Sustainability is increasingly important to investors

Although developments in key areas like sustainability are always gradual, there’s often a clear turning point. Annedien Heilbron, investor relations officer at ABN AMRO, says the year that sustainability became more pivotal in investment decisions was 2019. Obviously, sustainable investment had been moving from niche to mainstream for some time before that. But Annedien says it was in 2019 that investors in ABN AMRO started showing a specific interest in sustainability.

“For years, we’d been getting relatively few questions relating to ESG (environmental, social and governance) criteria, but now there are more and more of them,” says Annedien. “For institutional investors, sustainability has long been important from a risk perspective. But now, they’re asking questions about ABN AMRO’s long-term sustainable strategy. Carbon emissions and the bank’s greenhouse gas targets are also major talking points. Plus we’re seeing a growing emphasis on the social aspect as a result of the coronavirus pandemic. Investors want to know how the bank is supporting its staff in the crisis.”

The big challenge

So who are these investors in ABN AMRO? They’re mainly institutional investors like pension funds, investment funds and insurers– “the people who sift through our annual report”, Annedien says with a twinkle in her eye. Her department provides these stakeholders with the information they need to get an idea of the bank’s value and the risks involved.

Making proper assessments and comparisons requires firm data, and that applies to sustainability, too. Annedien says that’s the big challenge at the moment. That goes for banks as well, which are involved in rapidly evolving non-financial disclosures. The European Union, meanwhile, is increasingly pushing for reporting on ESG data.

Realistic figures

Annedien continues, “Currently, the biggest issue with data on sustainability is that you’re still comparing apples and oranges. Either the data are not easily quantifiable, or they’re measured in different ways. At the moment, the sector is hard at work to define better standards. Governments are also introducing many new laws and regulations to promote standardisation and transparency. For these reasons, we think interpreting data will be much easier in a few years’ time.”

These data include figures on scope 3 emissions, for instance – the total carbon emissions generated by the companies the bank finances. There are also different definitions of sustainable finance. As an example of just how complicated things can be, Annedien cites the financing of a wind farm. “On the face of it, you could say it’s a sustainable project. But windmills kill birds, too. The problem is there aren’t any readily available figures on this, though. Obviously, it can be complicated to arrive at realistic data and definitions.”

“It’s our money”

Sometimes there’s scepticism about investors’ interest in sustainability, but Annedien says she welcomes the increased focus.

“There’s a tendency to see the investor as a bogeyman who’s only out to make money,” she says, “but that’s too short sighted. It’s easy to forget that the assets of institutional investors are assets that belong to all of us. They’re our pensions, our investment accounts. That money has an impact, and we’re seeing that investors are using it to that effect. The result is that businesses are being motivated to change, and the transition to sustainability is accelerating. As a bank, we can only welcome and support these initiatives.”