Speaking the same language: ABN Amro IS on net zero ambitions and manager alignment

With the climate stewardship gap between large US and European investors widening, the question of manager alignment on climate has attracted media headlines. While some of the largest US managers have publicly backtracked on earlier climate pledges, a growing number of pension funds have taken measures to divest from managers they feel are no longer reflecting their own climate priorities. How has this division played out among asset managers?

According to Margot Seeley, head of sustainable investment for ABN Amro Investment Solutions, the asset management division of Dutch banking group ABN Amro, climate change remains a key factor.

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Founded in the 1990s, the €30bn asset manager operates as a multi-manager deploying an open architecture platform, which combines its in-house expertise with the appointment of external managers. The group has a strong focus on sustainability, with more than 90% of its AUM invested in Article 8 or 9 funds.

Most investments are in public markets, with the strategic asset allocation broadly split 50/50 between bonds and equities. On the mandate side, the bank works with 25 external managers, though the range of external managers is much broader in open funds, Seeley shares.

NZAM pushback

Given its focus on sustainability, ABN Amro has been vocal in its support for the Net Zero Asset Managers (NZAM) initiative, encouraging managers the bank works with to remain signatories. “We believe it is a valuable platform that creates a structured framework for discussing commitments,” Seeley says.

While asset owners such as pension funds have so far been at the forefront of the push towards manager alignment, ABN Amro IM has encouraged managers it is invested with to renew their commitments. “We were quite vocal with the asset managers we work with when NZAM was suspended. Common frameworks like NZAM enable investors to engage more effectively and with greater collective influence.”

Last year, the coalition eased its requirements for membership, effectively scrapping its net zero by 2050 target. It remains to be seen if managers will use this as an opportunity to water down targets, she acknowledges.

“Many managers are revisiting their targets. It is difficult to say what will remain in scope and what future net zero commitments will look like. By September or October, we should have a better sense of where the market is leaning. For now, much of the European market still appears committed to climate objectives, and long-term investors continue to push for this. Ultimately, the proportion of assets with climate commitments will shape the discussion.”

Regional divergence

One thing that has transpired in climate engagements with external managers is a clear regional gap, she acknowledges. “In the US there has been a change in tone, partly because they face legal risks, so our dialogue there is somewhat different. Discussions with European and UK players are generally smoother, though we have seen some changes in their communication.”

The firm’s due diligence process is split across two complementary areas. On the operational due diligence side, ABN Amro IM assesses firm-level ESG and climate commitments as part of its broader framework. The focus here is on reviewing all managers from a climate perspective, understanding the commitments they have in place and identifying areas where progress may be insufficient.

In parallel, manager due diligence focuses on the investment strategy level, assessing how ESG and climate considerations are integrated into specific strategies, Seeley explains.

These talks ultimately feed into net zero targets for the respective portfolios, she adds. “We are in the process of setting targets for selected portfolios. For some of our Article 8+ [stronger ESG integration compared to our Article 8 light fund range] strategies, we are putting some 2030 and 2050 targets in place. If an underlying manager is adversely impacting our ability to meet those targets, we will engage with them and look for alternatives if necessary.”

Walking the walk

However, unlike major asset owners who have recently overhauled their manager lineup, these conversations have not directly led to divestments. “Our focus is on discussing these topics in depth with our managers through engagement, helping them understand why they should meet these criteria. We want to work with asset managers that demonstrate credible commitments and genuinely ‘walk the walk.’ We are assessing both managers and strategies,” she adds.

Having said that, providing feedback is still crucial, she believes: “We want managers to understand why we are taking a certain decision. There is an educational element: making sure the asset managers we work with understand the needs of our client base. We are willing to invest the time and effort required to achieve that.”

Voting – red flags

Additionally, the manager is also keeping a close eye on voting patterns among its managers, with the information feeding into manager selection, she adds. “If a manager sells a strategy with climate considerations but then votes in a way that is clearly inconsistent with those claims, that should trigger a red flag.”

Technological innovation has helped to boost transparency in that respect, she believes: “The trend of pass-through voting is growing rapidly. Asset managers are expanding pass-through voting options, and more clients want a say over how their shares are voted. Many fintechs are also developing pass-through voting tools. As voting behaviour becomes more transparent, it is emerging as one of the clearest tests of whether climate commitments are genuine. That is why voting is set to become a central climate debate and a clear sign of positive momentum.”

Mandates as building blocks

Rather than divesting, ABN Amro uses its mandate structures to customise partnerships with individual managers, she explains.

“For us, this is relatively easier because most of our assets are held in mandate structures, which gives us significantly more influence than investing through open-ended products, as many asset managers do.”

“Our mandate funds can be used as building blocks within client portfolios. Within our mandate structures, we can apply tilts relative to the parent strategy, allowing us to better reflect our investment preferences, including specific approaches to exclusions and engagement.”

“We tilt mandate strategies based on our investment preferences and strategic priorities,” she explains.

Ultimately, there are solid financial reasons for pushing for better alignment, she believes: “I would like to speak the same language as the portfolio manager. Climate awareness should not just be a guideline written into an agreement. If that understanding is missing, stock-picking decisions may not be good, and eventually performance may suffer. Ultimately, this is about acting in the best interests of our clients.”

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