New team researches the economic impact of the sustainability shift

Research on sustainability is nothing new at ABN AMRO. In fact, a number of Group Economics departments have been conducting research in this field for years, looking at things like the economic loss caused by floods. Sustainability is also playing an increasingly important role in the work of the Financial Markets Research Team, such as research into the impact of ESG (environmental, social and governance) scores on fixed-interest securities like bonds.

The economic dimension

To consolidate expertise from across the bank, Group Economics set up a dedicated team last June: the Sustainability Research Team. Made up of five independent researchers (whose names can be found at the end of this article), the team focuses specifically on the economic dimension of sustainability – unlike the Financial Markets Research Team, whose focus is on shares and trading.

A new approach was needed to establish the team. Resources that were previously invested in research into raw materials have now been redirected to research on sustainability.

Climate scenarios

“Sustainability is a burning issue in business,” says Nick Kounis, manager of both the Sustainability Research Team and the Financial Markets Research Team. “Clients and departments at the bank are increasingly turning to us for information. “With our research, we try to better understand what decarbonisation and climate scenarios mean specifically for the business world. We ask how much money it will take to make it sustainable, what it will ultimately yield and which technologies are accessible.”

Entrepreneurs can avail themselves of a dashboard to consult research data on decarbonisation. Broken down by sector are options for reducing greenhouse gas emissions. The dashboard also describes available technologies and challenges that still need to be tackled. Essentially, the Sustainability Research Team turns scientific knowledge into usable information.

The team is also examining the path the Netherlands is taking towards a carbon-neutral future, identifying difficulties and determining the feasibility of objectives.

Relevant information

“We want to be a thought leader in sustainability,” Nick says. “Our aim is to give our clients relevant information they can use to improve their decision-making. These clients actually include departments at ABN AMRO, too. The climate and transition scenarios we’re developing for the bank will allow us to anticipate developments proactively.”

Nick explains that businesses have to consider both physical and transition risks. Physical risks are the consequences of climate change itself, such as an increase in extreme weather conditions. Transition risks have to do with the impact of legislation on the macroeconomy and on individual firms. A ban on a fossil fuel, for instance, could have major implications for business.

No crystal ball

These various risks play a key role in the Sustainability Research Team’s climate scenarios.

“The transition may well be a gradual one,” Nick explains, “with policies being made in time for companies to stay ahead of the risks. But the opposite scenario is possible, too – in that case, the government would fail to pass the necessary legislation fast enough, and the business community would have to change course quickly. We also have to take differing policies across sectors and countries into account, as well as the risk that technology may develop more slowly than we anticipate.”

ABN AMRO’s researchers may not have a crystal ball, but thanks to the scenarios they model and publish, businesses shouldn’t be caught off guard. Nick concludes, “Our team is fully dedicated to sustainability, so we really want to take research in this area to the next level. That way, our clients and the bank itself will be prepared to respond to the opportunities and risks intrinsic to the transition to sustainability. And that’s ‘Banking for better, for generations to come’.”

In addition to Nick Kounis, ABN AMRO’s Sustainability Research Team is made up of Georgette Boele (policy transition), Hans van Cleef (energy), Casper Burgering (economic transition) and Anke Martens (climate, macroeconomy and scenarios).