Fireside chat #1: Pauline Engelberts (COO)

News item -

A ‘fireside chat’ with our Global Chief Operations Officer Pauline Engelberts, about her insights in how ABN AMRO Clearing is supporting clients in transitioning to sustainable business.

We sincerely hope that all participants in the value chain want to become better informed on how their business is contributing to solving some of the big issues we are facing. Pauline Engelberts Global Chief Operations Officer, ABN AMRO Clearing

How Green is “Green”?

The definition of "Green" is a subject of debate in the financial markets. The EU is attempting to create standardisation with EU Taxonomy, which will help investors determine the impact of their investments. However, different interpretations of what is good or bad will remain, primarily because the subject of Sustainability is so broad and complex. "ABN AMRO Clearing actively contributed to the FIA first policy paper on sustainability in the derivatives industry, highlighting the role that derivatives markets can play in the transition to a more sustainable economy. Information transparency is key to maintain trust in the financial system," says Pauline Engelberts, besides being the Global COO also our Chief Sustainability Officer.

How does Clearing connect to ESG?

"ABN AMRO Clearing is often asked by clients if we can provide data on their ESG trading behaviour" Pauline continues. "We would like to be able to deliver this information, as one of our strategic goals is to assist our clients in the Sustainability transition. This information could help clients evaluate if they have a bias towards ESG (or not)". ABN AMRO Clearing covers 85+ exchanges globally; hence, a uniform & standard definition on ESG criteria would be beneficial to provide consistent and validated information across the board. "Unfortunately, we see many different definitions among the main indexes and futures’ constituents, and diverging interpretations of ESG amongst these exchanges," Pauline says. "This makes it almost impossible to compare the ESG content among futures contracts and index baskets, or even ESG ratings of shares".

What can be done to improve ESG reporting?

"We need consistent definitions and transparency on the criteria used to identify ESG components for exchange listed products. A harmonized framework would be ideal," according to Pauline. The recently adopted EU Taxonomy is already a step in the right direction; it now needs translation to a more granular level. Technology should be able to help in dynamic tracking, to allow informed differentiation between data labels and to provide consistent updates. Recognized benchmark data for individual companies, performed for example by Sustainalytics or Bloomberg, should be made available ideally at exchange level. This would improve transparency to investors and traders, and allow meaningful dialogue with clients on their overall sustainability investment and trading profiles. "Current analysis has shown that there is rather low correlation between ESG indexes due to different definitions and focus," Pauline states. "The questions we need to ask ourselves are: ‘do we know what we are investing in?’ and ‘do we have the right information?"

How can this work in practice?

ABN AMRO Clearing is running an initiative as a ‘Proof of Concept’, mapping its clients’ trading behaviour against an objective rating, not linked to one particular ESG index. "With the help of this source, we will collect the constituents’ instrument identifiers and run a query on all transactions in our books," says Pauline."We can then map that information to our clients’ portfolios and transactions, and inform them about their sustainability profile. This is an objective way of referencing." Some clients would also like to receive an indication of their relative performance, compared to their peers. If consistent and transparent data becomes readily available across all exchanges, it could lead to better informed, more conscious and informed choices by us all.

Transparent information means better decisions

"We sincerely hope that all participants in the value chain want to become better informed on how their business is contributing to solving some of the big issues we are facing," Pauline concludes. "The more we ask for transparency, the better the decisions we can make."