Algemene voorwaarden
Expert Views
Expert Views May 2017


More compensation budgets needed for Groningen gas 
By: Anya Marcelis

Profundo recently published a report commissioned by Friends of the Earth Netherlands (Milieudefensie), in which the costs from earthquake-related damages caused by gas extraction in Groningen province (in the north of the Netherlands) were estimated. This report found that annual costs could potentially rise in the coming decade to over 1 billion euros. The NAM, the joint-venture of Shell and ExxonMobil producing the gas, and the Dutch government still underestimate the problem and budgeted only a fifth of this potential amount to compensate for all earthquake damages in Groningen. For property damages, actual compensatory payments until 2016 are already more than double the budgeted amount for the entire decade. Some of the most significant expenses are still to be paid out, related to real estate devaluation and reinforcement of residential and public property structures.

In addition, from concern for future earthquakes, the annual extraction threshold decreases every year. With costs going up while revenues are going down, our estimates indicate that potential compensation costs could rise to as much as 27% of the total revenues from gas extraction.

Estimating costs and revenues is hampered, however, as little financial transparency is required from the NAM. Limited information is provided on the costs and budgets of compensation and the information available is often published by organisations other than the NAM. Until now, the NAM has largely focused on providing information on damage types and compensation procedures. In contrast, little has been published concerning the actual costs of these processes, and what the NAM or the Dutch government’s expectations or plans may be if damages continue to occur at the present level in the future. This demonstrates a focus on short-term gains rather than potentially extensive long-term damages.

The non-transparent and inadequate budgets for damage compensation are worrying for the affected residents in the Groningen province. The NAM’s response to the report does not address these concerns and a response from the Dutch ministry of Economic Affairs is not yet available. For the residents, it is important that compensation budgets also cover unknown costs, such as healthcare and judicial costs, and costs born directly by residents. The NAM was recently found liable for costs related to psychological and other immaterial damages.

Overall, the government and the NAM should move from a passive to a pro-active approach regarding compensation for the damage done by the extraction of the Groningen natural gas. Financial transparency on costs and revenues of the gas extraction industry in Groningen should be improved and the execution of compensation procedures streamlined. Rather than allowing for a thorough and effective procedure, the present involvement of various government and private instances dilutes the process.

For more information on this topic, please check our new report.
You can also contact Anya Marcelis at




Nuclear alert for investors
By Michel Riemersma

Amid increased nuclear weapons budgets and serious nuclear tension between the US and North Korea, 7 July 2017 could surprisingly become a landmark date in global nuclear disarmament. From 15 June until 7 July, the General Assembly of the United Nations holds its second ‘Conference to Negotiate a Legally Binding Instrument to Prohibit Nuclear Weapons, Leading Towards their Total Elimination’. Depending on the results of the conference, investors might have to make some tough decisions on the exclusion of nuclear weapons producers from their portfolios.

During the first conference in March 2017, 132 countries attended the negotiations. Dutch peace organisation PAX concludes that “it is already clear that there is extensive support for a comprehensive prohibition of these weapons of mass destruction”. Essential for financial institutions is the possibility that the financing of nuclear weapons developers and producers might be forbidden by such a new instrument. The Draft Treaty, released on 22 May, prohibits State Parties to “Assist, encourage, or induce, in any way, anyone to engage in any activity prohibited to a State Party under this Convention”. The implementation of the Convention on Cluster Munitions by multiple states shows that ‘assistance’ can be interpreted to prohibit financing and investment of controversial weapons. The nuclear Treaty is likely to be interpreted in the same way. For example, the Austrian delegation expressed that “the prohibition on assistance would also apply to financing” nuclear weapons.

PAX’s annual ‘Don’t Bank on the Bomb’ study shows that financial institutions often rely on guidance from national governments and international regulations for drafting responsible investment policies. These financial institutions should be aware of the potential impact the UN Conference can have on their portfolios. The 2016 ‘Don’t Bank on the Bomb’ study found that “390 banks, insurance companies, pension funds and asset managers from 26 countries were found that invest significantly in the nuclear weapon industry”. PAX argues that “financial institutions provide crucial and necessary support to companies, so that they are able to carry out their projects. Most nuclear armed states rely on private companies for the production, maintenance and modernization of their nuclear weapons”. Similar to the stigmatising effect of the 2008 Convention on Cluster Munitions, PAX states that a ban on nuclear weapons will “limit the flow of financing to the companies involved in nuclear arsenals and thereby have a concrete impact beyond the countries that initially accede to the treaty”. Therefore, even though the five states recognised as having nuclear weapons by the Non-Proliferation Treaty - US, Russia, China, France and the UK - are not participating in the conference, the UN treaty might impact their nuclear arsenals.

Financial institutions should closely monitor the UN negotiations this summer and be prepared to dismantle their nuclear weapons portfolios.

For more information or research opportunities on this topic, please contact Michel Riemersma

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