Strategy

ABN AMRO Takes Further Steps In Sustainability Drive

Tom Burroughes Group Editor 19 May 2015

ABN AMRO Takes Further Steps In Sustainability Drive

The bank says it is widening its efforts to push for sustainable investing and to raise standards of corporate governance via its financial muscle.

ABN AMRO is bringing out a new indicator designed to show how well, or how poorly, companies perform as responsible entities and to what degree they fit with ideas of sustainability.

In addition to its existing investment strategy, which excludes investments in “controversial weapons” and rates companies based on environmental, social and governmental criteria, the Netherlands-headquartered bank said it now also takes into account the exposure to violations of public treaties and the company’s sustainability policy.

In determining the Sustainability Indicator, the bank told this publication that it has developed the following methodology:

1.        Based on a number of relevant ESG aspects for that company, an ESG score on a scale from 1 to 100 will be calculated;
2.        It ranks the company’s score relative to its peers in an industry group on a scale from one (poor) to five (excellent): poor-weak-moderate-good-excellent;
3.        If Sustainalytics observes a severe controversy the company will be downgraded - depending on the kind of controversy - by one or more levels;
4.        If a company in a high risk sector lacks any required policy (e.g. an environmental policy for mining companies), this company will be downgraded by one level.

The move comes at a time when the issue of “sustainable” investing remains controversial. While some practices deemed to be sustainable from an environmental point of view, for example, may also fit with what is sound, robust business practice anyway, there is debate on whether a desire to maximise shareholder returns inevitably produces tension with other goals. The term can also mean a business that is run so as to grow and endure over the long run. (To see another article on these issues, click here.)

ABN AMRO has also teamed up with RobecoSAM to establish a new engagement process for businesses that systematically breach the UN Global Compact principles in a serious way. The aim of the dialogue, which RobecoSAM is conducting on behalf of ABN AMRO, is to improve the company’s conduct. If this does not yield improvements within three to five years, ABN AMRO may decide to block the company from the investment proposition and to sell the bank’s positions in the asset management activities and investment funds of the company in question.

“Sustainable investment is becoming increasingly important to our clients and ever more mainstream. As a large asset manager, ABN AMRO can have a significant impact on improving responsible behaviour among businesses,” Solange Rouschop, head of investment services and sustainability at the bank, said.

The bank said its clients and those of ABN AMRO MeesPierson invest more than €5.1 billion ($7.99 billion) in sustainable products, up 16.3 per cent from a year earlier.

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