Ethical banking isn’t new, but there are few lending institutions quite so squeaky clean as Triodos. We talk to the man at the helm of a robust, sustainable institution that’s taking financial conscientiousness to a new level
Towards the end of the Noughties, several Savile Row tailors noticed that fewer customers than ever before were ordering pinstriped suits. The reason had nothing to do with the capricious tides of fashion: it was because pinstripes have always been associated with the guys who had caused a global economic slump. Bankers had become public enemy number one: guilty not only of irresponsible lending, but also astronomical bonuses, dodgy funding and inept trading deals.
More than six years on and still under duress in terms of public perception of the finance industry, banking is changing its image. In 2010, high-street bank Metro arrived on the scene promising a community-based approach to its remit.
Then last year, TSB bounced back, claiming to be “the only major bank to operate differently” and offering a notable package of customer care initiatives. Even the high-street giants have started launching PR charm offensives.
But the bank with arguably the most impressive ethical stance in the UK – perhaps the world – is a medium-sized Bristol-based organisation. Founded in the Netherlands in 1980, Triodos has operated in Britain since 1995. Charles Middleton, the bank’s UK chief executive, explains: “What we’re all about is trying to encourage the use of money in a more conscious way. People are thinking more about what happens as a result of what food they spend their money on, what happens to the stuff they put in their bins. But what about the money they spend?
People come to us because they think, ‘Right, I get my energy from a green source, I’ve got a robust recycling programme, I think hard about the nature of my office space – why shouldn’t I consider my finance in the same way? I’d rather go and bank with an institution which shares my overall mission and purpose…’ That’s our proposition to savers – we’ll enable you to do that and help you build that thought into your overall perspective on making the world a more civil place.”
Triodos may not yet be a household name, but the global financial crisis helped to raise its profile. Not only did the business not require bailing out, it actively had money to lend when other banks were curbing all loans, and was in a position to put that message out. SMEs, in particular, came to them in droves “We haven’t got a balance sheet that would be able to provide very large sums,” says Middleton, “and that pulls us towards smaller businesses.”
But size isn’t the bank’s main concern, morality is. As far as Triodos is concerned, it’s not enough for a company to be innocuous: to secure funding from the bank, a venture must actually do positive good, either socially, culturally or environmentally. “We seek out projects that are making a positive difference rather than simply being morally neutral,” says Middleton.
“Other people can help the neutral ones – as far as we’re concerned, we’ve got a certain amount of capital that we need to deploy in the most effective way possible. So the more positive and proactive those projects are, the better.” Hence, typical of Triodos’s borrowers are Fairtrade coffee and tea brand Cafédirect, agricultural rehabilitation programme Jamie’s Farm, and award-winning organic health company Neal’s Yard Remedies.
Steady growth at Triodos
Triodos, says Middleton, offers very competitive interest rates (just because a potential borrower is ethical, of course, doesn’t make it naive or lacking in business savvy) yet has enjoyed consistent growth in the 11 years since he took the reins: in 2003, it had 57 staff, entrusted about €265m (£208m) in funds and made a net profit of €287,000; the same figures for 2013 are 109 staff, €789m and €2m respectively.
Of course, Triodos’s graphic design isn’t emblazoned on every UK street, but the bank is well known in the kind of sectors it services – such as organic farming, housing associations, fair trade, and so on.
Transparency, for Middleton, is fundamental to the bank’s ethos. “Details of every project we lend to are visible, in detail, on our website,” he says. “We’re constantly facilitating meetings between savers and people behind projects. We often arrange for 30 or 40 investors to go and spend a day witnessing projects being carried out – be it an ethical farm, an arts project, whatever. It’s always so lovely to see the pride the borrowing customer has in talking to investors about what they’re doing, how they engage with savers because of this common link – conscientiousness with money.”
Asked whether involvement with his institution adds kudos to its borrowers – one can imagine Triodos clients being fast-tracked through the odd due diligence process because of who they’re borrowing from – Middleton smiles thoughtfully: “That’s a great thought, and one I’ll carry with me,” he laughs.
“I like to think that there’s a powerful community of Triodos customers who feel something good about where they’ve either placed or sourced their money. And yes, we’re keen to help them leverage it. We have a blue plaque scheme so that customers can put one up in their premises to show that they’re banking with Triodos, if they’d like to.”
Voyage of discovery
Middleton worked for Barclays for 20 years before becoming the biggest fish in a proverbial pond a fraction of the size of the high-street behemoth. “During that time I spent four years living in India, four in Botswana and three in the Caribbean,” he explains.
“When I was in Botswana, I met a Dutch guy doing a youth building-related project, who was interested in banking but from a social perspective. He invited me to a Triodos annual meeting, and I was intrigued, so I travelled down to Bristol and I just encountered this extraordinary, very professional, very together organisation.
He invited me to join a panel to help find a UK MD. About halfway through the first meeting, I found myself thinking, ‘You know what? I want this job myself…’ It was a chance to have a real sense of purpose that I was aligned to.”
So does he see a banker’s entire raison d’être as having an inherent moral obligation to it – as is the case with, say, the legal or medical profession?
“I don’t know whether it’s a moral duty, but the fact is, it’s very difficult to drop out of the financial system entirely – as individuals and as businesses, we’re all somewhat beholden to it. That, to me, puts a huge responsibility on the financial system to behave in a way that is not just honest, but is also conscious of the role it plays.
It’s not enough to stay within the law. Finance plays such a key role in people’s, businesses’ and countries’ lives, and when it goes wrong we all feel the pain. So people working in the sector have a real obligation to work and behave in a way that supports that conscious ethos – and many of them clearly did not [leading up to the crash], and we’re all suffering the consequences. Apart from some of the bankers…”
So what does he think of the larger banks’ efforts to clean up their act? “I applaud the greater transparency and engagement, but the question is the extent to which it’s genuine, and can be resonant and congruent with the financial return that is adequate for the markets and investors. Much of the drive for the banks to behave the way they did came from demands for higher and higher returns.”
Middleton also has strong feelings on the subject of tokenistic corporate social responsibility. “The holy grail for CSR is for it to become properly integrated into the core activities of the business, instead of it being some adjunct thing on the side,” he says.
“With banking, you might have a CSR programme that gives away one per cent of your profits, but actually that is completely irrelevant to the impact of the billions you’re lending – when you think of the numbers involved, it outstrips any impact you can make by giving away, say, 60 million quid. That’s the rub.” Again, the broad, warm smile. “I recently read a piece in which CSR was described as ‘an amulet with which to ward off evil spirits’.”
So what more can be done to improve banking’s reputation? “They could perhaps try and stop the incessant rollout of scandals and dramas that occur. Every time we think they’re set to end, another one – a forex-rigging scandal or something – surfaces. Until that stops it’ll be very hard for them to get any trust and belief in their integrity back. There has to be a very robust, top-to-bottom framework put in place which rewards people for doing the right thing. Even if this happens, and is clearly demonstrated, it’ll still be a long time before people stop thinking of their banks in the way they do at the moment. There’s a lot of work to be done.”
Those willing to do it need look no further for a role model.