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June 29, 2007
ABN Amro: Honored for its Global Sustainability Work and Called Out for Its Climate Change Finance
    by Anne Moore Odell

The Financial Times awards banking goliath ABN Amro its 2007 Sustainable Banking Award while a new report points to the bank's carbon-intensive investments.


This month saw Dutch bank ABN Amro singled out as the most sustainable bank internationally on a broad set of ESG issues and the least sustainable among Dutch banks for its financing of carbon-producing projects. The Financial Times chose ABN Amro from more than 100 international banks to win the top prize in its Sustainable Bank of the Year competition. Conversely, a new report from Milieu Defensie names ABN Amro as a heavy investor in carbon-creating projects compared with other Dutch banks.

The Financial Times Banking Sustainability awards were developed last year by the London newspaper and the International Finance Corporation (IFC), the private division of the World Bank Group. They also named ABN Amro as the Emerging Markets Sustainable Bank of the Year for its operations in India. This is the first year that banks were applauded for their work in emerging markets.

Lars Thunell, IFC Executive Vice President and CEO, said: "These awards send an important signal to the banking sector. Sustainable finance, especially in emerging markets, is a proven strategy for creating value and opportunity for clients, shareholders, and the poor."

The awards are handed out to banks that work to include environmental, social and governance (ESG) issues into their banking operations. In a prepared statement, this year's judges said, "We would rather have [ABN Amro] than anyone else working on complex transactions. They have aspirational targets. They practice what they preach."

"We are delighted to have received this prestigious award," said Johan Bos, ABN Amro Vice President, Investor Relations. "We see it as an acknowledgement of our efforts and our long-term commitment towards the area of sustainability. We also feel it is a reflection of our ongoing efforts to mainstream sustainability in our business and all our BUs, including countries like Brazil and India, where ABN Amro plays a dominant and leading role in the field of sustainability."

Yet Milieu Defensie, the Netherlands branch of international non-profit organization Friends of the Earth, puts ABN Amro's sustainability rating as the lowest of the six Dutch banks examined in its newly published the report titled "Investing in Climate Change: Dutch Banks Compared 2007."

The report examines side-by-side the investment portfolios of Dutch banks. It compares how much the banks invest in fossil fuels and renewable energies and the banks' plans to limit further contributions to climate change. The six banks studied are the mainstream banks, ABN Amro, ING Bank, Fortis, Rabobank, and the ethical banks, ASN Bank and Triodos. Factoring in the size of the bank, the report creates a ratio of total investment assets to assets assigned to carbon-producing projects

According to the report, "There are substantial differences in the climate performance of the Dutch banks. ABN Amro performs the worst, while Triodos Bank is a clear leader. Rabobank is best performer of the four mainstream banks. The ethical banks Triodos Bank and ASN have consistently better scores than the mainstream banks.

Detailing some of the investments that the banks made in projects that have large carbon-footprints, the report paints ABN Amro as a bank with a heavy lending hand in carbon-producing projects all over the globe.

The report states that instead of holding the emitter of CO2 from the burning of fossil fuels as the only responsible party, it allocates responsibility to the production of fossil fuels as well. Therefore, the report negatively rates banks that finance fossil fuel projects, as these projects have serious effects on climate change.

"The financial sector can impact environmental and social quality in two ways," said Donald Pols, Team Manager on Climate and Energy for Milieu Defensie. "The first is through the direct impact of financial institutions on the environment and communities in which they operate, and the second, and perhaps more important some would argue, is through institutions' indirect impact as financial intermediaries, providing financing for corporate operations."

Yet ABN Amro's 2006 Sustainability Report's report (which was released before the Milieu Defensie report) takes issue with this logic and acknowledges the difficulty of carbon liability. The Sustainability Report questions: "If we are funding a power plant, who holds responsibility for the carbon? Is it the equity owner of the plant, the fuel supplier, or the purchaser of the electricity who is responsible for the facility's greenhouse gas emissions? If we were to measure the carbon footprint of a project, what share would we as a lender be responsible for? Surely a bank's responsibility does not extend beyond managing the potential financial risks in the projects themselves?"

With 118 billion euros invested in fossil fuels as compared to 7 billion euros invested in sustainable energy, the four mainstream Dutch banks share responsibility for an annual emission of 594 million tons of CO2, the Milieu Defensie report details. ABN Amro has 43 billion euros invested in fossil fuels, 8.3 % of its total portfolio, compared to 1.4 billion euros invested in renewable energy, .27% of its total portfolio.

Bos told SocialFunds.com that ABN Amro disagrees with Milieu Defensie's methodology used to calculate their indirect footprint as being ambiguous: "Global society (including NGOs) cannot ignore the fact that our developing and developed world economy and standard of living still fully depend on fossil fuel and the global economy will still be reliant on fossil fuel extractive industries for decades to come and as a bank we will and have to remain involved in this. "

"We are working actively to understand, develop and finance the transition towards a low carbon economic future which is an increasing part of our business and our public engagements," Bos added.

The report's authors recommend that banks recognize and report their financed emissions. It quotes ABN Amro's policy on emissions, "Because ABN Amro is a financial institution, our products and services do not emit any CO2." The report strongly disagrees with this point of view and recommends banks report to the Carbon Disclosure Project.

To governments, the report calls for a binding legal framework for banks to report on their financed CO2 emissions. It also would like a forum for NGOs and stakeholders to file complaints about socially unacceptable transactions. For civil organizations and individual consumers, the report suggests moving to a climate conscious bank.

Johan Frijns, coordinator for BankTrack, an organization that follows the financial sector and its social and environmental impact, told Socialfunds.com: "Banks need to receive a strong signal from their customers that financing climate change, in the form of fossil fuel extraction projects, is no longer acceptable. What better signal could they give than to walk away, as Dutch customers have started doing recently?"

"Clients moving their accounts will not 'save' carbon as asserted by Milieu Defensie/FoE," Bos commented. "The report understates the responsibility consumers have to reduce, for example, their fuel mileage. It is a bit odd to target financiers of oil and gas without also addressing the users themselves. "

ABN Amro has committed to becoming carbon neutral from 2008 onward. Its 2006 Sustainability Report acknowledges the complexities that surround environmental, social and governance issues. However, acknowledgement is not enough to stop climate change. As "Investing in Climate Change" makes clear, ABN Amro must make some hard choices in the years to come when investing in energy sources.

 

 
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