Europe’s prosperity depends on private capital, and the biggest untapped source is hiding in plain sight: EUR 10 trillion of household bank deposits. Redirecting just five to 10 per cent into investments could substantially narrow the EUR 800 billion annual funding gap identified by the Draghi report – the investment Europe needs to competitively tackle climate change, geopolitical tensions and other pressing challenges.
That EUR 500 million to EUR 1 trillion is not necessarily idle by choice. Most households are likely to assume their individual savings are too small to make a difference. We need to prove them wrong.
From savers to investors: what will it take?
The demand is there and Europe’s household savings are there, but the pathways to mobilise household capital are not. Encouraging households to make the switch from savings to investing will take real effort from all parts of the system. Three key things come to mind.
To start with, we need to teach people how to handle money from an early age and ensure financial education is part of the core curriculum across Europe. People need to understand that while cash and savings may feel safe, inflation gradually erodes their purchasing power. And as pension systems change, individuals are also increasingly responsible for securing their own financial future.Financial education should also help people understand that every euro they invest has the power to make the world a better place. Building financial confidence early can help move people beyond simply saving to investing for the long term. In doing so, they can grow their wealth while supporting a greener, more inclusive and resilient economy.
We also need to fix the regulatory framework and establish accessible investment opportunities for European citizens. The Netherlands was once a frontrunner in offering private debt and private equity funds to retail investors. Now the rules are tightening, and that’s a backwards step. Protecting investors is important, but providing options is also necessary. The EU’s new Savings and Investment Union (SIU) is heading the right way, aiming to redirect funds from savings accounts into productive investments, so citizens can earn better returns, and businesses, including scale-ups and small entities get the capital they need to grow.
Tax policy can also incentivise sustainable investing by rewarding behaviour. The Dutch green fund scheme was a powerful tool that underpinned the huge success of Triodos Groenfonds and other green funds. Disappointingly, it was recently scrapped as part of a political deal, and currently, in some cases, Dutch tax rules now make sustainable investing less attractive. That’s exactly the wrong signal. Politicians need to think beyond their next election and consider what their policies mean for future generations.
I acknowledge that there is some pushback. The current energy crisis has seen some countries reverting to the use of coal, but that’s a short-term reaction. Because at the same time, the geopolitical lesson is that Europe must become more independent and that is putting solar, wind and storage firmly on the agenda. Beyond this, we face additional pressing challenges: biodiversity loss, a shortage of affordable housing and growing inequality. These challenges can feel overwhelming, but we must make it clear that every household can play a part in the solutions.
We can’t do it alone
Unlocking the hidden capital isn’t about asking households to take on more risk; it’s about giving them the knowledge, tools and incentives to put their savings to work. Households, asset managers, pension providers and politicians all have a part to play. No single manager can activate millions of households, but a united effort can by developing the propositions, promoting them and making the case to policymakers.
Several Dutch pension providers have committed to investing around 10 per cent of their assets in impact. They are developing their own knowledge and frameworks, and we increasingly receive concrete requests to help deploy their capital through funds or mandates.
I’m open to co-creating solutions with like-minded parties. If you’re working on the same challenge, let’s talk.
