How policies yield sustainable improvements

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Free range piglets in front of a green shelter

Everyone agrees that banks should not invest in cluster bombs or illegal logging, and that sustainable solutions such as solar panels are allowed. This is a very black-and-white view, very much ‘right versus wrong’. Yet often matters are not so straightforward, and it is difficult to make the ‘right’ decision. We have developed policies to help in those situations. So how do you define those policies, and for whom, and what happens with them? Join me for a look behind the scenes of our sustainability policy.

ABN AMRO’s potential impact is huge; even a minor policy change has a considerable reach and so a significant effect. Marieke Abcouwer Marieke Abcouwer Social & Ethical Risks & Policy Adviser

Impact through clients

A proper policy is not based on what you do and do not do – it starts from why. As a major bank, our reach – and with it our influence – is considerable. We finance the activities of numerous clients with a wide range of operations: some sustainable, some less sustainable. We finance society. This makes us responsible in a way. The obvious path is to finance mostly sustainable activities and withhold funding from less sustainable activities. Yet an outright refusal does not achieve much. We would much rather talk to our clients and help them to improve their sustainability performances. Our policies form the basis for these efforts.

Sustainable business is still business

Another reason for developing sound policies is simply good business: to manage our financial risks. If we finance a company with lower sustainability standards and an incident occurs, the consequences could be significant. Say for instance that a chemical plant, built using our money, is not fully compliant with the safety and sustainability requirements. An accident is just waiting to happen: a loud bang, 30 people are injured and 200,000 litres of ethanol escapes into the surface water. Not only is this a disaster in terms of the human and environmental consequences, it will cost a mint to clean up the mess, leaving the company without funds to repay our loan. We are just like any other bank: if we lend money, we do not want to risk never seeing it again.

A paper tiger or an efficient tool?

Policies serve as a guide for both our clients and our relationship managers. It is the job of the relationship managers to ensure that ABN AMRO does not take any unacceptable sustainability risks when lending money or opening accounts. It is also in the client’s best interests to avoid these risks, and our policies offer tools to minimise them. As explained above, we do not demand a perfect score on a checklist. All our policies include a clear engagement component. Can you make improvements, and are you willing to? If you are, we will discuss them, give you time and help you.

Our sustainability policy is a standard element in every consultation that our relationship managers conduct. This often adds depth to the relationship. Clients are triggered to consider their business from another point of view: not just from the financial angle, but from a sustainability perspective too. This in turn provides new economic understanding, since companies with improved sustainability performances are the future.

Three types of policy

Clearly business and sustainability can go hand in hand. Whenever we review a new client application or loan application, we must always seek a balanced judgment: what is acceptable, and what is beyond the pale? Any decision that we make is based on a series of careful procedures that derive from our sustainability policy.

The scope of that policy covers all our activities, including lending, investment advice and payments. It also extends to our relationships, for example with clients and suppliers. To review our clients, we use a multi-stage system built around three types of policy: thematic, operational and market policy.

We also apply three policy themes: Human Rights, Climate Change and Animal Welfare. I will discuss Animal Welfare below. We also have operational policy papers in place, which describe how we view sustainability in the bank’s various activities (client acceptance, lending, investment advice, etc.).

Lastly, we use an itemised requirement matrix for each market, for example Agri Commodities, Manufacturing, Mining, Energy, Defence and soon Chemicals & Pharma. For each specific market, these matrixes show what we find acceptable, what we find unacceptable, and what is acceptable only on certain terms.

How it works in practice

We use three steps to reach our decisions on client acceptance and lending:

  1. Sorry, we cannot help you
    Before we make any decision at all about a new client (whether an individual or a company) or a loan application, we first carry out a series of ‘no go’ checks, based on our Exclusion List and our Controversial Weapons List. If the application does not pass these checks, we do not need to look any further: the process stops there and then.
  2. Performance score and risk analysis
    After this first check the relationship manager establishes the risk level (high, medium or low) based on the market and the country in which the client operates. He or she also gathers the relevant information about the company’s commitment and performances – for example whether it has a policy in place for sustainability, and how it reports on its performances. Have any incidents occurred? This yields a performance score: below par, on par, above par.
  3. Further advice or a green light
    If the new client or loan application is judged to present a high risk, but the relationship manager nevertheless believes that it should be approved given the client’s performance score, my colleagues and I at Sustainable Banking will verify the relationship manager’s analysis. Our findings determine whether we issue a recommendation to proceed or not. In 2015 we issued 450 recommendations​ (PDF 337 KB), of which 8 were negative and 86 were positive but with strict conditions attached. It is unusual for anyone to contest our recommendations. If they do, the Managing Board has the final say. In practice this happens about once a year.

Policies: a collaborative effort

Preparing a sustainability policy is a process that demands an intensive collaborative effort – both within the bank and based on a continual dialogue with our external stakeholders. Take animal welfare​ (PDF 253 KB) for example, for which I recently wrote our policy. First, with input from our relationship managers I mapped out precisely what our clients do, and what arrangements we have made with them. For example, what are their stables like in practice?

We then considered what we should or could demand and encourage, and what not. Sometimes you might impose a condition, but without previous experience the impact will be unclear or difficult to quantify. Another problem is that the necessary technology might not yet be fully developed – or it might be unaffordable. Input from external stakeholders is important in this process. To eliminate any possibility of confusion from our minimum requirements and suggested improvements, we then add and change details: going back and forth between the first and second steps. In the end we hold an ambitious but realistic document that is practicable for the relationship managers and clients.

Stakeholder consultation about animal welfare

One of the important external stakeholders involved in the development of our policy for animal welfare was Dutch animal welfare organisation Dierenbescherming. We explicitly inquired about their vision, and asked them to read and respond to what we wrote. Their input and feedback were very valuable. At the end of the process they believed the policy document was a positive step forward. Of course they will always be critical, but this clearly shows that we achieved a better result through a collaborative effort.

High client expectations

In some instances the clients themselves believe that matters could and should be improved. This was demonstrated earlier this year, during the Agri Round Table, where we invited clients in high-risk markets to sit down with us to improve our Agri Commodities policy. We expected that it would be a struggle to make any progress, but instead our clients felt that we were too soft in some areas. Left in charge, they would impose even stricter requirements. We incorporated the findings from these discussions into our new policy, which we then presented to other external stakeholders, including the Dutch branch of Friends of the Earth and Greenpeace.

What motivates me

Every day I have can help make the world a better place: whether I am outlining the Dutch laws for animal transport in our animal welfare policy or doing my bit to prevent further deforestation in Indonesia. It was a deliberate decision on my part to do this job at a major bank. ABN AMRO’s potential impact is huge: given the large client base even a minor policy change has a significant effect. In some cases only a few lines of policy can have an enormous impact.


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