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Our core banking activities – client acceptance, investment and lending – are always underpinned by our sense of corporate social responsibility. For more information about corporate social responsibility in our core banking business, please consult our 2018 Annual Report.
We have a rigorous client due diligence (CDD) policy in place, under which we properly establish information about our clients, such as the origin of their assets. This policy also guards us against providing services to clients who may be involved in financial and economic crimes, such as money laundering or financing terrorism.
Our CDD policy supports corporate social responsibility, as we test new corporate borrowers on our responsible lending criteria ‘at the gate’.
Private clients, charitable societies, associations, church groups and institutional investors increasingly demand responsible investment, while civil society institutions are encouraging banks to make their investment processes ever more sustainable.
Responsible investment processes are based on both financial and non-financial data, and Van Lanschot Kempen’s investment process clearly reflects both. We opt for a strategy of engagement – a dialogue with companies and/or fund managers – and will exclude companies and investment funds if such engagement proves ineffective. It is our experience that engagement can result in changes in company policies.
To underpin our engagement activities, Van Lanschot Kempen draws on the expertise of an independent, specialist consultant, which screens companies and/or investment funds. To this end, our data provider has translated the United Nations framework into more specific screening criteria that are easy to apply and do not reflect subjective views on responsibility, but draw on generally and internationally accepted minimum standards as set down in around more than hundred international treaties and conventions covering such themes as human rights, labour standards (including child labour), environment, bribery and anti-corruption, weapons, pornography, nuclear energy, animal welfare (including fur) and tobacco. See our Convention Library.
In 2017, we started to engage on climate change with Severstal, a Russian steel company, for instance in relation to reporting on climate change risks and setting long-term carbon reduction targets. We engaged directly with the company and collaboratively, as part of the Climate Action 100+ initiative. As a result, in 2018 the company reported its carbon footprint. The next steps in our engagement will be to discuss potential targets on carbon reduction with the company, and how it can report in line with international climate change standards (TCFD).
Our external stakeholders, and particularly civil society groups, clients and investors – institutional or otherwise – typically question us on our lending policies. The main thing they want to know is whether Van Lanschot Kempen puts its clients’ money – savings, deposits and current accounts – towards responsible lending exposures.
These questions have prompted us to draw up a responsible lending policy, which we’ve been implementing since 2011. The policy translates Global Compact and ILO principles – to which we are a signatory – on human rights, labour standards, environment and anti-corruption into a responsible lending process, and we’ve added a number of other themes, including weapons, fur, gambling, pornography, animal testing and nuclear energy. A split of the corporate portfolio to sectors can be found at the 2018 Annual Report, pp. 41-42.
In addition, we have expanded our responsible lending policy by adding rules governing banking relationships with other financial institutions. This is how we seek to prevent funds entrusted to us from ending up with financial institutions with few or no corporate responsibility policies, in the shape of interbank loans for instance. Together with our responsible lending policies, this supplementary policy for financial institutions also informs the periodic screening of our own investment and trading portfolios.
In the past period, banks’ recovery sections have come in for a great deal of scrutiny, with debate raging about their roles and practices. To create more transparency, the Dutch Banking Association (NVB) has drawn up its Handreiking Bijzonder Beheer (‘Guide to financial restructuring and recovery’, in Dutch only) in close collaboration with the country’s banks, which sets out what clients can expect from banks’ recovery departments. Van Lanschot Kempen was involved in its creation and fully endorses the document.
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During the annual update of the CSR risk filter for a corporate client in 2018, we found that the client had received a warning from a regulator a few years earlier. This information was new to us. It concerned a Dutch wood trade company that imports from Eastern Europe, South America and Asia. As far as we knew, the company had an acceptable sustainability policy, aimed at preventing importing “bad wood”, and it complied with all legal requirements. Further investigation fortunately revealed that it was a relatively light warning due to not completely satisfying some due diligence processes, and was not related to actual import of illegal wood.
Despite the reassuring finding, our banker was advised to discuss the case with the client with the aim of helping the client to comply with laws and regulations, and of preventing other warnings (as well as to ensure the right to a fair hearing).