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Private Regulation and Government Authority

The policy diffusion of the RBC Agreements for the Financial

Sector

A Master Thesis by Tom Reininga (s1693913) for the MSc. Public Administration

Track Economics & Governance, University Leiden

Supervisor: Dr. N.A.J. van der Zwan

Second Reader:

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Content

1. Introduction

p. 5

1.1. RBC Agreements for the Financial Sector p. 5

1.2. Theoretical Insights p. 6

1.3. Research Question p. 7

1.4. Readers’ Guide p. 8

2. Theoretical Framework

p. 10

2.1. Private Regulation p. 10

2.2. Incentives for Private Regulation p. 12

2.2.1. Market-Based Approach p. 12

2.2.2. Political Institutional Approach p. 14

2.3. The Role of Institutions p. 16

2.4. Policy Diffusion p. 17 2.4.1. Constructivist Approach p. 18 2.4.2. Coercive Approach p. 19 2.4.3. Competition Approach p. 20 2.4.4. Learning Approach p. 21 2.5. Empirical Expectations p. 22

2.5.1. Policy Diffusion and Empirical Expectations p. 22 2.5.2. Private Regulation and Empirical Expectations p. 24

2.5.3. Overview p. 25

3. Methodology

p. 27

3.1. Introduction p. 27 3.2. Operationalization p. 28 3.3. Case Selection p. 31 3.4. Data Collection p. 32 3.5. Data Analysis p. 33

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4. Case Description

p. 36

4.1. Introduction p. 36

4.2. From International Norms to Industry-Specific RBC Agreements

4.2.1. The UNGPs and the OECD Guidelines p. 36

4.2.2. Translating the UNGPs and OECD Guidelines to the Dutch Context p. 38

4.2.3. A New Agenda for CSR in the Netherlands p. 40

4.2.4. Industry Risk Analysis and Multi-Stakeholder Agreements p. 42

4.2.5. Advocating the RBC Agreements in the EU p. 44

4.2.6. Summary and Chronological Table p. 44

4.3. The RBC Agreement for the Banking Sector

4.3.1. The State of Sustainable Investment in the Banking Sector p. 46 4.3.2. Towards a Multi-Stakeholder Agreement in the Banking Sector p. 47 4.3.3. Negotiations on the RBC Agreement for the Banking Sector p. 49 4.3.4. The RBC Agreement for the Banking Sector p. 49

4.3.5. Summary and Chronological Table p. 50

4.4. The RBC Agreement for the Insurance Sector

4.4.1. The State of Sustainable Investment in the Insurance Sector p. 52 4.4.2. Towards a Multi-Stakeholder Agreement in the Insurance Sector p. 53 4.4.3. Negotiations on the RBC Agreement for the Insurance Sector p. 54 4.4.4. The RBC Agreement for the Insurance Sector p. 55

4.4.5. Summary and Chronological Table p. 55

4.5. The RBC Agreement for the Pension Sector

4.5.1. The State of Sustainable Investment in the Pension Sector p. 57 4.5.2. Towards a Multi-Stakeholder Agreement in the Pension Sector p. 58 4.5.3. Negotiations on the RBC Agreement for the Pension Sector p. 60 4.5.4. The RBC Agreement for the Pension Sector p. 61

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5. Analysis

p. 63

5.1. Introduction p. 63 5.2. Constructivist Approach p. 63 5.3. Coercive Approach p. 64 5.4. Competition Approach p. 65 5.5. Learning Approach p. 66 5.6. Market-Based Approach p. 67 5.7. Political-Institutional Approach p. 68 5.8. Overview p. 70

6. Conclusion

p. 72

7. Bibliography

p. 76

8. Appendix

p. 87

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1. Introduction

1.1. RBC Agreements for the Financial Sector

The Responsible Business Conduct (RBC) agreements are multi-stakeholder agreements that aim to stimulate the adoption of the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD

Guidelines) in the business conduct of various risk sectors in the Dutch economy (SER, 2014). The UNGPs and OECD Guidelines present international accepted norms and standards on corporate social responsibility (UNHC, 2011; OECD, 2011). The UNGPs and OECD Guidelines are widely ratified, but the RBC agreements are the first time that businesses, government, labour unions and civil society cooperate on the implementation of the norms and standards to improve the sustainability of international supply-chains (OESO Richtlijnen, 2019).

The RBC agreements for the financial sector stand out because they have the highest market coverage of all the RBC agreements (KIT, 2020). The financial sector consists of the banking, insurance and pension sector. Although the three sectors share many similarities, there are also important differences in the investment strategies which has led to the development of three distinct RBC agreements (KPMG, 2014).

The banks, insurance companies and pension funds have in common, however, that they have become increasingly influential institutional investors during the past decades because of an increasing economic dependence on the performance of financial markets (Epstein, 2005). This dependence is a form of financialization which refers to “the increasing role of financial motives, financial markets, financial actors and financial institutions in today’s political economies” (Epstein, 2005: 3).

The financialization of political economies has led to the spread of financial flows through transnational supply chains which has increased the risks of investments by institutional investors in corporations or projects that abuse human rights or neglect environmental considerations (Vogel, 2010). As a primary source of capital for these corporations and projects, the Dutch financial sector is considered to share the responsibility for these abuses

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and violations (SER, 2014). To address this issue the Dutch government has initiated the development of RBC agreements for the financial sector (ibid).

1.2. Theoretical Insights

The RBC agreements are multi-stakeholder initiatives that operate in the area of transnational private regulation. They are transnational in the sense that they apply to operations that transcend national borders, private because the primacy rests with the sectors to ensure the implementation and regulation of the UNGPs and OECD Guidelines and, lastly, regulatory because they enforce certain standards (Vogel, 2010).

Systems of private regulation that enforce international standards have emerged in nearly all global industries (ibid). The dispersion of policies or institutional designs to various countries or industries is analysed through the concept of policy diffusion. The literature on policy diffusion holds that private regulation is like other policies and institutional designs subject to a process of interdependence with the policy choices of others (Dobbin et al., 2007). The RBC agreements are, as previously stated, a unique initiative in which businesses,

government, labour unions and civil society cooperate on the implementation of norms and standards. As such, they provide an interesting subject to study the process of policy

diffusion that led from generic international norms and standards to the development of sector-specific multi-stakeholder agreements.

The literature on policy diffusion has developed four dominant approaches that emphasize and focus on largely distinct aspects (ibid). Political scientists, sociologists and economist have primarily employed these approaches separately to study the process of policy diffusion (ibid). In contrast to the majority of the research on policy diffusion, this research follows the advice of Dobbin et al. (2007) to utilize a complementary approach that makes use of all four approaches to enable a wider investigation of the policy diffusion process of the RBC agreements. Moreover, the complementary approach will contribute to the development of the theory on policy diffusion by adding more research data which will narrow down the number of possible explanations for the diffusion of systems of private regulation in the Netherlands.

The literature on private regulation offers an additional explanation for the emergence and development of the RBC agreements for the financial sector. The emergence of private

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regulation is commonly attributed to the rise of economic globalization which has produced a structural imbalance between the power of global corporations and markets and the extent to which governments can sufficiently regulate them (Vogel, 2010). This explanation does, however, not precisely capture how the formation of specific private regulatory regimes has developed (Bartley, 2007; Cafaggi, 2014). The literature on private regulation puts forward two approaches that offer a more thorough explanation on the driving forces behind the emergence of private regulation.

The market-based approach in the literature on private regulation holds that social and political pressures as well as risks and uncertainties in the market produce collective action problems for private actors which they seek to resolve through constructing and engaging in systems of private regulation (Bartley, 2007). The political-institutional approach, on the other hand, considers private regulation to be a settlement in contention and negotiation between private actors and other stakeholders (ibid).

Both approaches, however, largely neglect the role of the government in the development of private regulation (Büthe, 2010). If the role of the government is examined at all in the literature on private regulation, it is mostly characterised with a permissive attitude that allows the development of private regulation (ibid). The growing public role of the private sector through private regulation has even prompted discussion in the academic literature if this development suggested the decline of the state (Haufler, 2003; Büthe, 2010).

The Dutch government, however, seems to have played a crucial role in the development of the RBC agreements for the financial sector. As previously stated, the Dutch government had initiated the development of RBC agreements for the financial sector (ibid). As such, the case of the RBC agreements for the financial sector provides an interesting opportunity to study the role of government in the development of private regulation.

1.3. Research Question

The main goal of this research is to produce insights into the ways that governments influence the development of systems of private regulation and explain the policy diffusion process of agreements on international standards for responsible business conduct. To this end I will study the case of the Dutch government advocating the RBC agreements in the financial sector. The corresponding research question is:

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The case of the Dutch government advocating the RBC agreements in the financial sector is a theory-guided case study because it aims to explain a particular event (Levy, 2008). The analysis of the main factors that led the Dutch government to advocate the RBC agreements focuses on the causal factors that explain the outcome. A suitable research method is

process-tracing because it allows for the connection between causes and outcomes by drawing on the implications taken from the theory on the causal mechanisms (Blatter & Haverland, 2012).

This research will utilize a document analysis to study the main factors that led the Dutch government to advocate the development of the RBC agreements. The document analysis will mostly consist of primary sources from the Dutch government. The research will in addition use official documents by organisations in the pension, banking and insurance sector. These primary sources will be supplemented by secondary sources from newspapers. The use of various sources for the purpose of triangulation will strengthen the credibility of the evidence (Bowen, 2009).

The main findings of this research suggest that the Dutch government was primarily driven by neoliberal ideas and economic concerns in its decision to develop RBC agreements for the financial sector. The neoliberal ideas informed the design of the RBC agreements and the role of the government in their development. The economic arguments were put forward to substantiate the decision for stimulating responsible business conduct through

multi-stakeholder agreements. The RBC agreements were thereafter primarily driven by coercive measures by the Dutch government and the subject of a process of negotiation between the sector and NGOs which was shaped by the bargaining power of the parties and the

institutional setting.

1.4. Readers’ Guide

The next chapter will present a discussion on the literature on private regulation, policy diffusion and the institutional characteristics of coordinated market economies. This chapter will serve as the theoretical framework and will conclude with empirical expectations on the outcomes of the research. The methodological chapter will present a guide for the execution

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of the research that includes an operationalization of the theory and an explanation of the types of evidence that are needed to prove the empirical expectations. Chapter 4 will describe the succession of events that led from the publication of the OECD Guidelines and UNGPs in 2011 to the finalization of the RBC agreements for the financial sector in 2018. The succession of events will be described chronologically as much as possible. The next chapter is the analysis which will analyse the reproduction of the succession of events in the light of the theory to test the empirical expectations. Lastly, the conclusion will present the research results and use the findings to reflect on the theory.

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2. Theoretical Framework

2.1. Private Regulation

Private regulation refers to regulatory frameworks by non-state, market-based actors that regulate global corporations and supply networks (Vogel, 2010). These non-state, market-based actors include collaborations between firms, industry associations, activist groups, technical experts and non-governmental organisations (NGO’s) (Büthe, 2010). Since a defining characteristic of private regulation is that it is not executed by national

governments or international organisations, the legitimacy and implementation of private regulation are not based on public authority (Cafaggi, 2011). As a result, the enforcement of private regulation is not accomplished through legally enforceable standards but through instances of soft law (Vogel, 2010). Soft law refers to instruments such as agreements and declarations that are not legally binding (ECCHR, n.d.). The violation of soft law does not, subsequently, lead to legal sanctions, but is answered with a social or market sanction (Vogel, 2010). Through agreements and declarations based on soft law that define standards for corporate conduct, private regulation enables and constrains behaviour for more or less every global industry, such as coffee, cocoa, diamonds, forestry, energy and financial

services (Büthe, 2010; Vogel, 2010).

Private regulation differs from earlier forms of self-regulation in four principal ways. Firstly, firms engage in self-regulation predominantly to decrease transaction costs whereas the implementation of private regulation requires expenditures on the part of firms in order to adhere to commitments on social and environmental issues (Vogel, 2010). Secondly, private regulation is often a response to political and social pressures and after it is implemented it often continues to be subject to public scrutiny (ibid). The effect of political and social

pressures by primarily activist groups will be further discussed below, but for this section it is important to note that private regulation is more likely to be politicized than previous forms of self-regulation (Büthe, 2010). Thirdly and related to the previous reflection, the

governance of private regulation involves external stakeholders instead of only firms (Vogel, 2010). Subsequently, the standards are more likely to be vulnerable to contestation than was the case in traditional forms of self-regulation (Verbruggen, 2014). Fourthly, the relationship between regulators and regulated is more complex in private regulation than

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with self-regulation (Büthe, 2010). In an ideal type of self-regulation, the regulators and regulated are one and the same. With private regulation, on the other hand, those who demand and set the rules are not necessarily the ones who have to comply to the rules (ibid). This will be touched upon more elaborately when the limitations of traditional

political-economic models to explain the emerge and development of private regulation will be discussed.

The literature on private regulation associates its emergence with several key developments. As stated in the introduction, the emergence of private regulation is mostly attributed to the rise of economic globalization which has produced a structural imbalance between the power of global corporations and markets and the extent to which governments can

sufficiently regulate them (Vogel, 2010). More specifically, global corporations and markets transcend national boundaries through transnational supply-chains with centres of

manufacturing located in developing countries (ibid). National laws have proved to be inadequate in regulating the behaviour of transnational corporations and various coordinating issues have emerged as a result of conflicting administrative and judicial systems (Cafaggi, Renda & Schmidt, 2013).

A second key development that is identified as having contributed to the emergence of private regulation is the widespread move to a neoliberal ideology that denounces

government intervention and instead encourages private regulatory interventions (Büthe, 2010). The emergence of private regulation is in addition to economic globalization and neoliberal ideology viewed as a response to the rise of a “global civil society” (Vogel, 2010: 70). The global civil society consists of an international network of non-governmental organisations (NGO’s) that seek to improve international market practices by exercising pressure on corporations and financial markets that are under public scrutiny in developed countries in primarily Europe and North America (ibid). A key objective of the global civil society is to socialize market practices in developing countries and make them more sustainable through the politicization of markets in developed countries (ibid).

The emergence and development of private regulatory regimes in an increasing number of global industries indicate the growing public role for the private sector (Haufler, 2001). This has prompted discussion in academic literature if the growing public role for private actors suggested the decline of the state (Büthe, 2010). However, research has demonstrated that

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the extent to which private regulation is effective depends on the degree to which it is integrated or complementary to public regulation (Verbruggen, 2014; Cafaggi, 2014; Vogel, 2010). For example, private regulation needs to adhere to host-country laws and the standards it imposes are often based on standards by national or international governance bodies, such as the standards and principles provided by the Organisation for Economic Cooperation and Development (OESD) and the United Nations (UN) (Vogel, 2010). As such, the emergence and development of private regulation is not a simple transfer of regulatory authority from the public to the private sphere, but has given rise to new regulatory regimes and forms of cooperation between public and private parties (Cafaggi, Scott & Senden, 2011).

2.2. Incentives for Private Regulation

The emergence of private regulatory regimes is thus commonly attributed to a neo-liberal ideology and a reaction to pressures arising out of a global civil society and regulatory gaps due to globalization (Vogel, 2010). However, these explanations do not precisely capture how the formation of specific private regulatory regimes has developed (Bartley, 2007; Cafaggi, 2014). As put by Bartley (2007: 298) on these generic explanations on the emergence of private regulation: “the need for new institutions simply becomes their explanation”. Two types of approaches in the literature on private regulation offer a more thorough explanation on the driving forces behind the emergence of private regulation: the market-based approach and the political-institutional approach.

2.2.1. The Market-Based Approach

A dominant approach to explain the emergence of private regulatory regimes is locating it in the interest of the market (Bartley, 2007). The most uncompromising advocates of this market-based approach regard private regulation to be the result of firms acting as proactive and socially responsible actors that seek to promote the common welfare (Martin, 2003). The more sophisticated forms of the market-based approach argue that private regulation is a response of firms to collective action problems (Elliott & Freeman 2003). More specifically, the market-based approach holds that social and political pressures as well as risks and uncertainties in the market produce collective action problems for private actors which they

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seek to resolve through constructing and engaging in systems of private regulation (Bartley, 2007).

The argument put forward by proponents of the market-based approach draws on rational choice institutionalism since it considers private regulation to be a strategic solution that generates benefits for the cooperating actors (ibid). Correspondingly, systems of private regulation are viewed as institutions that facilitate order and exchange to generate benefits that would be unattainable by firms acting on their own (ibid). As stated above, the main incentives for firms to engage in private regulation are collective action problems. The literature that utilizes a market-based approach to explain the emergence of private regulation has identified three main issues that are related to reputation, information and competition.

Firstly, issues related to reputation are often the result of social movements campaigns that draw public attention to scandals that severely damage the reputation of a firm or an industry if the reputations are dependent on each other (Klein, 1999). In the latter case, a common reputation problem arises because firms will be associated with the scandals of other firms in the industry (King et al., 2002). To address this collective action problem, firms might development or engage in systems of private regulation that helps them to improve the standards of conduct in the industry and demonstrate to the public that they take the issues seriously (Bartley, 2007). Moreover, if participation in the system of private regulation is conditional on certain commitments and investments, private regulation creates a “club good” that helps to distinguish between the firms in the industry that seek to improve standards and the firms that do not (Bartley, 2007: 307). Subsequently, free riders of the system of private regulation are excluded (ibid).

Secondly, the market-based approach also considers private regulation to be a strategic solution to problems with sharing credible information (ibid). Consumers have become increasingly concerned with the conditions of production, but the information provided by the firms themselves on the conditions in supply-chains lacks credibility (Verbruggen, 2014). Private regulation offers a possible solution for this because it often includes the

involvement of government, non-governmental organisations or an independent monitoring party which endows the information on production conditions with credibility (ibid).

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Thirdly, firms face incentives from competition to engage in private regulation because individual attempts to improve standards of conduct will put a firm at a market disadvantage (Bartley, 2007). However, if a few firms have good standards of conduct compared to the industry average, they have an interest to impose similar norms and corresponding

expenditures on their competitors (Vogel, 1995). A second instant when private regulation is driven by economic competition between firms is when sharing credible information and judging others’ integrity in an industry is deemed too complex and is therefore in need of a systematized approach (Milgrom et al. 1990). Systematized standards are imposed on the industry to make sure that no one is put at a market disadvantage (ibid). This creates a “level playing field” in the industry and provides a solution to collective action problems related to securing competitive advantages and managing competition (Bartley, 2007: 309).

2.2.2. The Political-Institutional Approach

The political-institutional approach is in part a response to the dominance of the market-based approach to explain the emergence of private regulation (ibid). Advocates of the political-institutional approach argue that the market-based approach pays insufficient attention to political processes and the extent to which private regulatory regimes are compromised outcomes (ibid). In contrast to the market-based approach, the political-institutional approach therefore considers systems of private regulation to be a settlement in political contention and negotiation between private actors, government and non-governmental organisations (NGO’s) (ibid). Rather than just firms, the political-institutional approach thus focuses on a wider array of actors. Moreover, where the market-based approach reduces politics to pressures on firms, the political-institutional approach uses a broader sense of politics and conceptualizes it as “struggles about the distribution of power in society” (Bartley, 2007: 309). The political-institutional approach is rooted in historical institutionalism and situates the emergence and development of systems of private

regulation in neoliberal globalization (Dezalay and Garth 2002; Bartley, 2007). The literature that uses a political-institutional approach identifies three main causes that explain the emergence and development of private regulation: institutional entrepreneurs, embedded bargaining and neoliberalism (Bartley, 2007).

Firstly, the political-institutional approach considers NGO’s and social movements to be important institutional entrepreneurs that seek to further their agenda’s through the

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development or rearrangement of institutional structures (Garud, Hardy & Maguire, 2013; Bartley, 2007). The majority of the studies that analyse the role of NGO’s as institutional entrepreneurs in private regulation regard them as the transporters of Western based values to developed countries through attempts at socialising market practices (Vogel, 2010). A growing body of research has also sought to illuminate the strategic actions of NGO’s to prioritise issues related to ESG-criteria on the agenda and their role in creating new institutional model such as certification regimes (Bartley, 2007). Social movements are in addition to NGO’s increasingly theorized as institutional entrepreneurs that seek

institutional change through protests and supporting alternatives to the status quo (Armstrong 2005).

Secondly, advocates of the political-institutional approach argue that the emergence and development of private regulation results from bargaining within a complex institutional environment (Bartley, 2007). The outcomes of the bargaining are often suboptimal solutions for the actors involved, for NGO’s and social movements would probably prefer stronger regulation and firms would favour symbolic commitments with less enforcement (Seidman 2003). Private regulation must therefore be viewed as settlements of bargaining between the strategies and counterstrategies of the actors involved (Barley, 2007). As stated above, this bargaining is located in a complex institutional environment that determines the opportunities that the actors have in the negotiation (ibid). Accordingly, political-institutionalists conceptualise the process of contention and negotiation about private regulation as “institutionally embedded agency” (Bartley, 2007: 311).

Thirdly, related to the notion of institutionally embedded agency is the understanding that the emergence and development of private regulation is connected to larger political and cultural developments (ibid). More specifically, researchers who use a political-institutional approach focus on the effect of a neo-liberal ideology on policy issues (ibid). Neoliberalism refers to a set of ideas that promote the faith in free markets and the abolishment of any obstacles to the flows of capital by the government (Goldstein, 2011). Although the influence of neoliberalism on domestic policy domains varies widely per country, the

influence of notions of free trade and the belief in the market as solution to social problems is prevalent on the international level (Hall and Soskice 2001; Bartley, 2007). Since private regulation draws heavily on international agreements and standards, the institutions that

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are subsequently developed are mostly inclined to be directed towards the market instead of the government (Bartley, 2007).

2.3. The Role of Institutions

The discussion above has highlighted the importance of institutions in private regulation. However, the research that takes the role of institutions in the emergence and development of private regulation into account consists mostly of single-case studies that highlight the importance of particular institutions in the development of specific systems of private regulation (Büthe, 2010). Subsequently, a general theory or overview on the role of institutions in the literature on private regulation is missing. Following the example of Van der Zwan, Anderson and Wiss (2019) in their study on institutional preconditions and sustainable investment practices, this master thesis will use the Varieties of Capitalitalism (VoC) typology to identify institutional characteristic of different systems of political economy and their influence on the regulation of market practices.

The VoC approach provides a framework for the institutional differences and resemblances in developed economies that influence the ways in which firms cooperate with each other and other actors (Hall & Soskice, 2001). Hall and Soskice (2001) identify five areas that are of influence on the way cooperation between firms and between firms and other actors takes place: industrial relations, training and education, corporate governance, inter-firm relations and relations with employees. On the basis of these five areas, two different types of market economies are distinguished by Hall and Soskice (2001): liberal-market economies (LME’s) and coordinated market economies (CME’s). In LME’s, the political economy is primarily regulated through market mechanisms (ibid). CME’s, on the other hand, rely on non-market, state-organized forms of coordinating the interaction between firms and between firms and other actors (ibid). The Netherlands is a coordinated market economy (Van der Zwan, Anderson & Wiss. 2019). To serve the purpose of this research the remaining part of this section will focus specifically on the characteristics of CME’s.

These market mechanisms that characterize LME’s are uncoordinated wage bargaining, a minimal amount of state intervention through welfare provision, the financing of

corporations through the stock market and the prominence of general skills training (Van der Zwan, Anderson & Wiss. 2019; Hall & Soskice, 2001). CME’s, on the other hand, rely on

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market, state-organized forms of coordinating the interaction between firms and between firms and other actors (ibid). Contrary to LME’s, CME’s are therefore characterised by a state that organizes social protection, institutionalized and coordinated wage bargaining, the training of specific skills and the financing of corporations by banks (Van der Zwan, Anderson & Wiss. 2019; Hall & Soskice, 2001). LME’s and CME’s each stand at the end of a spectrum to categorize political economies, with many varieties of national political economies that are somewhere in between (Hall & Soskice, 2001).

2.4. Policy Diffusion

Private regulation is subject to policy diffusion which refers to the interdependence of policy choices across countries (Braun et al., 2007). In the case of the Agreements on responsible investment, the incorporation of norms on responsible investment by the Netherlands is shaped by transnational organisations such as the OECD and the UN that have developed normative frameworks (SER, 2014). The phenomenon of policy diffusion is not new as pointed out by Dobbin et al. (2007) who refer to the spread of participatory democracy in the nineteenth century and the expansion of Keynesian models of economic policy in the twentieth century. Policy diffusion in the late twentieth century and the twenty-first century is, however, distinctive from these earlier examples of policy interdependence by the

increasing rapidity in which it occurs and its wide geographical scope (Dobbin et al., 2007). The expanding scope and impact of policy diffusion has prompted scholars to increasingly investigate particular forms and trajectories of policy diffusion, rather than its general trends (Braun et al., 2007). Sociologists, political scientists and economists have each from their own specific theoretical and intellectual traditions sought to explain the diffusion of particular policies (ibid). This has led to the development of four dominant theories that emphasize and focus on largely distinct aspects of the policy diffusion process (Dobbin et al., 2007). The four dominant theories that can be distinguished are constructivist, coercive, competition and learning theories (ibid).

As previously stated, these theories have been primarily employed separately and,

subsequently, different accounts with various explanatory emphasis of the same empirical phenomenon have arisen (ibid). In contrast to the majority of the research on policy

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approach that makes use of all four approaches to enable a wider investigation of the process of policy diffusion. Accordingly, this section of the theoretical framework will elaborate on each of the four approaches rather than a single dominant one.

2.4.1. Constructivist Approach

The constructivist approach to policy diffusion is rooted in sociology and regards public policies as a social construct (Strang, 1991). More specifically, the constructivist approach draws on the idea of a growing global political culture that provides a normative framework that determines notions of appropriateness (Strang & Meyer, 1993). These notions of appropriateness regarding, for example, social goals are the pivotal driving force of policy development and adoption instead of logical, empirical evidence (ibid). The examples of human and educational rights serve frequently to illustrate the decisive influence of ideas on policy diffusion. Meyer et al.’s (1977) study demonstrated that the adoption of educational rights took place regardless of the level of economic and political development. Likewise, human rights were adopted regardless of the occurrence of human rights violations in a given country (Boyle & Preves, 2000). The explanation according to constructivist theorists lies in the fact that education and human rights were presented as fundamental to

modernity and progress (Dobbin et al., 2007). Countries therefore adopted these rights to show commitment to global norms and its idea of progress (ibid).

Given the crucial role of ideas in policy diffusion, it is key to understand the process through which ideas become dominant and go on to shape policy diffusion (ibid). The core concept used by constructivist in this regard is social acceptance. Constructivist theorists identify three mechanisms that produce social acceptance, namely a follow the leader principle, advocacy by experts and the acknowledgement of similarities between countries (Haveman, 1993; Strang & Meyer 1993; Dobbin et al., 2007).

Firstly, the follow the leader principle holds that policy makers are inclined to follow the example of countries that are successful (Haveman, 1993). This explains, for instance, why countries mimicked many policies of the United States, since it was perceived as the most successful country (Dobbin et al., 2007). Secondly, advocacy by experts may give an idea authority and, subsequently, help it to become dominant (Strang & Meyer 1993). The authority of expert advice is based on the assumed scientific objectivity of such an advice,

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which makes it a strong mechanism for the advancement of a certain idea and is often used by policy makers to substantiate a certain policy (Dobbin et al., 2007). Recent studies, however, have increasingly scrutinized the taken for granted authority of expert groups and investigated how expert groups compete for the advancement of policy ideas (ibid). Thirdly, countries are more likely to adopt policies from countries that they perceive to be similar to their own (ibid). These similarities may be based on cultural linkages or comparable

structural organisations (Strang & Meyer 1993).

The three mechanisms share the notion that ideas drive the convergence of policies through a process of isomorphism (Dobbin et al., 2007). In contrast to the learning approach to explaining policy diffusion that will be elaborated upon further down below, the

constructivist approach regards theory and rhetoric to be the main drivers of changes in ideas instead of an objective and logical deduction (ibid).

2.4.2. Coercive Approach

The coercive approach to policy diffusion highlights the importance of force and the

manipulation of incentives (Dobbin et al., 2007). Hard coercive mechanisms refer to military force, but most scholarly attention has been on soft coercive mechanisms and analyses the effect of changes in incentives (Shipan & Volden, 2008). Accordingly, this section of the theoretical framework will focus on soft coercive mechanisms.

The literature identifies three mechanisms through which soft coercion is exercised: conditionality, political leadership and hegemonic ideas (Dobbin et al., 2007). Firstly, conditionality occurs when there are requirements attached to the provision of a certain good or service (ibid). A principal example of conditionality are the loans provided by the World Bank to developing countries (Mosley, 1995). In the case of conditional loans by the World Bank, developing countries accept financial aid in return for promoting certain political and economic reforms in their countries that are often based on a neo-liberal ideology (Dobbin et al., 2007). In this way policies that advance neoliberalism spread from primarily powerful Northern countries in the EU and Northern-America to developing countries (Vreeland, 2003).

Secondly, policy leadership refers to the influence that powerful players exercise on policy diffusion by shaping the rules of the game (Dobbin et al., 2007). More specifically,

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coordination between actors such as countries requires a common framework for

addressing an issue or the development of a shared institutional body which is often shaped by the most powerful players (ibid). For example, the organisational structure of the

European Central Bank and its policies are strongly influenced by Germany and its political structure (Garrett & Weingast (1993). As this example illustrates, the influence on policy diffusion through policy leadership is not necessarily through sanctions but can also be based on following a well-tested model (Dobbin et al., 2007).

Thirdly, hegemonic ideas shape policy diffusion, as argued in the constructivist approach, because it influences sense-making and the formulation of solutions (ibid). In contrast to the constructivist approach, the coercive mechanism underlines the importance of powerful actors rather than only the persuasiveness of the idea itself (Mintrom & Vergari ,1998). As has become apparent from the discussion of the coercive approach, the three mechanisms hold in common the importance of power which enables powerful countries or institutions to impose policies on weaker actors (Dobbin et al., 2007). Moreover, the three mechanisms share a focus on the effect of outside sources of incentives or ideas (ibid).

2.4.3. Competition Approach

The competition approach to explaining policy diffusion also focuses on incentives, but rather than the exercise of (political) power the incentives are from economic competition (ibid). The object of analysis in the competition approach is economic competition between countries, instead of competition between firms as with the market-based approach found in the business administration literature on private regulation (Vogel, 2010; Dobbin et al., 2007). Governments seek to optimise their policies to gain competitive advantages at the cost of their direct competitors (Dobbin et al., 2007).

The research that utilizes the economic approach to policy diffusion has found, broadly speaking, that developed countries adopt policies to promote market harmonization, whereas developing countries compete for attracting foreign investments through

favourable conditions in “a race to the bottom” (Korten, 1995; Dobbin et al., 2007: 458). This means that developed countries are inclined to follow suit with competitors to adopt

policies that facilitate market harmonization (Dobbin et al., 2007). Developing countries, on the other hand, will adopt policies that reduce restrictions for foreign investments to keep

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an edge on the competition with regards to attracting capital (ibid). Although the

competition approach does not identify as clear mechanisms through which policy diffusion is driven as the previous two approaches, its central claim is that governments anticipate or respond to the policy choices by their competitors to gain competitive advantages

(Wasservallen, 2018).

2.4.4. Learning Approach

The learning approach argues that policy diffusion is mainly the result of newly developed evidence that changes the view of what policies are most effective (Dobbin et al., 2007). The learning approach draws on a rational choice theory and holds the view that policymakers engage in cost-benefit analyses to determine their policy choices (ibid). The lessons may be drawn from the experiences of the actors in question themselves or from other parties (Levy, 1994). A crucial aspect of the learning process in the learning approach is that policies are only adopted when the views on a particular policy have actually changed (Dobbin et al., 2007). This contrasts with the constructivist approach which holds the view that policies are not necessarily adopted because of a belief in the effectivity of a policy but, rather, are adopted to signal commitment to dominant ideas (ibid).

The literature that uses a learning approach distinguishes between three mechanisms for learning that explain the diffusion of policies. First, a political science perspective on the cumulation of social knowledge is put forward which stresses that learning is the result of getting aquatinted with a shared body of expert knowledge (Haas, 1980). The information in this “shared fund” is mostly technical information about which there is consensus among experts that it constitutes effective policy options (Dobbin et al., 2007: 460).

Secondly, the Bayesian learning mechanism rooted in economics approaches learning as an iterative process in which policymakers learn by adding new evidence to earlier knowledge and, subsequently, continue building a body of knowledge (ibid). By continuously developing the body of knowledge the false hypotheses are rejected and the strong, consistent evidence leads to the formulation of a few theories on which policy makers can draw for their policy choices (ibid).

Thirdly, the perspective of channelled learning draws on the iterative process put forward by the Bayesian learning mechanism but adds to it that information is socially processed (Hall,

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1993). The channelled learning mechanism is therefore more in line with the constructivist approach which also stresses that actors are characterised by a bounded rationality and are influenced by their environment (Dobbin et al., 2007). Correspondingly, the channelled learning mechanism holds that actors are more inclined to learn from information that is produced by members of the same network and from certain dominant theories instead of reviewing all available knowledge (ibid).

2.5. Empirical Expectations

The aim of this research is to explain the main factors that have led the Dutch government to advocate the development of Agreements on international responsible investment in the financial sector. This research is linked to the literature on policy diffusion and the literature on private regulation. Both bodies of literature put forward several explanations for the emergence and development of systems of private regulation. This section of the master thesis will formulate empirical expectations based on the discussion of the literature.

2.5.1. Policy Diffusion and Empirical Expectations

The literature on policy diffusion consists of four dominant approaches to explain the process of policy diffusion. As previously stated, this research will use a complementary approach that makes use of all four approaches to enable a wider investigation of the policy diffusion process of the Agreements on responsible investment.

The constructivist approach holds that ideas are the pivotal driving force in policy diffusion and that research should analyse the mechanisms through which ideas become socially accepted and dominant (Dobbin et al., 2007). These three mechanisms are the follow the leader principle, advocacy by experts and the acknowledgement of similarities between countries (ibid). In the case of the Agreements on responsible investment, we should

therefore expect that ideas stressing the capacity of the market to provide solutions to social problems and other ideas associated with private regulation and neoliberalism will feature heavily in the reasoning of the Dutch government to advocate the development of the Agreements. With regards to the mechanisms, we should expect that the process through which these ideas have become dominant will refer to 1.) examples that are perceived as successful, 2.) the advice of expert groups, and/or 3.) the policies of countries that share similarities with the Netherlands.

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The coercive approach highlights the importance of force and the manipulation of incentives in policy diffusion and identifies three mechanisms through which coercion is exercised: conditionality, political leadership and hegemonic ideas (ibid). In the case of the Agreements on responsible investment, we should therefore expect that the Dutch government has sought to advance the development of the Agreements by influencing the behaviour of other actors through the manipulation of incentives. More specifically, we should expect that the Dutch government has sought to advance the development of the Agreements through 1.) the attachment of conditions or sanctions on whether or not parties participate, 2.) exercising influence on the framework or form in which the Agreement is developed, and/or 3.) exercising influence on the ideas that are developed in the Agreement.

The competition approach focuses on economic incentives to explain the process of policy diffusion (Dobbin et al., 2007). This approach holds that the critical driver in policy diffusion is governments anticipating or responding to the policy choices by their competitors to gain competitive advantages (Wasservallen, 2018). In the case of the Agreements on responsible investment, we should expect that 1.) the Dutch government is mainly driven by economic concerns, 2.) that it seeks to gain advantages over its competitors, and/or 3.) the

development of the Agreements takes place in reference to the policy decisions of competitors.

The learning approach argues that policy diffusion is mainly the result of a cost-benefit analysis that makes use of scientific and objective evidence to determine the most effective policy options (Dobbin et al., 2007). The literature that uses a learning approach

distinguishes between three mechanisms: a political science perspective on the cumulation of social knowledge, a Bayesian learning mechanism and channelled learning. In the case of the Agreements on responsible investment, we should expect that the Dutch government seeks to advance the development of the Agreements by substantiating it with a cost-benefit analysis that uses (new) scientific evidence on issues regarding sustainable

investment and private regulation. Furthermore, this scientific evidence is the result of 1.) technical information about which there is consensus among experts, 2.) an iterative process in which policymakers continue building a body of knowledge, and/or 3.) an iterative process that is shaped by the evidence that is produced by members of the same network and from certain dominant theories.

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2.5.2. Private Regulation and Empirical Expectations

This research makes use of all four approaches to policy diffusion to produce an analysis that shines light on the different aspects of the development of the Agreements on responsible investment, rather than one dominant one. Still, the combination of the four different approaches has its limitations because it is focuses mainly on governments as key actors and largely neglects the role of other actors such as firms, NGO’s and social movements.

Although this research focuses specifically on the role of the Dutch government, it is important to analyse the role of other actors as well to produce a comprehensive study of the development of the Agreements. The literature on private regulation complements the literature on policy diffusion in this regard.

The market-based approach sees the emergence of private regulation as a response of firms to social and political pressures as well as risks and uncertainties in the market that produce collective action problems (Bartley, 2007). These collective action problems are related to issues of reputation, credible information and competition. The private actors involved in the development of the Agreements on responsible investment are the pension funds, banks and insurance companies. From a market-based approach we should expect that the efforts and choices of these actors to develop or engage in a system of private regulation to provide a solution to collective action problems is the main driving force in the development of the Agreements. If this is true, the Agreements have been developed because they present a solution to 1.) issues related to the reputation of pension funds, banks and insurance companies, 2.) issues related to the provision of credible information on conditions in the supply-chains of the companies in which pension funds, banks and insurance companies invest, and/or 3.) issues related to competition and creating a level playing field in the industry.

The political-institutional approach considers systems of private regulation to be a

settlement in political contention and negotiation between private actors, government and NGO’s (Bartley, 2007). The literature that uses a political-institutional approach identifies three main causes that explain the emergence and development of private regulation: institutional entrepreneurs, embedded bargaining and neoliberalism (Bartley, 2007). From the perspective of the political-institutional approach we should therefore expect that the Agreements constitute a compromised outcome of contention and negotiation between the

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actors involved. If this is true, this compromised outcome has been reached through 1.) the efforts of NGO’s and social movements as institutional entrepreneurs that seek to develop or rearrange institutional structures, 2.). the institutional environment of the Netherlands that determines the opportunities that the actors have in the negotiation, and/or 3.) a neoliberal ideology that promotes the idea that markets can provide solutions to social problems.

2.5.3. Overview

The table below provides an overview of the empirical expectations based on the different approaches. The approaches are presented separately, but in practice the case could display a mixture of the approaches. In the ‘Methodology’ chapter, the empirical expectations will be operationalized to use them in the process-tracing of the development of the RBC agreements for the financial sector.

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Policy Diffusion Private Regulation

Theoretical Approach Mechanisms Theoretical Approach Mechanisms

Constructivist Approach: Crucial role for ideas that stress the capacity of the market to provide solutions to social problems and other ideas associated with private regulation and

neoliberalism.

1.) Reference to examples that are perceived as successful

2.) The use of expert advice

3.) Reference to the policies of countries that share similarities with the Netherlands.

Market-Based Approach: The Agreements are mainly the result of efforts and choices by the pension funds, banks and insurance companies to

develop or engage in a system of private regulation that provides a solution to their collective action problems.

1.) Solution to issues related to the reputation of pension funds, banks and insurance companies,

2.) Solution to issues related to the provision of credible information on conditions in the supply-chains of the companies in which pension funds, banks and insurance companies invest

3.) Solution to issues related to competition and creating a level playing field in the industry.

Coercive Approach:

The Dutch government seeks to advance the development of the Agreements by influencing the behaviour of other actors through the manipulation of incentives.

1.) The attachment of conditions or sanctions on whether or not parties participate

2.) Exercising influence on the framework or form in which the Agreement is developed

3.) Exercising influence on the ideas that are developed in the Agreement

Political-Institutional Approach: The Agreements are a

compromised outcome of contention and negotiation between the actors involved.

1.) NGO’s and social movements are crucial actors as institutional entrepreneurs that seek to develop or rearrange institutional structures,

2.). The Agreements are shaped by the institutional environment of the Netherlands which determines the opportunities that the actors have in the negotiation

3.) The Agreements are shaped by a neoliberal ideology that promotes the idea that markets can provide solutions to social problems.

Competition Approach: The Dutch government is driven by economic concerns and it seeks to gain

advantages over its

competitors by means of the Agreements.

1.) The Dutch government is mainly driven by economic concerns

2.) The Dutch government seeks to gain advantages over its competitors

3.) The development of the Agreements takes place in reference to the policy decisions of competitors

Learning Approach:

The Dutch government seeks to advance the development of the Agreements by substantiating it with a cost-benefit analysis that uses (new) scientific evidence on issues regarding sustainable investment and private regulation

1.) The use of technical information about which there is consensus among experts

2.) Learning through an iterative process in which policymakers continue to build a body of

knowledge

3.) An iterative process that is shaped by the evidence that is produced by members of the same network and from certain dominant theories.

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3. Methodology

3.1. Introduction

The aim of this research is to explain the main factors that have led the Dutch government to advocate the development of RBC agreements in the financial sector. The corresponding research question is:

What are the main factors that explain the Dutch government advocating the development of responsible business conduct Agreements in the financial sector?

The dependent variable (variable X) is known in this research. This means that it is already known that the Dutch government was the principal advocate for the development of tailor-made Agreements on responsible investment in three industries in the financial sector. The focus of this research is thus on the elucidation of the independent variable (variable Y) to explain the process that caused the dependent variable. The independent variable in this research constitutes the main factors that explain the Dutch government advocating the development of the Agreements. Process-tracing provides a suitable research method to this end because it allows for the connection between causes and outcomes by drawing on the implications taken from the theory on the causal mechanisms and required conditions (Blatter & Haverland, 2012).

The discussion on the literature on policy diffusion and private regulation has produced various empirical expectations on the causal mechanisms that could explain the process that led the Dutch government to advocate the development of sector-specific RBC agreements in the financial sector. In total, there are six theoretical narratives on the causal mechanisms derived from the six different approaches that have been put forward by the literature. Four of the theoretical narratives are derived from the literature on policy diffusion, with the remaining two theoretical narratives being derived from the literature on private regulation. In practice the causal mechanisms that are put forward by the six theoretical narratives may occasionally commingle, but for the most part they can be isolated from each other

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3.2. Operationalisation

This thesis will analyse the succession of events leading to the finalization of the RBC agreements for the financial sector in the light of the theoretical narratives. The theoretical narratives need to be operationalized to employ them for this purpose. The two tables below present operationalization schemes. The operationalization schemes will be used to guide the collection of evidence to test the empirical expectations derived from the

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Policy Diffusion

Theoretical Approach Mechanisms Operationalization

1. Constructivist Approach 1.) Reference to examples that are perceived as successful

2.) The use of expert advice

3.) Reference to the policies of countries that share similarities with the Netherlands.

1.) Do the documents refer to examples of similar regulatory interventions to substantiate the development of the Agreements?

2.) Do the documents refer to expert advice to substantiate the development of the Agreements? 3.) Do the documents refer to the policies of other countries that are perceived as being similar to the Netherlands?

2. Coercive Approach 1.) The attachment of conditions or sanctions on whether or not parties participate

2.) Exercising influence on the framework or form in which the Agreement is developed 3.) Exercising influence on the ideas that are developed in the Agreement

1.) Does the Dutch government impose conditions on the participation of the parties in the

Agreements? Or, does the Dutch government impose sanctions to incentivize parties to participate in the Agreements?

2.) Does the Dutch government exercise power through the use of financial or legal incentives to influence the form or trajectory of the Agreements?

3.) Does the Dutch government exercise power through the use of financial or legal incentives to influence the ideas that are incorporated in the Agreements?

3. Competition Approach 1.) The Dutch government is mainly driven by economic concerns

2.) The Dutch government seeks to gain advantages over its competitors

3.) The development of the Agreements takes place in reference to the policy decisions of competitors

1.) Do the documents refer to economic motivations by the Dutch government such as competitive advantages or attracting capital?

2.) Do the documents refer to economic competition with other countries to substantiate the development of the Agreements?

3.) Do the documents refer to policy decisions by competitors on which the Dutch governments seeks to react or anticipate with the Agreements?

4. Learning Approach 1.) The use of technical information about which there is consensus among experts 2.) Learning through an iterative process in which policymakers continue to build a body of knowledge,

3.) An iterative process that is shaped by the evidence that is produced by members of the same network and from dominant theories.

1.) Do the documents make use of a cost-benefit analysis that draws on scientific evidence that is acquired through shared sources of knowledge?

2.) Do the documents make use of a cost-benefit analysis that uses scientific evidence that is acquired through an iterative process?

3.) Do the documents make use of a cost-benefit analysis that uses scientific evidence that is mainly acquired from partners or from dominant theories?

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Private Regulation

Theoretical Approach Mechanisms Operationalization

1. Market-Based Approach 1.) Solution to issues related to the reputation of pension funds, banks and insurance

companies

2.) Solution to issues related to the provision of credible information on conditions in the supply-chains of the companies in which pension funds, banks and insurance companies invest

3.) Solution to issues related to competition and creating a level playing field in the industry.

1.) Do the documents refer to issues that are related to (potential) reputational damage of pension funds, banks and insurance companies? Especially reference to scandals or problems under public scrutiny.

2.) Do the documents refer to issues that are related to pension funds, banks and insurance companies having trouble with producing credible information on the conditions in the supply-chains of companies in which they invest?

3.) Do the documents refer to issues related to competitive (dis)advantages when certain pension funds, banks and insurance companies adopt the norms on responsible investment and others do not?

2. Political-Institutional Approach

1.) NGO’s and social movements are crucial actors as institutional entrepreneurs that seek to develop or rearrange institutional structures 2.). The Agreements are shaped by the

institutional environment of the Netherlands which determines the opportunities that the actors have in the negotiation

3.) The Agreements are shaped by a neoliberal ideology that promotes the idea that markets can provide solutions to social problems.

1.) Do the documents refer to NGO’s and/or social movements that have played an instrumental role in the negotiations on the development of the Agreements?

2.) Do the documents refer to institutional characteristics of the Netherlands that have influenced the negotiations on the development of the Agreements?

3.) Do the documents refer to ideas that are related to a neoliberal ideology to promote the development of the Agreements?

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3.3. Case Selection

The case of the Dutch government advocating the RBC agreements in the financial sector is a theory-guided case study. A theory-guided case study aims to explain a particular event rather than providing generalisation beyond the case (Levy, 2008). Accordingly, the aim of this thesis is to explain the main factors that have led the Dutch government to advocate the development of RBC agreements in the financial sector.

The analysis of the case is structured according to the empirical expectations that focus on different aspects of the development of the RBC agreements. As stated above, the empirical expectations are derived from the six theoretical narratives from the literature on policy diffusion and the literature on private regulation. The case of the Dutch government

advocating the RBC agreements in the financial sector is a most-likely case in the light of the literature on policy diffusion. The literature on policy diffusion holds that private regulation is like other policies subject to a process of interdependence with the policy choices of others. This process is driven by ideas, the manipulation of incentives, economic concerns and/or rational cost-benefit analyses. The literature on policy diffusion thus advances a broad array of possible explanations which increases the probability that it may apply to the case of the Dutch government advocating the RBC agreements in the financial sector. The case of the Dutch government advocating the RBC agreements in the financial sector is a least-likely case in the light of the literature on private regulation. The literature on private regulation holds that the development of the RBC agreements is a response of private actors to collective actions problems or that it constitutes a compromised outcome of contention and negotiation between private actors and other stakeholders. Both explanations largely neglect the role of the government. The Dutch government, however, seems to have played a crucial role because it initiated the development of the RBC agreements. Subsequently, the literature on private regulation has a lower probability of providing an explanation to the case.

The Dutch government advocating the RBC agreements provides nonetheless an interesting case from the perspective of the literature on private regulation precisely because it largely diverts from the explanations that the literature has put forward. Moreover, the literature on private regulation has an added value for the purpose of this research because it

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complements the literature on policy diffusion. The literature on private regulation extends the focus on governments to other actors to produce a comprehensive study of the

development of the RBC agreements.

The difference in the explanatory probability of the literature on policy diffusion and the literature on private regulation can be explained by the extreme qualities of the case. After all, the development of multi-stakeholder RBC agreements that draw on international standards and that are initiated by a government is unprecedented. An extreme case is due to its rareness interesting for study but at the same time difficult to link to specific

theoretical explanations (Seawright & Gerring, 2008). The literature on policy diffusion can account better for the extreme qualities of the case because it provides a broader array of possible explanations which are more generic in scope.

3.4. Data Collection

This research will utilize a document analysis because there has been extensive reliable documental reporting on the development of the RBC agreements that can be easily

accessed. Besides, a part of the events that will be analysed took place almost a decade ago which increases the risks that respondents might have forgotten important details which they will omit during interviews. As such, document analysis provides a suitable method for the purposes of this research.

The document analysis will mostly consist of primary sources from the Dutch government, such as policy notes, reports of government debates, advisory reports and position papers. In addition to the primary sources from the Dutch government, the document analysis will deal with position papers, service documents, agendas and other official documents from organisations in the pension, banking and insurance sector. These primary sources will be supplemented by secondary sources from newspapers. The use of various sources for the purpose of triangulation will strengthen the credibility of the evidence presented (Bowen, 2009).

This thesis focuses specifically on the role of the Dutch government in the development of the RBC agreements for the financial sector. Government documents that deal with this subject can be accessed on officielebekendmakingen.nl. Two search terms were used to narrow down the search results. Firstly, only the documents that were published between

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2011 and 2018 are taken into account. The choice for 2011 as starting point is based on the publication of the UNGPs and the OECD Guidelines in 2011. These documents are the basis from which the RBC agreements have been developed. The end point is 2018 because the RBC agreements for the insurance and pension sectors were, following the RBC agreement for the banks in 2016, finalized and made public in 2018. Secondly, I have used the search terms ‘IMVO-convenanten’ to narrow the search results further down. The use of both search terms led to the identification of 275 documents. Only the documents that deal specifically with the RBC agreements were analysed further.

The primary sources for official documents by organisations in the pension, banking and insurance sector that deal with the RBC agreements were derived from the sector associations. The sector associations are De Pensioenfederatie (pensions), Nederlandse

Vereniging van Banken (banks) and Verbond van Verzekeraars (insurance). The publications

by these sector associations deal with sector-wide agreements on issues related to sustainable investment and are thus suitable for the purpose of this research.

Lastly, the primary sources were complemented by secondary sources from newspapers. The newspaper sources are meant to substantiate the pattern of a comprehensive storyline, although the reliability can be sometimes difficult to judge (Beach & Pedersen, 2012). To increase the reliability of the news sources I have selected the most read newspapers:

Financieel Dagblad, NRC, De Telegraaf, de Volkskrant, Trouw, Het Parool and het AD. The

newspaper database of LexusNexus was subsequently used to search these news sources. The search terms that were used are ‘IMVO-Convenanten’, ‘UNGPs’, ‘OESO-Richtlijnen’ and ‘2011-2018’. This led to the identification of 217 articles.

A list of the consulted documents can be found in the Appendix at the end of the thesis.

3.5. Data Analysis

Through a process-tracing method a comprehensive storyline of the development of the RBC agreements for the financial sector will be presented. To this end, trustworthy empirical data needs to be collected that will help to shine light on the empirical expectations of the causal mechanisms. To construct a comprehensive storyline a process-tracing research needs to collect evidence on the connection between events, the underlying motivation of the actors involved and the structural conditions in which they are embedded (Blatter &

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