Clearing a path to sustainability

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ABN AMRO Clearing is wielding its influence to help shift of financial markets towards sustainability - article by Kirsten Hyde, FIA

ABN AMRO Clearing's overarching strategy as a business is to provide safe and transparent markets, and we believe sustainability is an integral part of that. Pauline Engelberts Global Chief Operations Officer, ABN AMRO Clearing

In a world where expectations on corporate responsibility and transparency are increasing, companies are recognising the need to integrate sustainability into their business strategies and policies. One company that is making strides in this area is ABN AMRO Clearing, one of the world's leading firms in the clearing of exchange-traded futures and options. The Dutch firm is determined to play a leading role in facilitating the sustainable transition of financial markets. 

"ABN AMRO Clearing's overarching strategy as a business is to provide safe and transparent markets, and we believe sustainability is an integral part of that," said Pauline Engelberts, global chief operations officer at ABN AMRO Clearing, which manages the trading risk management needs of proprietary trading firms, corporate hedgers, and prime clients including financial solutions and hedge funds in 90 markets around the world.

"This means accelerating the shift of our clients to a more sustainable business and increasing financial flows to sustainable companies and products. If you look at the strategic pillars of ABN AMRO Bank, of which we are part, there is a commitment to support clients' transition to sustainability," Engelberts said. 

ABN AMRO Banks' stated aim is to maintain a prominent position as a sustainable bank that takes responsibility for its actions and engagements, not only in terms of its own impact on the planet and on people, but also as a provider of financial services with an indirect impact trough the activities of clients and investments. This ethos filters trough to all its business.

Sustainable reviews

For instance, before ABN AMRO Clearing assumes, responsibility for the transactions of its clients, it carries out a series of client screenings to determine their credit rating, professional integrety and sustainability risks. "We review our clients every year in general anyway, but seven years ago we included sustainability risk profiling, where we look at environmental, social and governance factors," explained Engelberts.

"With environmental, we look at the impact of the business that they're doing, working closely with the sustainable banking department within ABN AMRO Bank and ESG ratings provider Sustainalytics. With social and governance, we look to see if there are any negative media and press reports about the company in the past. Are there any reputational risks? Have we heard of any market or business practices that they conduct that we feel do not fit in with our ESG criteria?" Engelberts continued.

"ABN AMRO Bank has a clear engagement strategy with clients, so when a client has elevated sustainability risk - for instance a client in the energy sector - we explore improvement opportunities with them, so we can support their energy transaction," Engelberts said.

She added that if the risks cannot be managed, the firm will decline to engage with the client, the transaction or the activity and might even end the relationship with the client. It also talks to customers about sustainable products such as carbon certificates, products based on wind or solar energy, and how to structure these products for their benefit.

But its work does not stop at offering advice to clients. ABN AMRO Clearing also seeks to gain first-hand experience with its own organisaton and lead by example. For example, it carried out a comprehensive study at the start of this year to estimate the carbin emissions of its data centers around the world.

"We analysed our data centers and while most are being fuelled with renewable energy sources, one data center was not green. For that, we have engaged in a climate action reforestation program to offset our carbon emissions by 100%," said Engelberts. "Next year we will go beyond the 100%."

The program began in May this year in Chicago in collaboration with Amsterdam-based reforestation company Land Life Company. Since then, ABN AMRO Clearing has supported the planting of a new forest in the Castilla y León region of Spain where Land Life has already planted hundreds of thousands of trees on degraded land, restoring biodiversity and natural ecosystems to the area. Next year, the two companies will extend the program to other cities around the world.

Worldwide partnerships

As a major international player, ABN AMRO Clearing is also a partner in several worldwide partnerships, such as the Sustainable Stock Exchanges Initiative in coorporation with the World Federation of Exchanges. This initiative was launched by the United Nations in 2009 and explores how exchanges, working with investors, regulations and companies, can enhance corporate transparency and encourage sustainable investment. As a member if the investor working group, it takes part in roundtable discussions on how to increase transparency in ESG performance of capital markets as a whole.

Another example is the clearing firm's work with Frontclear, a development finance company, to address clearing and settlement challenges in emerging and frontier markets in Africa and Asia. "Working with Frontclear is important as it relates directly to working towards safe and transparent markets," said Engelberts. "If you look at the UN's Sustainable Development Goal 9, which involves building resilient infrastructure and fostering innovation, it is in everyone's interest that the markets in which financial services are still under-developed are set up in a safe and transparent way. This partnership relates directly to what we think is important."

Officially launched in November 2018, the partnership with Frontclear supports best practice in clearing and settlement, with ABN AMRO Clearing committing to making staff available to support initiatives that make local interbank markets more transparent and efficient. This, its is hoped, will result in enhanced access to financing for local small and mid-sized companies. "We provide consultancy in kind, with staff going with Frontclear to particular country and giving advice, sharing best practices and reviewing plans to help develop that market better," explained Engelberts. So far, ABN AMRO Clearing has worked in Nigeria, Ghana and Mongolia and has agreed with Frontclear to continue this work in more countries next year.

Sustainable Development Goals

"When you look at our sustainability strategy, we are focusing on several of the SDGs in a way that supports our commitment to operational sustainability, but also engages staff, engages our clients and engages our industry," said Engelberts.

She added that ABN AMRO Clearing is particularly committed to the UN's sustainable development goals 8 (decent work and economic growth), 9 (industry, innovation and infrastructure), 12 (responsible consumption and production), 13 (climate action) and 17 (partnerships for the goals).

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