A new way of banking: Investing in happiness
Based in the Netherlands, Triodos Bank invests in companies and nonprofits that offer positive environmental returns.
Wed, Jul 03, 2013 at 05:15 PM
“More happiness. Less greed. Less selfishness. More truth. More equality. Less poverty.”
As these equations ran across the famous Nasdaq board in Times Square, you’d be forgiven for assuming they were a provocation by hactivist group Anonymous — or an ad for a nonprofit campaigning against the excesses of capitalism.
In fact, they were a commercial for a bank.
Investing in positive change
As the Times Square stunt might suggest, Triodos Bank is a little different from the banking monoliths that have come to dominate the sector. Based in the Netherlands, Triodos now has branches in Britain, Spain, Belgium and Germany, and is in the process of expanding its operations to France.
Financing everything from renewable energy through green building and organic farms to social housing and nonprofit programs working with ex-offenders, Triodos invests only in businesses, nonprofits and social enterprises that provide a positive environmental and/or social return.
Kessingland Wind Farm is owned by Triodos Renewables, the bank’s own wind energy company. The farm sits on the grounds of Africa Alive! Wildlife park in Suffolk, where this giraffe lives. (Photo: Triodos UK)
A quiet, practical kind of radicalism
James Vaccaro, now Triodos’ head of market and corporate development, recalls coming across a report as a young man that publicly detailed all of the bank’s loans (Triodos was the first commercial bank in the U.K. to provide this level of public transparency about its lending):
“I studied math at Cambridge University, and there’s somewhat of a conveyor belt from that discipline into a career in investment banking or management consultancy. I was on that conveyor belt, and was wondering how I could reconcile my livelihood with my values. Triodos was just launching in the U.K., and I came across a document detailing all their loans. It was the most radical document I had ever seen.”
James Vaccaro is head of market and corporate development at Triodos. (Photo: Triodos UK)
At the same time, says Vaccaro, the radical nature of this document was not about posturing, or being provocative for the sake of it. Instead, it was offering a blueprint for how to make values-based business an integral part of the economy. This approach may finally be taking hold.
“When we started out, wind and solar were still referred to as 'alternative energy'. Now they’re just energy. Investments in renewables now outstrip investments in what should be called 'finite' energy. We’re seeing reports from organizations like the IMF and PWC suggesting we could go 100 percent renewable in many parts of the world using existing technologies. And that’s just one example of how the sectors we work with are moving from the 'alternative' and into the mainstream."
Intention is everything
Key to Triodos’ success, says Vaccaro, is that unlike many ethical investment models, Triodos has avoided the concept of so-called “negative screen” investing. Instead of simply not putting money into tobacco, weapons, or other sectors deemed “unethical,” Triodos actively makes decisions about which investments will make the world a better place:
“Intention is everything. If you get up in the morning, and focus on what you are not — or what you don’t want to do — that’s what will suck up your energy. And it’s not very inspiring. If, instead, you choose to focus on what you do want to achieve, what you do stand for, what you do support — that provides a positive vision to move forward on. And that positive vision brings energy to our team members, to our borrowers, and to our customers too.”
Abbey Home Farm, an organic farm in Cirencester, England, is financed by Triodos UK. (Photo: Triodos UK)
Crisis brings opportunity
I ask James whether the recent financial crisis has changed things, in terms of how people think about the banking system. He agrees that in many ways it has, but warns against complacency moving forward:
“The push for more regulation and protection is welcome. But there’s a latent opportunity to do more. The whole concept of 'too big to fail' is still oriented toward panic. If you’re looking at a more systemic notion of what needs to change, banks need to be more diverse, and more in tune to people’s real needs. It’s not healthy to have something that’s too big to fail. “
It’s also not enough, argues Vaccaro, to say it’s the bankers’ fault. A large proportion of the population has bought into the same short-term thinking as the banks, focusing only on the largest return they can get for their investments, not on the real value that their investments can generate:
“Institutions can be regulated to the heavens by government, but until there is real demand for long-term sustainability coming from all angles, we’re only tinkering around the edges of the system.”
Jamie’s Farm, a Triodos borrower, works with vulnerable young people with behavioral problems from inner city areas who spend a week working on their farm in Bath. (Photo: Triodos UK)
Bank as change agent
Triodos has seen strong growth since it was first founded in 1980. As of 2012, the bank had about 400,000 customers. True to form, however, the organization doesn’t just measure its impact based on the numbers on a balance sheet. Triodos’ 2012 annual report highlights a broad range of metrics that it deems a part of the bank’s success, including financing 346 energy and climate projects with a generating capacity of 2,038 megawatts of energy; lending to organic farms that collectively could produce the equivalent of about 18 million meals; or to museums and theaters that attracted more than 5.7 million visitors in 2012.
“It’s easy to talk about the evils of growth,” says Vaccaro, “but what we really need to discuss is what type of growth we want to see. There are many types of growth that are unlikely to hit a limiting crisis point. Can our civilization really become 'too educated,' or have 'too much joy'? Really, we want to pursue the same kind of growth we see in nature — a growth based on abundance, cooperation, interdependence and sustainability.”
Small is beautiful
Yet despite the bank’s many successes, Vaccaro does not see Triodos joining the ranks of the banking giants anytime soon. In fact, he argues, there’s a real need to rethink the entire idea of the gigantic financial institutions, focusing instead on a diverse movement of banks and credit unions that can relearn how to meet their customers’ needs:
“The mistake in banking has been to commodify something that absolutely has to be relationship-based for it to have any chance of serving society. Regulators wanted a few, central banks serving everybody — but that thinking has been fundamentally challenged. There needs to be a whole panoply of different, diverse banks, including cooperative banks, ecological banks, and other specialists which are closer to the industries or markets that they serve.”
Values-led banking goes global
In keeping with this vision of diversity and cooperation, Triodos Bank is being careful to manage its growth moving forward — only launching in new markets where there is a clear demand and an unfilled niche. In an effort to spread the company’s approach, however, and to learn from others, Triodos has become a founder member of the Global Alliance for Banking on Values (GABV), an umbrella organization that represents 25 different financial institutions with different banking models, but a shared vision for what banking and business should be out to achieve.
That vision is rapidly gaining traction in the mainstream. In fact the GABV issued a report looking at the performance of conventional and values-driven banking side-by-side. The results, says James, were eye-opening:
“Conventional banks are not funded by deposits — instead they pursue speculative investments aimed at maximizing return on capital. We hold a lot of capital — three times as much as the average bank. And yet the difference in annual returns is very small. So what is all that additional risk for? We’re competitive with the conventional banking system already, and that’s before we even start counting the very real negative economic impact that the environmental and social consequences of business-as-usual actually represent.”
As “alternative energy” becomes assimilated into the mainstream, and as organic farming demonstrates itself to be a viable, serious industry, so too the notion of “ethical banking” may be a concept that has finally arrived. As regulators grapple with the fallout of speculative investing and short-term financial profiteering, conversations are going on at the highest levels as to the nature and purpose of our economic system. Institutions like Triodos have been having these conversations for years. Here’s hoping the world is now ready to listen.
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