[MUSIC] In the circular economy, we make the shift from an ownership based model to a use base model. In such a model the supplier of the product becomes responsible for the effective reuse of the product and its components or materials. As a financial institution, we are convinced these are the companies of the future and there are many opportunities and advantages in financing the circular economy. I give you a few considerations. First of all, we would like to finance companies that are thinking about getting back scarce materials. Resources that in some instances are depleting and in that sense the shift from a linear to a circular business decreases credit risk. Secondly from a customer relationship point of view, it is also beneficial for companies to go circular because in most instances the relationship between the customer and the company will become longer lasting. Thirdly corporate's are increasingly being confronted with new laws and regulations, like for instance, the extended producer responsibility as stated by the EU. Fourth the financial sector itself is also confronted with more regulations like the EU taxonomy more and more of our investors will determine the sustainability of our loan book. Finally of course, we want to support our clients in their transition towards sustainability transforming linear business models to circular ones can play a pivotal role. Circular companies simply do more goods, they add more value to our economy and society at large. It seems like there are more than enough reasons to finance the shift towards a fully circular economy, however, financing circular companies is still lagging. Why is that, from the perspective of commercial banks circular companies in theory have many advantages. In practice, however, they come with many challenges, I give you some examples. First of all straightforward banks and innovative concepts are not a happy marriage, traditional financial assessment methods are not yet equipped to validate circular economy business models. For example banks often prefer assets as security for their lending but companies that sell product as a service will have contracts rather than assets. This makes those companies more challenging for banks to finance not to mention that a lot of circular companies are still in an image phase. Financing circular companies has relatively high transaction costs replication and standardization of contracts is needed to lower the transaction costs. Thirdly many circular solutions require collaboration across the value chain, an holistic approach is desirable and ideally banks should finance the entire value chain where they normally would finance single companies. This is, however, quite difficult to accomplish because risks and profits are not divided evenly within the value chain. The obstacles do not solely lie within the banks, think for example about the fact that most shareholders still look mainly at financial gains. So integrated reporting can be of major impact on this, it facilitates investors to base their decisions on more than just financial information. Secondly governments have set ambitious targets or circularity this requires action from policymakers. Lastly our current fiscal system favors conventional linear business models, of taxes in Europe 51% comes from labor and only 6% from resources. Taxes should be levied more on resources and less on labor, so tax resources not labor, we call this system change X-tax. So is short circular business is a promising concept for a sustainable future, there is however a more level playing field between linear and circular companies. And if we want to accelerate the transition towards a more sustainable economy we need to overcome these barriers in order to create at least a level playing field. Thank you for watching this. [MUSIC]
