An international bank has turned down one in ten investment and loan
requests from corporate clients after referring them to an in-house
ethical screening unit.
Over the past two years client-facing
staff at ABN Amro have referred 667 proposed transactions with
companies to the bank’s central sustainable business advisory unit,
which declined to recommend 62 of them. A quarter of the referrals
(181) were approved only with conditions. Client-facing staff can in
theory ignore the unit’s advice, but in practice they rarely do so.
Amro’s stance is further evidence that financial institutions are
starting to look routinely at the social and environmental risks
associated with loans and investments. The bank has put no figure on
the value of the business that it has turned down.
sectors that are most likely to receive a negative recommendation from
the eight-person unit are aerospace and defence, mining and metals, and
oil and gas. Aerospace and defence had the largest number of declined
deals last year – five out of 61 referrals – but the unit turned down
proportionately more in the gaming and leisure sector, where four of 14
referred deals were declined.
The Amsterdam-based bank, which
has 3500 branches and 105,000 employees in 60 countries, says there has
been a ‘significant’ rise in referrals to the unit in 2005, up from 295
to 372 compared to the previous year, mainly because its staff are now
more aware of how social and environmental issues can affect investment
However, as more deals have been referred to the
unit, the rate of negative recommendations has fallen, from 14 per cent
in 2004 to five per cent last year. The bank believes this is because
employees are becoming more adept at raising issues early on, giving
clients the opportunity to take ‘corrective action’.
dealing directly with clients initially assess deals using ‘filters’
that the bank has put in place. For example, they ask whether the
transaction involves a sensitive issue such as nuclear power, whether
it involves work in a country where there is widespread corruption, or
whether the client has recently been the subject of litigation or a
pressure group campaign.
Emma Griffiths, an associate at the WSP Environmental Consultancy, told EP:
‘The Co-operative Bank does something similar, but it is uncommon for a
mainstream financial services company to be routinely declining general
purpose loans on social and environmental grounds.’
ABN Amro is
among the financial institutions that now assess project loan finance
proposals against the Equator Principles. But only five of the deals
declined by the bank fell into this category, with a further 27
approved after conditions were agreed.