October 21, 2011 – As the World Bank and IMF warned that the global economy had entered a “dangerous new phase”, pioneers of an emerging movement of sustainable banks came together at a specially convened event to ask if values-based banking can sustainably finance the future. This is a brief note to reflect the highlights of their discussion.

‘Real Banking for the Real Economy’ was hosted by the Royal Netherlands Embassy in Washington and the Global Alliance for Banking on Values (GABV), a network of values-based banks from across the world, on 22 September. Dutch Ambassador Renée Jones-Bos welcomed an audience of senior policy makers, practitioners and opinion formers and introduced panelists Peter Blom, GABV Chair and CEO of Triodos Bank, Luis Felipe Derteano, President of Grupo ACP, Tamara Vrooman, CEO of Vancity, Rosalind Copisarow, Managing Director of Oikocredit, and Eugene Ludwig, CEO of Promontory Financial Group. Laurie Spengler, President and CEO of SBI, lead the discussion.

The event began by asking a fundamental question. What are sustainable financial institutions, and what role can they play in supporting economic growth and development? Laurie Spengler highlighted some key principles which characterise these organisations, principles that are embedded in the work of the 14 members of the GABV’s network of independent sustainable banks. They include:

  • a triple bottom line approach at the heart of the business model
  • a long-term perspective in executing their business so they are resilient to external pressures
  • a core focus on real business and the real economy
  • maintaining direct relationships with clients and risk, and
  • transparency and stakeholder participation in governance.

Responding to the challenge of whether “sustainable banking is more than marketing speak”, Peter Blom began by describing how Triodos Bank started in 1980 when ‘sustainability’ itself was rarely used as a term at all. Now “nobody in the world says they are against it”. Since then sustainable banking has demonstrated it is here to stay. Despite initial predictions that Triodos Bank would last three or four years to be absorbed by a sympathetic conventional bank when it ran in to trouble, it is now “staffed by 700 people in five countries across Europe with assets of around $8 billion.”

Tamara Vrooman, CEO of a credit union that now serves one in four people in the Metro Vancouver region, explained that to understand sustainable banking you have to understand “that as banks, we are in the service of people who rely on us for credit, investments and deposits. We take our cue from them. When we become disconnected from that, and start to make money by manufacturing financial instruments, that is where – simply put – we get into trouble.”

Luis-Felipe Derteano, Chair of Grupo ACP, described how a values-based approach was translated into concrete action by the founders of Mibanco, a groundbreaking Peruvian microfinance bank serving 650,000 clients: “A group of entrepreneurs decided that they could do something more for their country, not by handing out money but by providing tools so that people could develop their own capacities.”

The panelists went on to discuss the role values-based banks and investors can play in economic development and growth, through a powerful connection with the real economy. Tamara Vrooman described how banks occupy a unique space because, “Many institutions talk about the need for more sustainable economic growth, the need for greater inclusion, and the need for greater participation in economic institutions. But banks are uniquely positioned to really deliver it, because of our ability to leverage.”

To realise that opportunity, the panelists argued that sustainable banks require investment and appropriate regulatory support. As a representative of private investors driving growth in the microfinance sector in particular, Oikocredit Managing Director Rosalind Copisarow, described how investors who demand “more social impact, and more ecological sustainability” have played a critical role providing finance for organisations serving people “living at the base of the pyramid” around the world.

Eugene Ludwig, President Clinton’s former Comptroller of Currency is a “bank doctor”, who”comes to work when there is a financial problem”. He argued that in the right regulatory environment, economic growth can be delivered by sustainable banks precisely because they focus on the unserved: “Banking portfolios serving lower income individuals perform as well or better than any other banking portfolio”, he said. And, significantly, it is of fundamental importance that we “care enough” to appoint “people of stature and competence” in “critical” regulatory roles.

The panelists painted an optimistic future for sustainable banking during a closing exchange of views about what values-based banking could look like in the future. Eugene Ludwig was confident. “I believe the sustainable banking movement is certain to expand”, he said. Rosalind Copisarow echoed that view, as long as these financial institutions, “listen to their clients”. Luis Felipe Derteano emphasized the importance of learning from the past, and the wisdom of taking time to consider the future: “we have learned that there is no business as usual approach any more. We have to be thinking organisations.”

According to Peter Blom, specialized and networked banks, like those in the Global Alliance for Banking on Values, can have a profound influence on the economy – through inspiration not replication. “We don’t copy each other in the Global Alliance. We are inspired by each other.” He agreed that proximity to the real economy and, “to people’s needs such as food, a house and education” would be critical for the future. Because, “If we can stay as close as possible to people’s real needs, small and medium sized sustainable banks are flexible enough to deliver on a much larger scale.”

Against the backdrop of an IMF meeting wrestling with enormous challenges, Tamara Vrooman challenged the sustainable banking movement to think big. “I am worried that this crisis is so acute that survival is going to be the goal rather than actually setting up the system to prosper in the future. The invitation to us is to be bolder than we have been, to create a truly sustainable financial system that goes beyond the margins. One in which far more people can participate and benefit.”

About the Global Alliance for Banking on Values

The Global Alliance for Banking on Values (GABV) is a membership organization, made up of fourteen of the world’s leading sustainable banks, from Asia and Latin America to the US and Europe. They are bound by a shared commitment to find global solutions to international problems – and to promote a positive, viable alternative to the current financial system. These organizations believe that we must improve the quality of life for everyone on the planet, recognizing that we are economically interdependent and responsible to current and future generations.

Founded in 2009, the network’s members have to meet three criteria:

  • they are independent and licensed banks with a focus on retail customers
  • with a minimum balance sheet of $50 million;
  • and, most significantly, they should be committed to social banking and the triple bottom line of people, planet and profit

About the Royal Netherlands Embassy

For more than 400 years, the Netherlands and the United States have been joined by the values of freedom, justice and an entrepreneurial spirit. A vibrant economic force, the Netherlands is also the third largest investor in America and a reliable trade and investment partner to the U.S. The Royal Netherlands Embassy, Dutch Consulates General and Honorary Consuls in the U.S. promote strong bilateral relations between the United States and the Netherlands in the areas of peace and stability; international law; energy and climate; water management; international human rights; and creative industries. The Netherlands and the United States: Two countries, one spirit united by values, history and a vision of the future.

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