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Core banking activities

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 2017 annual report.

1. Client acceptance

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’.

2. Responsible investment

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.

Case study

Voting

Follow This, a group of responsible investors, filed a special shareholder resolution at Shell’s annual general meeting (AGM) in early 2017. The resolution called on Shell’s management to set and publish quantitative targets for reducing greenhouse gas (GHG) emissions, in alignment with the goal of the Paris Climate Agreement to limit global warming to well below 2°C. These reduction targets should not be limited to Shell’s own carbon emissions but should also include the indirect emissions caused by its products, i.e. by Shell’s customers. These indirect emissions are very material as they account for around 80% of Shell’s total emissions.

At the Shell AGM, Kempen European High Dividend Fund’s managers were one of the stakeholder groups who voted in favour of the Follow This resolution, arguing that Shell is co-responsible for customer carbon emissions as it is able to
influence such emissions, for instance by producing cleaner fuels. Regrettably, the Follow This resolution was not adopted: 6.2% of all shareholders voted in favour, while 5% abstained. But there was some good news at the end of November: Shell announced that it will seek to halve the carbon footprint of its end products by 2050. This should set Shell on a more sustainable course, even if this still falls short of the goals of the Paris Climate Agreement.

See our annual CSR reports for more examples of engagement results

3. Responsible lending

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 annual report 2017, pp. 127-129.   

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. 

Transparent about our Recovery Section

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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Screening: case study

In June 2017, we received a potential high-risk alert on a Dutch trading company (our client) importing batteries from Hong Kong. Because the production of batteries can have substantial negative environmental and social impacts, our responsible lending policy required an additional assessment of our client and its supply chain. Our assessment revealed that our client was sourcing all its batteries from one Hong Kong-based production company and that the latter held various international social and environmental certificates (e.g. ISO 14001 and SA 8000). In addition, we found that the Hong Kong company only produced the more environmental friendly rechargeable NiMH batteries, had an internal environmental committee in place and had already received a number of prizes.

However, we also learned that the company had been involved in a serious negative incident back in 2004, when a number of employees fell ill because of cadmium pollution. It appeared that the company had responded correctly: it provided compensation to sick workers (exceeding the minimum local/Chinese compensation requirements), stopped the production of nickelcadmium batteries, and strengthened its environmental health and safety facilities and training. The battery company has not been involved in any further incidents of this sort since 2004.

On the basis of our findings, we ultimately issued a positive internal recommendation and continued the relationship with our client.