By Business & Finance 
Valentina Doorly charts the quiet ascent of ethical banking and asks what the future holds for the industry.
The western mercantile economy was born, technically, across the late Middle Age and early Renaissance with intertwining trades by sea and by land from the Mediterranean city states of Venice, Pisa, Genoa, to the Flanders, from Elizabethan England to the powerful kingdom of France lead by Louis XIV dynasty. At that time, the first pragmatic nucleus of Lex Mercatorum and ‘Trade and Navigation Acts’ were agreed in order to establish international standards that would overrule and superimpose on the national ones, with a sort of free trade agreement before its time.
However, the moral foundation of the modern business world had already been laid out a couple of thousand years before by the masterful Roman emperor Vespasian: ‘Pecunia non olet’, money doesn’t smell. Regardless of how the money is made, it’s not tainted by its origins. In one simple locution, the gist of doing business, is distilled for our apt use.
Common thinking such as ‘business is business’ and ‘money talks’ have constantly been reconfirmed to us throughout the centuries. It doesn’t matter where the money comes from, or where it goes, as long as it delivers a yield, a ROI, an interest.
But this take on the topic doesn’t suit all palates. Some are interested in where the money comes from and, oddly, what it is being used for. And often, they turn to ethical banking for their savings and investments.
OPEN DOOR POLICY
The customers’ who enter the doors at Triodos Bank in Bruxelles, range from the millennial urbanites to the retired business owner, from the school teacher to the young millionaire. This crowd is not a sectarian bunch imbued of utopia. It’s just that they have one belief in common – money is to them prominently a medium and only incidentally, a goal. And like all media, it takes its meaning and colour according to the purpose it gets used for.
Triodos is the biggest financial reality in ethical banking in Europe. Founded by four Dutch promoters in 1980, with the mission of challenging the self declared moral neutrality of financial business, it wants to make a point about the power of money, and the opportunity of channeling it for the good of our society.
In a typically blunt Dutch enunciation, one article of the founding document states: “every human being should be able to develop in freedom, has equal rights and is responsible for the consequences of his economic actions for fellow human beings and for the earth”.
SOCIAL INVESTMENT
Money smells to them and it has to carry three precise scents – people, planet and prosperity. With this core of anthroposophy planted at its origins, Triodos Bank invests its financial muscle into environment, renewable energy, microfinance and social projects. The assets under their management are hovering around the €12bn mark, with a year-over-year increase of 16% in 2015 (+10% in 2014), with performance by Triodos Sustainable Funds and Triodos Microfinance Fund bagging a +19% and +17% respectively.
Triodos Organic Growth fund, a long-term private equity fund that invests in privately owned sustainable consumer businesses in Europe, grew by +9% in 2015. These investments funds range from inclusive finance, sustainable energy and organic food and agriculture. Frantic chase for the next disruptive digital start-up turned into a Unicorn which was not their game as Triodos are in the business of reasonable, organic growth for many, and, unsurprisingly, are striking a cord with the Podemos movement in Spain, with numbers of their supporters opening up an account with this bank with unconventional approach.
Triodos is the biggest financial reality in ethical banking in Europe
The company’s mission statement sounds candid and impeccable: “To help create a society that promotes people’s quality of life and that has human dignity at its core… and enable individuals institutions and businesses to use money consciously in ways that benefit people and environment”.
In terms of gender diversity, 40% of managers here are women. The salary pay gap between top ranking executives and lowest level of the ladder? 10. Yes, you heard this right, the ratio between the CEO remuneration and the receptionist’ salary in 2015 was 9,8. In addition, “Triodos bank continues not to offer bonus or share option schemes to either members of the Board or executives. Financial incentives are not considered an appropriate way to motivate and reward co-workers in a value based bank. In addition, sustainability is by its very nature the result of a combined effort by team members aimed at both the short and the long-term”.
RATES AND RETURNS
Fractional reserve ratio – the leverage between deposit received and loans administered is 8.4% – gets kept in deposit, which could be considered over conservative if compared to the minimum recommended European standard of 3%. Insolvency rate on loans is 0.16 % against an average rate of 4.6% in the principal markets of their operations.
Opaque investment funds – with undetailed destinations – are not on the menu. The bank publishes a full list of its investments, black on white, and these are available online for everyone to see. Transparency is offered on the homepage under the tag: ‘Know where your money goes’, so open and clear information is there for everyone to see. With branches in the Netherlands, Belgium, UK, Germany, Spain, Triodos is now disembarking in France, in a slow but steady expansion across the continent.
Valentina Doorly
Ethical banking is still a niche, in Europe, but it is growing substantially and becoming stronger by the day. From a future insights perspective, there is an ideological alignment and alliance here – ready to be forged – between ethical banking and the emerging movement that catalyses in between 20% to 30% of electorate in Spain, Italy, France and Ireland.
Money smells to them and it has to carry three precise scents – people, planet and prosperity
Triodos just needs to gauge the sensitivities around social fairness and sustainability and the sense of disenfranchisement in countries hit by financial damage, and they will have their custom made algorithm to shape the commercial strategy.
In 2010, Peter Blom, CEO of Triodos since 1997, was invited to join the Club of Rome, acclaimed strategic think-tank, for having grown a successful banking business model that proved that another approach to banking is possible. He commented: “Only by changing finance we will be able to finance change”. Touché. The previous year, Triodos had co-founded the Global Alliance for Banking on Values that unites a network of 28 financial institutions serving 20 millions customers with over $100bn assets under management. Their slogan was: “Banking as if society mattered”.
Vision for the future makes more sense if we become aware that, environment or business, we are all connected in ecosystems. We need to take a medium to long-term view for our choices and resources allocations or the global imbalances that we have created risk submerging us before we find the fix. It’s time to change our kpi’s, our metrics and our measuring tapes. Maybe its time to reawaken our senses and capture the good smell of money.
TRIODOS BANK RESULTS
