Since the financial crisis, disillusioned customers have continued to desert the big banks in favour of sustainable banking. The world’s leading ethical bank, Triodos Bank, has been especially successful, with annual growth rates of around 20%.
Triodos Bank was formed in the Netherlands in 1980 and also has branches in Belgium, Germany, the UK and Spain. The Bank lends money from around 100,000 savers across Europe to hundreds of organizations, including fair trade initiatives, organic farms, arts groups and renewable energy projects.
British MD Charles Middleton tells David W. Smith why ethical banking is mounting a successful challenge to mainstream banking.
How has the ethical banking sector performed since the financial crisis?
I’d say there’s been a real awakening of interest from the public. It’s clear many people have become disillusioned with the big banks and have been looking for more positive things to do with their money so interest in sustainable banking has kept growing. Prior to the crisis, banking was for most people just something you had to do. But people have seen the massive negative effect of unsustainable and unethical banks on the whole economy and on millions of lives.
At Triodos Bank, we’ve gone from a small- to a medium-sized bank in the last five years. Growth has been around 20% each year over that period and – although there’s a slight slowing – we’re still expecting around 15% this year. But we’re not aiming at growth for its own sake. It’s also about increasing the impact of our lending and investing.
Would you agree little has changed in the culture of the big banks?
The response to the crisis has largely been about finding ways to prevent it happening again which is leading to some new regulations. But this approach focuses on addressing past mistakes rather than designing a fundamentally different future. That’s at the core of why the ‘Big Banks’ have not changed that much.
We are seeing a gradual shift toward more sustainable banking, but as long as profit comes before people and planet, banking businesses will not play the responsible role in society that they need to.
Consumers have enormous power. If everybody took a more conscious approach with their money the world would look very different. It’s important to stress the influence each one of us has over the financial system. We’ve all got a choice to make about what we do with our money and it’s our money that fuels the financial system so that choice can make a difference.
Can you reassure investors that returns will be healthy?
To some, ethical banking is still perceived as a niche for people who don’t depend on their money performing well. But ethical banking has matured and is now found in building societies, crowd funding and a growing number of ethical banks. Ethical investment funds have performed well over recent years as well as providing assurance on how the money is used.
Returns with Triodos Bank are competitive and we take a more holistic view. Of course, we measure ‘returns’ financially, but we also take into account the social impact. Every organization we finance is making a positive difference – socially, culturally or environmentally. To give just one example, 187,500 people benefited from the work of 285 educational establishments financed by Triodos Bank in 2013.
How did you end up working for Triodos Bank? Were you looking to work in ethical finance?
Before I moved to Triodos Bank, I was a commercial banker for 20 years at Barclays. When I first started there, the bank’s Quaker roots were still in evidence, but over time the bank ceased to take enough account of its Quaker values. In hindsight, it lost an important influence on its business.
‘We are seeing a gradual shift toward more sustainable banking, but as long as profit comes before people and planet, banking businesses will not play the responsible role in society that they need to,’ Charles Middleton
While I was with Barclays I spent several years working overseas starting in India, where I got involved in charitable projects that encouraged me to think more about the ethics of banking. Back to the UK, I persuaded friends to buy photos I’d taken in India which funded the education of 17 children in Mumbai. Later on, I was looking for opportunities to work in the charity world, when I heard about Triodos Bank. They were looking for a UK CEO and it was aligned perfectly with where I wanted to be.
I feel lucky to work here. I spend a lot of time visiting the businesses we lend to and experiencing at first hand their passion and commitment for what they are doing. I also spend time connecting our savers with how their money is being used.
What is Triodos Bank’s attitude to profit? Is it secondary to doing the right thing?
We have a clear mission to use finance to help create a more sustainable future but it doesn’t mean we’re a charity. To remain a viable bank we need to make a profit, just not at the expense of the environment and people, in fact exactly the opposite. We believe the triple bottom line approach of people, planet and profit is the right way to do business.
‘We’d like consumers to look beyond the big figures trumpeted by the large banks and to challenge the proportion of the money that they look after which is being ethically invested,’ Charles Middleton
We aim to be a reference point for sustainable banking and to fulfil that role we need to grow in a sustainable way which includes making a profit. This profit-making approach is common to most of the 25 banks in the Global Alliance for Banking On Values, of which we are a founder member.
How is this different from the big banks’ approach to profit?
They are profit-maximising rather than profit-making. For instance, while they all invest in renewable energy, it’s a small part of what they do. Lloyds, for example, is financing around double the amount of renewable energy output in megawatts that we do. But as a percentage of total investments it is very small, whereas for us it makes up around 30% of our lending. We’d like consumers to look beyond the big figures trumpeted by the large banks and to challenge the proportion of the money that they look after which is being ethically invested.
Is there an element of ‘greenwash’ in the approach of the big banks?
There is an element of banks trying to be seen to be doing the right thing particularly in light of the very low regard people have for banks. It’s right to challenge how genuine and how substantive their actions are. At the same time we also want to support organizations, including banks, when they are making small steps towards sustainability.
How important is transparency for Triodos Bank?
It may be a buzz word in banking but it is completely fundamental to our proposition. If you want to be an ethical and sustainable bank, transparency is key so people can decide whether they trust you or not. We publish details of every organization we lend to, or invest in so every investor knows where the money goes and is able to make a conscious decision about their money.
What’s your attitude to fracking?
We wouldn’t invest in any form of fossil fuels as existing reserves are more than enough to cause massive climate change. A lot of fracking will be funded by private money and if the same amount was invested in renewables, this would make a significant difference to how much sustainable energy we could generate.
Energy efficient measures such as solar panels on social housing are a good start, but we need massive investment in renewable energy sources. The UK has so much potential to develop tidal and wave power, but very little money is being invested and we’re trying to redress the balance.