September 28, 2007 - RBS and ABN AMRO are both currently rated AAA by Innovest. However, it would be mistaken to conclude that a combined RBS and ABN AMRO will automatically become a AAA.

The key determinant of the combined entity is not how well both banks have managed their respective environmental, social and governance (ESG) risk profiles up until now. Rather, the key driver will be how effectively ABN’s superior ESG due diligence strategy is integrated into RBS.

The main reason why RBS is a AAA is because its ESG due diligence is as good as it has needed to be to outperform in the European economies where its lending book is concentrated. In our view, if RBS were to aggressively enter higher risk emerging market economies without upgrading its existing ESG due diligence systems, it would find itself exposed to environmental, social and political risks that it is currently not equipped to navigate. This would likely impact credit quality, top line growth and the bank's brand in the long run. Another determinant of RBS's AAA rating is that RBS seems to understand this. The bank has proactively avoided higher risk economies because of its own awareness that it is not equipped to manage these extra financial risks.

ABN AMRO is a AAA for fundamentally different reasons than RBS. In our view, ABN AMRO is better equipped to anticipate and circumnavigate the environmental, social and political downside in emerging markets than the majority of its competitive set. When we evaluated all of the companies that ABN has financed in emerging markets we found that ABN financed a lower proportion of poor ESG performers than all other global banks. ABN AMRO’s ESG due diligence team is one of the most senior, well respected, well integrated due diligence ESG teams in the global banking sector. From an ESG perspective, this team consistently delivers superior results.

In our view, the ESG performance of a combined RBS-ABN AMRO largely hinges on how well RBS integrates and leverages ABN’s ESG expertise as it moves into emerging markets where ABN is an established leader and RBS is a new entrant.

Downloadable reports for these companies and others are available for purchase through Innovest's partner, CSRwire at http://www.csrwire.com/reports/independent.

About Innovest

Innovest Strategic Value Advisors is an internationally recognized investment research and advisory firm specializing in analyzing companies’ performance on environmental, social, and strategic governance issues, with a particular focus on their impact on competitiveness, profitability, and share price performance.

Innovest currently has offices in New York City, Toronto, San Francisco, London, Paris, Sydney, and Tokyo.

Innovest Strategic Value Advisors, Inc.

Innovest Strategic Value Advisors, Inc.

Innovest Strategic Value Advisors is an internationally recognized investment research and advisory firm specializing in analyzing companies’ performance on environmental, social, and strategic governance issues, with a particular focus on their impact on competitiveness, profitability, and share price performance. Innovest currently has offices in New York City, Toronto, San Francisco, London, Paris, Sydney, and Tokyo.

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