Interview: ‘Human Capital Is More Important Than Ever in the ESG Era’

From 1 January next year, large listed companies will have to comply with the CSRD sustainability reporting requirement. This goes for ABN Amro too. According to the bank’s sector banker for business services Han Mesters, this obligation is not just morally right; it is already part of the financial institution’s risk analysis.

Anyone who walked into ABN Amro's headquarters at Zuidas business park twenty years ago would have seen a very different picture from today. While people in smart suits are still around, you also see many others in casual dress. At first glance, the atmosphere seems convivial.

Perhaps it is symbolic of the bank’s transformation in mentality which, as in many other organisations, has been a gradual process. There is nothing wrong with more informality, in line with the societal transitions we find ourselves in. More attention to ethics and good governance, better relations in the workplace, and a focus on sustainability, both internally and externally. In short: the growing importance of non-material things. This will also make the bank more attractive to the newest generations.

Han Mesters has seen it all change over time. He has been with the bank for more than 25 years, including in the role of investment analyst. In recent years, as sector banker for business services, economic historian by training Mesters has increasingly focused on strategy and trends, promoting human capital and ESG, which stands for Environmental, Social, and Governance. ESG largely determines a company's attractiveness to investors and will only gain importance in the future. Mesters: ‘I was one of the first within the bank to take a course on this.’ He is now giving numerous presentations to convince colleagues of the necessity of ESG.

As an organisation, we have already done pretty well on the environmental part – the ‘E’ – says Mesters. ‘For instance, we can measure carbon emissions and put a price tag on them. Large companies can hold their suppliers in the chain accountable if there are shortcomings or abuses.’ This last point is noteworthy, because many of these suppliers are large global supply chains, for whose actions it will become easier to hold an enterprise or organisation accountable in the future.

As for the social part, a big challenge is still ahead. This is about the social transition within companies, for instance in the areas of inclusion and diversity, but also in being an attractive employer, talent development, decent work, and education. ‘Measuring this is still quite hard now,’ Mesters says. But when asked, he does have some ideas about it. ‘Look, as a bank we grant transition loans that are based on social impact. For example, we go to a supermarket and ask how many people with poor employment prospects they have employed. We will then measure this number of people during three to five years and if it has increased, we will give such a company a discount on their financing for doing socially well.’ Mind you: Mesters foresees that those who do not have their ESG in order will soon face problems: ‘Suppliers must be aware of it that they can come under pressure from large companies in that case, because the public blames those large companies.’ Anyone across the playing field who is not ESG-proof may therefore miss the boat. Mesters: ‘I never stop talking about this awareness.’

A related fact is that from 1 January next year, many clients of the bank will have to comply with the Corporate Sustainability Reporting Directive (CSRD). Not only within their own customer organisation, but also within the chain of suppliers, for example. Many of the bank's clients are therefore already working hard on implementing the CSRD. The bank recently gave other businesses a casual warning in the Financieel Dagblad newspaper: be aware that this is daunting task. Incidentally, ABN Amro, as a large organisation, was already subject to ESG reporting requirements earlier, under the ‘SFDR Directive’.

As the non-financial side is gaining importance, so are talented and suitable employees; people who are comfortable with ESG values. Human capital – a collective name for the knowledge, experience and skills of your people in the organisation – is therefore an important concept for Mesters. ‘Especially the newest generations on the labour market want to be in a position where they can mean something to society. If you invest in them and can retain them for ABN Amro, you will be rewarded. With time, this will translate into more financial gain.’ Attracting the right employees is therefore a must in the ESG era. In its application procedures, the bank is very keen on this. ‘We don’t set such great store on CVs. Generally, all our applicants are smart people with nice transcripts. What matters are their skills and their outlook on life. Do they stand behind ESG values or are they willing to adopt them?’

Mesters observes that starters, unlike their colleagues of two generations above them, approach life with greater awareness. They bring this attitude with them to the workplace. For them, meaningful and social engagement is a prerequisite for their career. And if they don’t like the working culture anymore, they just leave. ‘This awareness is less common among the people in their fifties and sixties who are now in top positions. The word purpose is more likely to irritate them. So well, all this is moving forward and you end up having a different company.’ He is also very curious to see what the generation currently still in secondary school is going to do. ‘Surveys show that they only want to work for a company or organisation that reflects diversity in society. Refusing to go along with this will become a liability in the long run. All these things, these trends, from intergenerational differences to the drive for sustainability, is exactly the feedback I constantly give to my colleagues.’

In summary, with all the transitions going on, companies will have to adapt to a great many things.