Professional Documents
Culture Documents
Sustainable
‘Green’
Banking:
The Story of
Triodos Bank The world has seen much focus on economic progress and mankind
R.N. Dash* has made giant steps in its journey through time. The side effects of the
development process have, however, also been equally enormous – loss of bio-
diversity, climatic change, environmental damage, etc. Social issues such as, poverty
alleviation have also become more important as the world has progressed economically. We
have realized, although a bit late, that development needs to be sustainable and equitable.
Sustainable development denotes development that does not reduce the possibilities and choices for the future
generations, at the same time ensuring continuity of economic progress for the present generation. It requires that
decisions taken today do not compromise options for the future - this issue is central to any serious commitment to
sustainability. It also involves balancing economic interests with the communities’ social aspirations and minimizing
environmental impacts.
Sustainable development transcends matters of ethics, corporate social responsibility and the environment although they
are all related. For business as a whole, how these factors are linked differs according to sectors, regulatory regimes, and
how the policies relating to these areas are implemented.
The process of sustainable development involves all sectors in the economy – Government, NGOs, corporates, citizens and,
of course, the financial sector. Banking is often associated with formal and rigid approaches and the sector generally
perceives itself as environmentally neutral. The context in which banking operates is, however, continuously changing.
Although banks themselves are generally environment friendly and do not impact the environment much through their own
‘internal’ operations, in view of the relationship between the banking sector and the firms who are users of banks’ products,
the ‘external’ impact on the environment through these entities is substantial.
Banks that are serious about sustainable development put principles at the heart of decision-making. This includes
fundamental issues, such as, how deals are done and loans are made, in searching proactively for opportunities and even in
establishing and adhering to policy frameworks that deliberately preclude involvement in certain investments. For example,
an investment in a factory that pollutes heavily (and passes on the costs to the society at large) will generally have a higher
financial rate of return than a factory that invests in expensive pollution control technology, as a result showing a lower rate of
return. How will banks assess the two and which one of the two will be considered first for lending, although everyone knows
that the second case will clearly be a better investment option in the long run?
26
c
k
27
c
k
earnings, the bank turned a profit in the first year itself. The when they are making financial decisions”. Triodos is
founders of Triodos Bank, in fact, revised a few unwritten perhaps the only commercial bank to provide an annual list
rules of banking. For instance, customers were given the of all the loans the bank has made; thus, savers can see
opportunity to target a cause that would receive a portion of exactly how their money is used.
the interest from their savings accounts. The wealthiest
borrowers also paid the highest interest rate!! After all, if they Expanding Activities
are charged the lowest rate as many banks do, we are
making the rich richer and businesses that are having a When the nuclear disaster occurred in Chernobyl in April
tough time already would be even closer to bankruptcy if 1986 and within a week, the toxic cloud had reached the
they weren’t charged a lower rate. Dutch border, leading to contamination of vegetables and
dairy products, the bank used this disaster as an opportunity
Triodos also introduced the principle of “personal security”. A to develop its own initiatives to start investing in wind parks
lot of good ideas are lost because banks ask borrowers to and promoting alternatives to the potentially dangerous
produce capital or collateral. That is why the bank introduced nuclear energy, in partnership with the government sector in
a system whereby a larger group of people could act as the Netherlands as well as the corporate world. The
guarantors for a new initiative. This has the added benefit of emerging field of sustainable and renewable energy
stimulating involvement and creativity in a new venture. The received an enormous boost and the Netherlands became
similarities in this to the principles of micro credit cannot be one of the international leaders in this area.
lost sight of, although these loans are nowhere near the
small loans typical of micro finance programmes. Triodos Bank has profited from the changing spirit of the
times in other ways too. Increasingly concerned about the
Investment Funds quality of their food, increasing numbers of consumers in
Europe as elsewhere in the world have started switching
In 1990, Triodos Bank launched the first “green fund” for over to organic and health food products. The bank has
funding environment friendly projects. Other funds followed systematically financed several supply chains involving
later. In the Netherlands, the Triodos Added Value Fund, organic farming. Further, several theatre groups and film
Triodos Green Fund, Triodos Sustainable Real Estate Fund companies as well as artists in need of financial help have
and Triodos Culture Fund are at present distributed to the approached and got assistance from Triodos Bank when not
general public via several other banks which ensures a many banks anywhere in the world would find them
larger outreach. The bank also initiated the first life and bankable in the conventional sense.
pension insurance schemes in the Netherlands together
with insurer Delta Lloyd Asset Management that included Triodos Bank tries to help bridge the gap between economic
social and ecological criteria in the investment guidelines. development and the interests of people and the
environment in three different ways – by providing
In the late 1980s the bank was also one of the first in Europe sustainable services, by developing new and innovative
to become deeply involved in micro finance. It made an products and by engaging in public debate about the benefits
important contribution in expanding the role of micro finance and challenges of socially responsible business and
from an aid instrument used by several donor organizations sustainable banking. In fact, the name Triodos is translated
to a business activity that spread across developing from the Greek and means “three-way approach”.
countries, even without donor funding. At present, it provides
loans and equity investments to microfinance institutions Principal Lending Areas
worldwide through specialized funds.
At present, the bank’s lending portfolio comprises the
Triodos Bank has shown that sustainability isn’t just a fad or following three major segments:
an idea for the fringes of the financial world. For customers
who want to use their money in a responsible manner, there Segment What it includes Share in
are funds available now even with the bigger banks who total lending
have their own sustainable funds. Companies too take pride (2007)
in presenting to shareholders extensive reports on their
environmental activities. According to the bank’s CEO, Nature and Projects in the field of 40 per cent
“transparency is increasingly becoming a key concept in the Environment renewable energy (wind
financial world. Nowadays businesses are more energy & hydro-electric
emphatically taking account of people and nature, including
projects), organic agriculture
28
total lending
c
k (2007)
29