburg. I am not an insurer, but who protects the people in Valkenburg? Who stands up for them? Who helps them?"

Europe's sights are still very much focused on the investment side, while these floods also have a considerable European touch? Is that the next step? Looking at the insurability of flooding?

"I would find that logical. Again, I am not an insurer, but also in this area it would be nice if there were frontrunners who show how things can be done differently and better. There is certainly a role for Europe when it comes to raising or increasing dikes or giving space to water, for example, but how people can limit the damage as much as possible is not the first task for a legislator. Keep in mind that if floods occur more often, insurers cannot always count on the government as 'insurer of the last resort'. It is good that governments and insurers are discussing this after the floods in Limburg."

You say 'I'm not an insurer' a few times, but what would you do differently if you were an insurer?

"I would very emphatically opt for a mission in which sustainability is broadly anchored. The great task that an insurer has is not only to insure people against damage, but preferably to prevent that damage. That is why I would invest better and more sustainably. And I would change the reward structure. You don't have to judge a board on financial results. Just look at how much more sustainable the company has become under their leadership and count them on that."

Finally, let's be honest: are you confident that 'we' will achieve the Paris climate goals?

"It's going to be very hard work, but it's still doable."

(Text: Miranda de Groene - Photography: Ellen Jonges)