Controversial activities: where does ABN AMRO draw the line?

ABN AMRO is using its corporate finance activities to support the transition to sustainability and, to that end, pursues an inclusive strategy. In principle, the bank welcomes any company as a client, even if it still has to make the transition to sustainability. “ABN AMRO can actually play a key role in helping companies make the transition even if their revenue models aren’t yet fully sustainable,” says Strategic Risk Specialist Myrthe Haase. “Obviously, we have a relationship with them, since we’ve granted them a loan. This gives us a certain leverage that we can use to achieve our purpose, ‘Banking for better, for generations to come’.”

But there are some activities ABN AMRO has pre-emptively ruled out because they pose too great an environmental, ethical or human rights risk. Examples include the production of fur or the development of new coal-fired power plants. Indeed, both of these can be found on the bank’s exclusion list, which currently consists of over thirty activities. Companies with these activities are not acceptable as clients of the bank . Some exclusions, like the manufacture of cluster munitions or the production of cigarettes, also apply to the investments the bank makes on its clients’ behalf.

Listening to stakeholders

The exclusion list is regularly updated to reflect societal developments, new scientific and other insights, and dialogues with external stakeholders. Wijbrand Fabius, Stakeholder & Engagement Manager at the bank, oversees these discussions. He says, “We’re a large bank with a lot of in-house knowledge. By the same token, we know there are organisations out there like trade unions and civil society organisations that have a great deal of expertise in specific areas. It’s important and meaningful to maintain close contact with these organisations for additional input and assessment. Based on this and a careful and comprehensive analysis, we will then add to the exclusion list if we need to.”

Discussions with clients

The exclusion list is part of the bank’s due diligence process, which involves an analysis and assessment of its clients. The process is triggered at key moments – when onboarding a new client, when an existing client is periodically evaluated and when loans are granted.

If an activity undertaken by an ABN AMRO client winds up on the exclusion list, the bank does not automatically break off the relationship. “As a bank, we have a duty of care,” Wijbrand emphasises. “Terminating a relationship immediately might force a smaller client into bankruptcy, for instance.” The client is expected to make significant changes, though. “Our role is to set a minimum standard. We give clients time to make a plan. Although we’re a firm believer in our inclusive strategy, there’s a limit to our patience.”

Temporary employment agencies

One of the latest developments involves the bank’s exclusion of uncertified temporary employment agencies. Myrthe explains: “We rely heavily on migrant workers in the Netherlands. In fact, some 530,000 migrants come to work here every year, particularly in sectors like agriculture, horticulture, construction and logistics where there’s a strong demand for low-skilled labour. In most cases, both employer and worker benefit. But abuses do occur. Migrant workers risk being exploited, earning less than the minimum wage, being grossly overcharged for poor housing and not having access to medical care.”

ABN AMRO is aware that disreputable temporary employment agencies often play a key role in such abuses. That’s why the bank has now excluded agencies that have failed to earn a certificate from the Labour Standards Foundation (Stichting Normering Arbeid) proving that an independent audit has been carried out to ensure that the agency satisfies basic legal requirements. If an agency additionally provides housing, it will also need a certificate from the Foundation for Flexible Housing Standards (Stichting Normering Flexwonen).

Coordinated action

Unfortunately, having the required certification is no guarantee that an agency is above board. Myrthe says, “We still have to carry out due diligence, even if a new or existing client is certified. Migrant workers are often in a vulnerable position. They don’t speak the language or know their way around Dutch institutions. If they lose their job, it’s often the case that they immediately lose the roof over their head as well.” That’s why ABN AMRO is focusing so much on the plight of migrant workers. The bank will soon be launching a thematic engagement with business clients in a number of sectors to help improve the position of these workers.

Myrthe and Wijbrand hope other financial institutions will follow ABN AMRO’s example and tighten their exclusion lists. Wijbrand says, “We want to join forces with other stakeholders to make sure a disreputable company can’t just switch banks. After all, it’s only by taking coordinated action with financial institutions and civil society organisations that we’ll successfully eradicate these abuses.”