A recent report by Impact Finance Belgium (IFB) highlights the pressing need for strategies to enhance impact investing in Belgium. The report details four strategic proposals aimed at unlocking private capital and government resources to accelerate sustainable and impact investments in the country. Inspired by successful initiatives in other European nations such as France, the Netherlands, and the UK, these proposals aim to reshape Belgium’s relatively nascent impact investing landscape.
Challenges in the Belgian Impact Investing Market
Belgium’s impact investing market, currently valued between €6 billion and €16 billion—accounting for 1-2.5% of assets under management—faces various challenges. Although it is expanding, the market remains small compared to its more populous neighbors. The IFB report emphasizes the need for greater institutional, retail, social investor, and government engagement to drive growth in this sector.
Four Strategic Proposals
Leveraging Dormant Assets
The first proposal focuses on utilizing dormant assets as guarantees to attract private capital. Drawing inspiration from the UK’s dormant asset scheme, IFB suggests that these assets could facilitate guarantees rather than serve as first-loss investments. The report discusses how dormant assets can be mobilized within Belgium’s legal and financial frameworks, with support from legal advisors like Freshfields to navigate potential legal challenges.
Creating Retail Impact Funds
The second proposal calls for the introduction of retail impact funds, making them accessible to Belgian retail customers who wish to invest in sustainable products. Regulatory and legal obstacles have historically hindered financial institutions from offering impact investment options to retail clients. IFB aims to create a specific retail impact fund to cater to this growing interest and stimulate market development.
Allocating Insurance and Pension Funds
The third initiative advocates for allowing a portion of insurance and pension funding to be directed toward sustainability and impact investments, similar to the French model of 90/10 funds. This proposal aims to align with Belgium’s existing legal framework while providing investors with options to support sustainable initiatives.
Implementing Green Budgeting at State Level
The final proposal suggests incorporating green budgeting at the government level, embedding sustainability frameworks into state-owned investment operations. IFB also recommends increasing the issuance of green sovereign bonds, akin to UK green gilts, to broaden investment opportunities for institutions and signal the government’s commitment to sustainability.
Potential Impact of the Proposals
The report estimates that implementing three of these four pilot initiatives could unlock between €2.5 billion and €4 billion in private investment. Although the retail market proposal is excluded from this estimate due to complexity, IFB’s co-founder and chair, Steven Serneels, remains optimistic. He believes that these initiatives can foster a favorable environment for increased impact investing in Belgium.
The Role of Government and Stakeholders
Government involvement is crucial for instigating a shift in investor mindsets towards green investment. By setting an example, the government can encourage broader adoption of sustainable practices among private investors. The IFB report reflects a collaborative effort involving consultations with key stakeholders, including the national financial regulator, institutional investors, and sector experts.
Conclusion
The recommendations outlined by Impact Finance Belgium present a clear roadmap for expanding the impact investing landscape in Belgium. By addressing existing barriers and leveraging successful strategies from other European countries, these proposals have the potential to significantly enhance Belgium’s position in the global impact investment market. As Serneels aptly noted, “The proof of the pudding will be in the eating,” indicating that successful implementation will depend on collective action and support from a wide range of stakeholders.
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