‘A human rights report would be impossible nowadays’: ABN AMRO’s sustainability chief on the pros & cons of formalising ESG

ABN AMRO talks leadership in ESG reporting and impact investment

Since 2016, ABN AMRO has published a human rights report based on UN guidelines – a move it claims makes it the first bank in the world to have done so.  

But to get an initiative like that off the ground would be “impossible” in 2020, says Richard Kooloos, the bank’s Director Group of Sustainability, . 

“Our human rights report was literally chaired by a colleague and I,” he says. “We just decided we were going to do it. We didn’t ask approval from anyone.” 

“Nowadays, it would be impossible, because we would have to get approval from around 20 people, as now it is deemed to be important within the organisation. It’s become full-grown, but at the same time, it changes the internal dynamics.”

Two years ago, ABN AMRO formalised a sustainability strategy which Kooloos admits comes with pros and cons.

“Old world sustainability was very qualitative and sometimes had a moral aspect. It was very much about your vision and the story you were telling. Now that is turning into compulsory and data-driven.”

“Everyone from relationship managers, to senior credit officers, to the board itself needs to be learning about what it actually means to their role,” he tells RI. “In a way it slows down the advance, because there are so many people that need to catch up and learn. To get to where you need to, you need to slow down before you can advance again.”

ABN AMRO, the third largest bank in the Netherlands, started as a new organisation in 2010, following the acquisition and break-up of the original ABN AMRO by banking consortium Royal Bank of Scotland Group, Santander Group and Fortis. ABN AMRO was subsequently taken over by Fortis, which collapsed in 2011 and had to be rescued by the Dutch state, which now owns 56% of the organisation.

When this happened, Kooloos, who has been with the organisation for 13 years, feared it would have too much influence from the Dutch parliament. 

“We have had none whatsoever. I sometimes jokingly say it is like Margaret Thatcher all over again, saying ‘I want my money bank’,” he says, referring to the phrase famously used by the former UK Prime Minister in tussles with the European Economic Community. “That seems to be the only agenda of Parliament.”

He says the current Minister of Finance Wopke Hoekstra sends a “Larry Fink style-letter” to all state-owned companies every year, and recently has touched on the subject of sustainability. 

But ABN AMRO has long been on this path anyway. It was one of the first banks globally to end the financing of tobacco in 2017. It was involved in the first social impact bond in the Netherlands and helped incubate Social Finance Netherlands. Fossil fuels make up just 3% of its loan exposure and its lending to the oil & gas industry comes with strict conditions on reducing carbon emissions and making the transition to a low-carbon economy. ABN AMRO is also a founding member of the new Principles for Responsible Banking.

Kooloos describes the bank’s sustainability journey as continuous and fluid, and says recently external factors such as the EU Action Plan on Sustainable Finance and the TCFD are changing the playing field for everyone.

“It used to be voluntary commitments of ambitious organisations, but now ESG is getting into the territory of becoming law. And next to that, let’s say the old world sustainability was very qualitative and sometimes had a moral aspect. It was very much about your vision and the story you were telling.

“Now that is turning into compulsory and data-driven. That has both good and bad sides.”Richard Kooloos

A recent ABN AMRO survey found 93% of staff believe in, and are committed to, its sustainability strategy. But it also found many are struggling with translating it to their role.

“It’s quite different from if you are in a business where you make physical products, because then you focus on reducing the ecological footprint. The carbon footprint of a loan is zero, but the client has a footprint. It’s a different way of translating sustainability into your products and services.”

The journey, while difficult, will be vital to the business going forward, observes Kooloos, reflecting on the recent shock announcements of BP and Shell, which earlier this year wrote off assets of $14bn and $22bn respectively.

“It if causes a drop in share price, it’s still being absorbed, but if there is going to be a bigger drop as a result of a carbon tax or market sentiments then clients will start to say ‘ABN AMRO you knew this was happening but you didn’t inform me enough’”.

Kooloos says while there is the risk of ESG losing its soul or purpose, it has to become more data-driven to effectively integrate into credit and investment decisions, and reporting frameworks. 

ABN AMRO has published an integrated financial report for the past eight years, identifying six sustainability-related “capitals”.  

“The problem is always that financial capital has a clear number, but all the other capitals are kind of fuzzy. It’s hard to move it from art to science,” he reflects.

Last year, for the first time, ABN AMRO gave financial numbers to natural capital impacts and human capital impacts. 

“It’s not perfect,” Koolos says. “It was just to prove it can be done. And the result is that we are now working together with several people across the globe on this.”

ABN AMRO is also working on “impact banking” – giving microloans to smallholders working with partners on the ground – to increase its positive environmental and social impacts.

“It’s focused on clients of ours operating predominantly in Africa, South America and Asia in coffee, cocoa, cotton or palm oil, and working with them to set up structures to repair their value chains,” says Kooloos, adding that a lot of smallholders face poverty and forced labour, as well as damage to “ecological value” that could be address partly through these kind of cooperations between lenders and people on the ground.