NETHERLANDS Trends and Developments Contributed by: Marc Habermehl, Roderik Vrolijk and Max de Heer, Stibbe
include provisions that prohibit investments in the defence industry, in particular if raised prior to the war in Ukraine. • Uncertain business cases – businesses in the defence industry typically have a limited cus - tomer base, primarily concentrated among governments. The demand is uncertain and heavily influenced by the geopolitical climate, leading to volatile valuations that can nega - tively affect (VC) investors’ exit opportunities. • Reputational risks – (VC) investors may be concerned of reputational risks, particularly if geopolitical tensions decrease and the public opinion on defence-related invest - ments shifts, leaving the (VC) investors with a substantial defence portfolio. • Limited availability of larger tickets – to scale up early-stage companies in the defence industry, larger amounts of venture capital are typically required. Obtaining such large-sized tickets from Dutch and European investors is often still challenging. The Dutch government acknowledges that it has an important role in ensuring a structural demand and, where possible, in removing bot - tlenecks for investments in the defence industry. The authors expect the Dutch VC market to con - tinuously focus on defence-related investments over the course of 2025. Continuous Focus on ESG Over the last couple of years, the government, society and companies have increased their focus on environmental, social and governance (ESG) aspects. The number of VC funds focus - ing on impact investment and climate tech has grown. Successful examples of such funds in the Netherlands are Carbon Equity, Infinity Recy - cling and SET ventures. ESG-related regulation applicable to VC funds has also increased. This began in 2021 with the entry into force of the
EU’s Sustainable Finance Disclosure Regula - tion (SFDR). The SFDR requires managers of VC funds to: • integrate sustainability risks into their invest - ment decision-making processes, and to be transparent with respect to products that target sustainable investment; and • update product documentation, including prospectuses, websites and ad hoc market - ing materials. In May 2024, the Netherlands Authority for the Financial Markets ( Autoriteit Financiële Markten ) emphasised that it will continue to monitor SFDR compliance by financial market participants, signalling tighter enforcement against non- compliant entities and highlighting a new phase of supervisory attention for accurate SFDR dis - closures. Amendments to the AIFMD The EU Second Alternative Investment Fund Managers Directive (AIFMD 2.0) entered into force on 15 April 2024, with a local transposi - tion deadline set for 16 April 2026, and it will impact EU funds and their managers. AIFMD 2.0 will introduce a range of stricter require - ments that necessitate significant adjustments in the compliance and operational procedures of alternative investment funds and their managers. Areas such as loan origination, risk management and liquidity management will become subject to increased scrutiny, with the aim of compel - ling alternative investment funds, including EU VC funds, to enhance their internal frameworks and practices to meet the new standards. While these changes may initially pose operational challenges, they are designed to promote great - er financial stability, enhance investor protection and mitigate systemic risks within the industry.
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