Impact Assessment 2023: Note on methodology

Introduction

About this document

This document provides an overview of the methodology, data and modelling used to make the Impact Report 2023.

Introduction

Scope of the Impact Measurement Methodological Approach

Input Data

Modelling Approach

Key Assumptions

This document is structured as follows. It starts with the chapter 'Scope of the assessment' which describes the scope of the Impact Measurement for ABN AMRO. Then, the chapter 'Methodological Approach' provides the key methodological approach (generic to all capitals and impacts assessed). It is followed by the chapter 'Input Data' which discusses input data and its procedures. The chapter 'Modelling Approach' provides the modelling approach and the last chapter 'Key Assumptions' lists the main assumptions and limitations of the assessment.

Two appendices supplement this document. The first one gives a high-level overview of the methodological approach per capital. The second appendix provides a list of all impacts in scope, with a brief description and a note on the methodological approach.

The methodology described in this document draws from the Impact-Weighted Accounts Framework from the Impact Economy Foundation (IEF) and Integrated Profit and Loss (IP&L) Assessment Methodology (IAM) of Impact Institute.1

Context of the Impact Measurement

Between 2014 and 2018, a number of pilot impact measurements were conducted. These assessments strengthened the understanding of the impact

ABN AMRO has, as a bank, through both its operations and value chain. The pilot assessments include

the diamonds industry, mortgage provision and a qualitative Impact Measurement for the bank as a whole. Based on these and other pilots, the concept of an Integrated Profit & Loss Assessment was developed. ABN AMRO has been working on this concept with Impact Institute and other partners. While this remains a work in progress, an extensive overview and understanding of ABN AMRO's impact has been constructed. The first bank-wide assessment was published in the 2018 Impact Report. In 2019 and 2020, an Impact Summary of the results was published in the Integrated Report. The Impact Report includes a comparison of 2023 and 2022 results.

Impact measurement is still a young science and our methodology continues to evolve. With this assessment, we already have an extensive overview and understanding of our impact. However, it remains a work in progress. Impact indicators and valuation factors may change in the future and new ones may be introduced.

Goal of the Impact Measurement

The goal of the Impact Measurement in 2023 is to better understand the estimated impact we made as ABN AMRO during 2023 and to provide more transparency to our stakeholders about the impact we had on them.

Appendix I: High-level approach per capital

Appendix II: Impact Group List References

Scope of the Impact Measurement

This section will cover the various scoping aspects of the Impact Measurement. This includes time scope, activities scope, capital scope, stakeholder groups scope, value chain scope, and impact scope. Note that impact measurement and valuation is a developing field, and elements of the scope and approach might change over time.

Introduction

Scope of the Impact Measurement

Methodological Approach

Input Data

Modelling Approach

Key Assumptions

Time scope

The Impact Measurement is assessed for the calendar year 2023. The scope includes both realised well-being (and realised breaches of rights) as well as the increase or decrease in the value of assets to society during 20231.

Capital scope

The capitals in scope for the assessment are produced capital, human capital, social capital and natural capital. Produced capital is a direct combination of

manufactured, financial and intellectual capitals. Figure 1 below provides a brief description for each of the capitals.

Appendix I: High-level approach per capital

Appendix II: Impact Group List References

Activities scope

In this assessment, internal impacts (effects that are

Figure 1: The six capitals included in the Impact Measurement

reflected in the prices of transactions ABN AMRO is involved in) are measured for 95% of the organisation's activities and external impacts (effects that are not reflected in the prices of the transactions ABN AMRO is involved in) are measured for 80%, where coverage is measured according to the contribution of the impacts in scope to the Consolidated Income Statement of ABN AMRO Bank N.V. These percentages

Produced capital

Manufactured capital

All tangible assets. This includes the assets used for production (property, plant, and equipment, sometimes collectively referred to as manufacturing capital). In the context of Impact Measurement, this also includes the tangible assets of intermediate and finished products.

Other capitals

Human capital

The productive capacity embedded in individual people. This includes their health, their competences and the time they put into producing goods and services. In addition, in the context of impact statements, elements of well-being are listed under human capital if they occur at the level of individual people.

are calculated by considering the proportion of each of the line items in the Consolidated Income Statement that reflect activities that are covered for internal and external impacts.

Financial capital

All assets that are a form of money or other financial assets, including contracts. Financial capital is owned by a specific stakeholder in almost all instances. Almost all financial capital exchanges between stakeholders preserve the total amount of financial capital (positive impact for one, and negative

for the other that is compensated in another capital).

Social capital

Value embedded in groups of people - from family to the global community - and includes social ties, norms, networks, and brands. Well-being effects are often listed under social capital if they only impact a group of people and could not be said to impact only one, singular individual.

1 A reassessment on 2022 Impact results is included in the Impact Report 2023.

Stakeholder group scope

The stakeholder groups in scope for the assessment are clients, employees, investors, and society. Table 1 on the right offers the properties of the stakeholder groups.

Value chain scope

Table 1: Properties of affected stakeholder groups

Introduction

Scope of the Impact Measurement

Methodological Approach

Input Data

The value chain of ABN AMRO is the combined total of all value chains for all products and services ABN AMRO contributes to. A value chain consists of all businesses and actors that contribute to the production and delivery of a specific final good or service. In this

• Retail and SME clients
• Commercial, Corporate and Institutional Banking clients
• Private banking clients
• Public sector clients
• Brokers, intermediaries and other distributors

Modelling Approach

Key Assumptions

Appendix I: High-level approach per capital

assessment, there are four value chain scopes: own operations impacts, client impacts, upstream value chain impacts and downstream value chain impacts beyond direct clients.

Own operations impacts refer to (direct) impacts that have effects mainly due to the own operations of ABN AMRO. Client impacts refer to (indirect) internal impacts generated at clients of ABN AMRO, both corporate clients and retail clients. Upstream value chain impacts refer to (indirect) impacts at suppliers of goods, services, and capital. Lastly, downstream value chain impacts beyond direct clients refer to impacts that originate at direct and indirect suppliers and clients of ABN AMRO's clients. The structure of these scopes are shown in Figure 2 on page 4. The impacts of the latter three value chain scopes relating to the activities of these actors are an indirect effect of the activities of ABN AMRO. As a result, ABN AMRO is associated with some of this impact. This is discussed in detail in the section 'The approach to attribution over the value chain'.

Stakeholders who receive products or services from ABN AMRO. Note that deposit holders who have a function to provide capital to ABN AMRO, are also clients as their deposit account reflects a service provided by ABN AMRO.

Stakeholders who are full-time and part-time employees, as well as sub-contractors of

ABN AMRO. They receive a salary or wage and other benefits from the company and constitute much of the human capital.

Shareholders and bondholders of ABN AMRO that provide financial capital to the organisation. They are most directly affected by the financial results of the organisation.

All other stakeholders. This includes direct and indirect suppliers of goods, services and capital, including external consultants; business partners; local communities; governments and regulators; other (non-governmental) organisations; the organisations upstream and downstream ABN AMRO's business clients; and all others who are affected by ABN AMRO or its value chain - including the entire global community in case of 'natural capital' impacts. Note that this stakeholder group also includes clients, employees and investors of organisations other than

ABN AMRO.

Appendix II: Impact Group List References

Figure 2: The value chains of ABN AMRO

Supplier

of Client

A simplified overview of the value chains of ABN AMRO, and the business activities that different impacts can relate to. The value chain does not explicitly take into account (and does not attribute impact to) governments, regulators, NGOs, media or any other actors that impact the value chain but are not a direct or indirect supplier or client, though they can influence the value chain.

Scope of the Impact Measurement

Methodological Approach

Input Data

Modelling Approach

Key Assumptions

Appendix I: High-level approach per capital

Appendix II: Impact Group List References

Impact scope

The impact groups in scope for the Impact Measurement are presented in Appendix II to this document.

The impacts to be included in the scope were assessed based on both internal input (from ABN AMRO) and external input. The internal input included materiality matrices of ABN AMRO, existing impact studies from ABN AMRO, and internal expert input. The external input included materiality matrices from other banks, direct existing impact studies from other organisations, and external expert input. A balanced selection of positive and negative impacts in scope was aimed for.

External costs in the Statement are not netted, unless they are shown unaggregated elsewhere.

The following impacts have not been assessed, mainly due to limited data availability: contribution to money creation, and contribution to financial system (in) stability. Similarly, the consumer and producer surplus of a number of activities have been placed out of scope and for some impacts the scope of sub-effects is limited to where robust data is available (e.g., the scope for air and water pollution only includes pollutants

for which data is available on both emission levels and valuation).

Methodological Approach

This section describes four key elements of methodology: the properties of reference scenarios, the approach to attribution over the value chain, the (high-level) approach to top-down and bottom-up analysis, and the approach to valuation. The methodology draws from the approach described in the Impact Assessment Methodology (IAM) of Impact Institute.1

Introduction

Scope of the Impact Measurement

Methodological Approach

Input Data

Modelling Approach

Key Assumptions

The properties of a reference scenario

Impact is defined as the difference between the outcome of a set of activities and a counterfactual outcome of a reference activity. The set of activities for this Impact Report are the activities that ABN AMRO performs, such as providing mortgages, employing people and paying suppliers.

Within the scope of this Impact Measurement, a reference is a no-alternative scenario and impact is referred to as absolute impact. In a no-alternative scenario ABN AMRO is not active, and no alternative activities (such as competing banks taking over any of ABN AMRO's activities) are modelled.2, 3 As a result, this reference helps assess the impact of the activities itself rather than making a comparison with how others would perform those activities. For example, the greenhouse gas emissions of ABN AMRO's own operations are simply given by the volume of the emissions. That is, they are compared with a reference where they are not emitted,

as opposed to a reference that would need to model how much other organisations would emit in a reference.

So-called marginal impact is not in scope in the Impact Measurement. Marginal impact is impact where the reference scenario includes a specific alternative. This can be increased activity of ABN AMRO's competition. In that case, marginal impact would show the difference between the outcomes of ABN AMRO's operations, and those of competing banks. As ABN AMRO operates in a competitive market, these differences are expected to be relatively small and focus is on absolute impact only.

The approach to attribution over the value chain

As with all organisations, ABN AMRO creates value, together with other organisations, in its value chains. A simplified representation of these value chains is given in Figure 2. ABN AMRO understands that it is

associated with the activities of its suppliers, clients and investments, and the impact thereof. This follows, for instance, from closely monitoring human rights issues at its clients and their value chains.4

In Impact Measurement, the idea of shared contribution to impact across the value chain is quantified. This naturally gives three options: impact arising only at one organisation with no other organisation in the value chain contributing to the impact, impact arising at no one organisation in particular, with multiple organisations in the value chain contributing to

the impact, and impact arising primarily at one organisation with other organisations in the value chain contributing to the impact. Firstly, when impact arises at an organisation and no other organisations in the value chain contribute, the impact is fully attributed to the organisation, with no attribution to any of its value chain partners.

Appendix I: High-level approach per capital

Appendix II: Impact Group List References

ABN AMRO Note on methodology: As used in the Impact Report 2023

8

Secondly, when contribution to impact is fully shared across the value chain and no organisation contributes in particular, impact is first added together, and then distributed over the different value chain partners, with a distribution that is not sensitive to the organisation at whose own operations the impacts originally occurred. Thirdly, shared contribution to impact across the value chain with a primary contributor is a combination of the two options above. Part of the impact is re-attributed over the value chain, but not all of it. This recognizes that organisations in the value chain are associated with each other's impact, but that they always have a stronger contribution to their own impact.1

Based on this, three categories of impact can be identified:

• Mainly internalities. In the Impact Measurement, ABN AMRO is considered to be the sole contributor to its internal impacts. Contribution to these impacts is therefore not shared across the value chain. These reflect effects that are reflected in the prices of transactions we are involved in, and that typically only affect directly involved stakeholders. There is no re-attribution over the value chain. Examples of this include the salaries paid to employees, opportunity cost of capital, and payments of clients
  for ABN AMRO's services.2

• Externalities with a primary contributor.
  For (positive and negative) external impacts, shared contribution to the impact across the value chain is acknowledged, but the attribution also takes into account that there is a primary contributor. This is the third position above, and it is modelled by assigning 50% of the impact directly to the organisation that creates the impact in the first place, and the other 50% is shared over the full value chain.
  In this way, ABN AMRO's Impact Measurement contains elements of impact from its value chain partners, but it is also ensured that the largest share of impact is always attributed to the organisation that creates it in the first place. If ABN AMRO creates an impact, it is included in their own impact statement for more than 50% (and for a smaller share to the impact statements of their value chain partners) and if a value chain partner creates an impact, it is included mostly in their own impact statements, but a share less than 50% shows up in ABN AMRO's impact statement. See the end of this section for a simple example of how this is calculated.
  Examples of externalities modelled in this way are occupational health and safety incidents, financial distress due to difficulties to repay loans and contribution to climate change.3

• Externalities without a primary contributor. For externalities for which it is not feasible to identify a primary contributor, full shared contribution to the impact can be applied, and the impacts are re-attributed fully over the value chain. This type of impact has not been identified in ABN AMRO's Impact Measurement.
  For all externalities, it is possible to either identify ABN AMRO as primary contributor (and they are attributed a majority of the impact) or a value chain partner as primary contributor (and ABN AMRO
  is attributed a minority of the impact).4

The share of impact that is attributed to ABN AMRO versus their value chain partners (for the part of impact that is attributed over the value chain at all) is modelled based on how much of ABN AMRO's revenue is part of its added value versus paid to its suppliers of goods, services and capital. This uses the Consolidated Income Statement for the year 2023.

For every unit of impact per Euro of revenue or expense, ABN AMRO is attributed 31% of the value chain impact. This follows from the table below, as the share of the (upstream) value chain payments that are associated with ABN AMRO's added value as opposed to suppliers (value chain partners).5

Introduction

Scope of the Impact Measurement

Methodological Approach

Input Data

Modelling Approach

Key Assumptions

Appendix I: High-level approach per capital

Appendix II: Impact Group List References

Table 4: Associated with ABN AMRO's added value

Example application of the attribution formula.

Consider an impact of the externality type, where ABN AMRO is considered primary contributor and creates 100 units of impact, and all the other organisations in the value chain are assessed to have 150 units of impact. In this example, the total value chain has 250 units of impact. Half of this is directly attributed to the organisations that create the impact in the first place. ABN AMRO gets 50 of the 100 units its primarily contributing to, and the other organisations get 75 of the 150 units directly. Of the 125 remaining units, ABN AMRO gets 30%, that is 39 units, and the other organisations get the remaining 86 units. In total, ABN AMRO's impact statement now reports 89 units.1

Introduction

Scope of the Impact Measurement

Methodological Approach

Input Data

Modelling Approach

Key Assumptions

Appendix I: High-level approach per capital

Appendix II: Impact Group List References