Terry Slavin talks to ABN Amro’s Tjeerd Krumpelman about how the Dutch bank is using the recommendations on climate risk reporting to steer decision-making on sustainable lending
Tjeerd Krumpelman of ABN Amro is a big fan of the Task Force on Climate-related Financial Disclosures.
“What TCFD does is they give you a different lens on how to assess risk,” says Krumpelman, who is global head of business advisory, reporting and engagement at the Dutch bank. “And this is why I like it a lot. Because this is where you get into the core of banking. Our business is to assess risk and translate that risk into interest rates or decision-making.”
The Dutch bank is participating in a UNEP Finance Initiative pilot project on implementing the TCFD recommendations for banks. He said the company joined the pilot project “to learn from other financial institutions on how to how to use these guidelines and how to work on these different scenarios, and stress tests and all that stuff. So that's been really helpful for us as a bank.”
If we scare away clients with less sustainable homes and they go to another bank, that would not help the world in any way
He points out that the Netherlands is below sea level, and with two thirds of its lending activity in Dutch real estate, ABN Amro’s biggest climate risk lies in its mortgage portfolio. The other area it is focused on in the UNEP FI pilot is investment in the energy sector.
The bank has sustainability goals of having all the real estate it finances score high on energy efficiency by 2030, renewable energy account for 20% of its energy portfolio by 2020, and to double the value of its sustainably invested assets to €16bn by the same date.
Krumpelman said ABN Amro was trying to incentivise clients to live more sustainably through favourable rates on mortgages or home improvement loans.
“If your home uses less energy, maybe generates its own energy, or is in an area where there is less risk of flooding, then it could very well be that that is a lower risk for the bank, so you will be charged less.”
Asked whether there isn’t a risk of losing clients to competitors with lower mortgage rates, Krumpelman said that was one reason the TCFDs should be made mandatory.
“If the end result is that we scare away clients with less sustainable homes and they go to another bank where they got cheaper mortgage, that would not help the world in any way.”
He said countries are already moving towards embedding the TCFD recommendations into regulation, but at different speeds.
We've worked on SDG, impact and human rights reporting. And the TCFD will provide us with other insights to help steer the bank in the right direction
He points out that France is forging ahead with mandatory climate-related disclosures, while in the Netherlands regulation is developed on a more consensual basis. Still, he said, many Dutch companies aren’t waiting for it to become mandatory. ABN Amro will publish its TCFD report early in the new year.
Asked whether there is friendly competition on sustainability between ABN Amro with other Dutch lenders, like ING, he said the two banks each have a 20% market share of the Dutch mortgage market, and are collaborating on measuring the sustainability of their mortgage portfolios.
He said ABN Amro has come a long way since a year ago, when it decided to implement the TCFD recommendations, without knowing how to go about it. It was a big challenge to figure out what they mean, and where to start, he says, something that has been helped by the UNEP FI pilot project. The next phase will be to decide how to embed it into the organisation and use it in in reporting.
As it pursues its strategy of becoming a more sustainable bank, Krumpelman said ABN Amro has developed integrated reporting.
“We've worked on the SDG reporting. We've worked on impact reporting, we've worked on human rights reporting. And the TCFD will provide us with other insights to help steer the bank in the right direction. And I think there's a lot of connectivity between these initiatives.”
While TCFDs are tricky, so are the Sustainable Development Goals, which companies have embraced more enthusiastically than the governments for which they were designed five years ago.
“I think that that the communicative value of the SDGs is really high. But once you dive into them. You'll find yourself challenged as a company to align. I think it would help if companies were to disclose both their positive and negative impacts on the SDGs.”
We never question how much it costs to have a good risk-functioning person or to be compliant with regulation because they are all crucial to the value creation
Asked about the added cost to its operations from such initiatives, Krumpelman said it was question he sometimes received, but not from the board.
“We never question how much it costs to have a good risk-functioning person or to be compliant with rules and regulation because they are all really crucial to the value creation over time.” He said ethics and integrity should be regarded in the same light. “Of course it needs some financial capital to get that going. But it's delivering on a lot of the other value if you do it right, and destroying a lot of value if we get it wrong by underperforming on sustainability or ESG [environmental, social and governance]”
One high point for him came in September, when he was in the UN General Assembly in New York as 130 banks, representing more than $47tn in assets, signed the Principles for Responsible Banking, which include transparency and accountability, impact and target setting and governance among their six principles. “So it’s 30% of all the money in banks in the world signing up. It was a great moment to see all those CEOs sign the principles. … We will have to act on these principles now. It's not a free ride.”
This article is part of our Climate Risk briefing. See also:TCFD UNEP FI SDGs Principles for Responsible Banking ESG ING