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Vancity credit union 2016 Scorecard

The scorecard is divided between basic requirements, quantitative factors supplemented with brief explanations, and qualitative elements. These sections provide details of a bank’s mission and transparency; builds on this with carefully selected data that highlights the extent to which a bank is engaging in sustainability as its core activity; and explains how a sustainability agenda translates into the everyday work of a bank and its co-workers.

Basic requirements

Basic Requirements

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Quantitative factors

Quantitative Factors

Show the Quantitative Factors

Qualitative elements

Qualitative Elements

Show the Qualitative Elements

Regulated financial institution

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The bank provides evidence that it is a regulated financial institution including:

  • Where it operates
  • Under what regulatory framework it operates
  • Evidence of client deposit and financing relationships

Headquartered in Coast Salish Territory/Vancouver, British Columbia (BC), Vancouver City Savings Credit Union (Vancity) is a member-owned, community-based, full-service financial institution with 59 branches in Metro Vancouver, the Fraser Valley, Victoria, Squamish and Alert Bay. Primary lines of business include retail and business banking (deposit-taking and lending), commercial mortgage lending, and investment advice and services.

Vancity (Vancouver City Savings Credit Union) is regulated by the Financial Institutions Commission (FICOM), an agency of the Province of British Columbia. Wholly-owned subsidiary Citizens Bank of Canada is regulated by the Office of the Superintendent of Financial Institutions (OSFI), an agency of the Government of Canada. Citizens Trust, which is wholly owned by Citizens Bank, is regulated by both FICOM and OSFI.

Vancity's Rules, which are approved by the membership and FICOM, and that provide a framework for how Vancity is governed, are available here.

Mission Statement

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Mission Statement as published on its website or in any official document with specific relevant references to it value-based banking strategies

Mission: To be a democratic, ethical, and innovative provider of financial services to our members. Through strong financial performance, we serve as a catalyst for the self-reliance and economic well-being of our membership and community.

Vision and values:

Our vision is to redefine wealth in a way that furthers the financial, social and environmental well-being of our members and their communities.

Our values are:

Integrity: We act with courage, consistency and respect to do what is honest, fair and trustworthy.

Innovation: We anticipate and respond to challenges and changing needs with creativity, enthusiasm and determination.

Responsibility: We are accountable to our members, employees, colleagues and communities for the results of our decisions and actions.

In 2016 we added a fourth value of Reconciliation in support of the UN Declaration on the Rights of Indigenous Peoples as a framework for meaningful reconciliation and the Truth and Reconciliation Committee’s Call to Action for Business.

Reporting Transparency

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Annual Reports must be publicly available

Further proof of engagement in transparent reporting practices is encouraged

Vancity’s integrated annual reports include audited financial statements using International Financial Reporting Standards (IFRS). Our 2016 annual report is aligned with the International Integrated Reporting Framework and prepared in accordance with the Global Reporting Initiative’s G4 Sustainability Reporting Guidelines, Core option. Our reporting practices are guided by AccountAbility’s AA1000 Principles of Inclusivity, Materiality, Responsiveness and (2017 onwards) Impact. These principles are consistent with the co-operative governance model: they speak to the importance of long-term thinking and stakeholder engagement to inform strategy and decision-making. We advocate for credible reporting as members of the GRI GOLD community and the International Integrated Reporting Council’s Integrated Reporting Banking Network.

The content of our annual report is aligned with our business strategy and quarterly internal performance reports. We focus on material issues, including those raised by stakeholders, and provide a transparent account of progress made on strategic objectives and plans, and how results affect compensation. We also include progress made towards our Sustainable Development Goal  pledges, see page 38 of our 2016 Annual Report [PDF]. Our reports provide readers with an overview of what we expect to achieve in the year(s) ahead and are supplemented by detailed on-line reports for specialist users, including annual financial statements and accountability/non-financial statements.

Key topics reported in 2016 included: Member well-being and service experience, Building healthy communities, Member growth, Financial performance and resilience, Access to basic financial services for everyone, Financial literacy, Affordable housing, Employee capability and well-being, Environmental sustainability, and Transparent and inclusive governance. Our reports are increasingly focused on measuring and reporting our impact on members and their communities.

Adherence to AccountAbility’s AA1000 Principles and key organizational data/information, including progress made on financial and non-financial targets, are externally audited by the same firm who audit our financial statements, currently KPMG.

The Audit Committee of the Board of Directors receives the annual report plan and outline (which includes material topics to be disclosed) and the corresponding set of performance measures. The Board approves our integrated annual report prior to its release.

In addition to our annual reports, our five year business strategy is available to members and other stakeholders online.

These factors are related to the Principles of Values-based Banking and provide insight into three key elements of a bank’s activity linked to its:

  • financial viability,
  • focus on the real economy and
  • focus on a triple bottom of line of people, planet and prosperity

Bank Resiliency through Earnings – 3 year Average Return on Assets

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Return on Assets tell you how profitable a bank is. It is a good measure of a bank’s operating performance relative to the total amount of money it manages. This is important because values-based banks need to be resilient financially to deliver long term, positive impact.

It’s also reasonable to assume that if a bank’s profits are excessively high they may be taking inappropriate risks and may be enjoying unreasonable profits at the expense of their customers.

To really understand how profitable a bank is, and to avoid comparing ‘apples with oranges’, it’s important to compare a bank’s profitability with other banks in the same market. Therefore this measure is compared with a peer group selected and transparently described by the bank.

Return on Assets 2016: 0.34%

Return on Assets 2015: 0.36%

Return on Assets 2014: 0.35%

Return on Assets 2013: 0.42%

Explanation: (Profit Margin) X (Asset Turnover) =  (Net Earnings/Net Interest and Other Income) X (Net Interest and Other Income/Avg Assets)

In 2016 we changed the methodology to report on a consolidated basis. This did not affect the result for 2015, which excluded Citizens Bank, Citizens Trust and Dockside.

Market Comparison – 3 Year Average Return on Assets

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Return on Assets tell you how profitable a bank is. It is a good measure of a bank’s operating performance relative to the total amount of money it manages. This is important because values-based banks need to be resilient financially to deliver long term, positive impact.

It’s also reasonable to assume that if a bank’s profits are excessively high they may be taking inappropriate risks and may be enjoying unreasonable profits at the expense of their customers.

To really understand how profitable a bank is, and to avoid comparing ‘apples with oranges’, it’s important to compare a bank’s profitability with other banks in the same market. Therefore this measure is compared with a peer group selected and transparently described by the bank.

Return on Assets 2016: 0.79%

Return on Assets 2015: 0.81%

Return on Assets 2014: 0.83%

Return on Assets 2013: 0.74%

Explanation: Our benchmark data is for the five largest Canadian banks (RBC, TD, CIBC, BMO, BNS).

Bank Resiliency through Capital – Equity to Total Assets

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The Equity to Total Assets ratio tells you how strong a bank is. The Equity of a bank represents the money invested by its owners to cover any losses it may incur. This ratio uses the total balance sheet of the bank, which means it provides a transparent and conservative measure of a bank’s resiliency. This is important for values-based banks which are focused on lasting benefits to society, and so want to develop strong capital positions that make them stronger over the long-term.

Other measures, such as risk weighted assets capital ratios, can be used for the same purpose but they are both more complex and less transparent, so the Scorecard has chosen to use Equity to Total Assets. As a guide the Scorecard currently recommends this level to be at 8% or higher.

Equity to Total Assets 2016: 5.39%

Equity to Total Assets 2015: 5.49%

Equity to Total Assets 2014: 5.66%

Equity to Total Assets 2013: 5.52%

Explanation: Average Total Member's Equity/Average Total Assets.

In 2016 we changed the methodology to report on a consolidated basis. We’ve updated our 2015 result accordingly.

Bank Resiliency through Asset Quality – Low-quality Assets to Total Assets

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Low quality assets (such as loans to enterprises that struggle to repay them), at levels significantly above the market average, are generally a bad thing for banks because they represent the risk of financial losses in the future.

Values-based banks should have strong customer relationships, and have a deep understanding of their activities and the sectors they work in. Together this will limit the chances of loans and investments going wrong and should make working through challenges with clients easier when problems do occur. Meaningful relationships with customers and precisely this expertise, is at the core of a values-based approach to banking.

The quality of a bank’s assets should be compared with banks in the same market to understand how it is doing relative to market conditions. Therefore this measure is compared with a described peer group.

Low-quality Assets to Total Assets 2016: 0.02%

Low-quality Assets to Total Assets 2015: 0.02%

Low-quality Assets to Total Assets 2014: 0.05%

Low-quality Assets to Total Assets 2013: 0.05%

Explanation: Avg Impaired Assets (Loss provision - Individual) / Average Total Assets (consolidated).

Market Comparison – Low-quality Assets to Total Assets

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Low quality assets (such as loans to enterprises that struggle to repay them), at levels significantly above the market average, are generally a bad thing for banks because they represent the risk of financial losses in the future.

Values-based banks should have strong customer relationships, and have a deep understanding of their activities and the sectors they work in. Together this will limit the chances of loans and investments going wrong and should make working through challenges with clients easier when problems do occur. Meaningful relationships with customers and precisely this expertise, is at the core of a values-based approach to banking.

The quality of a bank’s assets should be compared with banks in the same market to understand how it is doing relative to market conditions. Therefore this measure is compared with a described peer group.

Low-quality Assets to Total Assets 2016: 0.07%

Low-quality Assets to Total Assets 2015: 0.06%

Low-quality Assets to Total Assets 2014: 0.06%

Low-quality Assets to Total Assets 2013: 0.07%

Explanation: Benchmark data is for the five largest Canadian banks (RBC, TD, CIBC, BMO, BNS).

Bank Resiliency through Client Based Liquidity – Client Deposits to Total Assets

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Banks finance their assets (such as loans, investments and their wider activities) with money that is:

  • deposited with them by customers,
  • and/or borrowed from others (mostly other banks) and then lent on to clients,
  • or sourced from investors.

A large amount of borrowing from the markets to finance a bank’s activity is, by definition, riskier because markets are more volatile. Banks are both stronger and more values-based when more of the money they use to finance their activity comes from customers.

High levels of funding from customer’s deposits also suggests a strong connection with clients and the real economy – both important elements of a values-based bank. Ideally 75% of a bank’s assets are funded through clients.

Client Deposits to Total Assets 2016: 75.39%

Client Deposits to Total Assets 2015: 72.64%

Client Deposits to Total Assets 2014: 73.25%

Client Deposits to Total Assets 2013: 75.26%

Explanation: Avg Client Deposits + Wholesale deposits (includes Central 1 deposits) / Average Total Assets

In 2016 we changed the methodology to report on a consolidated basis. We’ve updated the 2015 result accordingly.

Assets Committed to the Real Economy to Total Assets

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Values-based banks are strongly and directly connected to financing the real economy because that’s where they can have a positive impact on people’s lives and safeguard the environment.

Real economy assets in a values-based bank should, therefore, be relatively high. By the same token financial economy assets should be relatively low because their impact on people’s lives is, at best, indirect. The Scorecard seeks to have the level for this ratio above 50% and ideally close to 65%.

Assets Committed to the Real Economy to Total Assets 2016: 85%

Assets Committed to the Real Economy to Total Assets 2015: 87%

Assets Committed to the Real Economy to Total Assets 2014: 87%

Assets Committed to the Real Economy to Total Assets 2013: 93%

Explanation: Real Economy Assets / Total Assets.

Real Economy assets include: Total Assets, excluding Interest from derivative Instruments, Interest bearing deposits with financial institutions, and all Financial Assets (FLTPL/AFS).

In 2016, we removed items previously included in Real Economy Exposures that are TBL treasury investments but Financial Economy exposures. We also excluded current and deferred taxes from Real Economy Exposures.

The above data is for on-balance sheet assets. If we include in the denominator off-balance-sheet funds under administration, some of which are TBL (socially responsible investments) but all of which are Financial Economy, the percentage or real economy exposures is 70.00%.  We have not yet applied Real Economy or TBL criteria to off-balance sheet lines of credit or guarantees, which total almost $6 billion.

Revenues from the Real Economy to Total Income

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If a bank is earning more of its revenues from the real economy, it is both making more of a difference to people’s lives and is a more resilient institution.

Revenues from the financial economy tend to be more volatile, are more removed from most people’s lives, are highly unlikely to be sustainable and mean a bank is less resilient over the long term. Ideally 75% of a bank’s revenues will be from the Real Economy.

Revenues from the Real Economy to Total Income 2016: 86%

Revenues from the Real Economy to Total Income 2015: 94%

Revenues from the Real Economy to Total Income 2014: 95%

Revenues from the Real Economy to Total Income 2013: 87%

Explanation: (Interest Income linked to Real Economy Assets less Loan Impairment Expense plus Other Income Linked to Real Economy) divided by (Interest Income less Loan Impairment Expense plus Other Income).

Real Economy Income: 'Interest Income related to real economy assets' (defined as Total interest income excluding income related to derivatives, interest bearing deposits with financial institutions,  and all Financial Assets (FLTPL/AFS)), less 'loan impairment expense', plus 'other income related to real economy' (which is defined as other income excluding Net Gains and Losses on Financial Instruments and interest rate derivatives).

In 2016, we removed revenue from TBL treasury investments valued at $4.2million, items previously categorized as Real Economy but that are, in fact, Financial Economy according to the GABV’s definition. We also deducted total interest expense, which includes interest paid to members and Treasury costs such as securitization etc. as these enable us to fund the loans in the real-economy.

Assets Committed to the Triple Bottom Line to Total Assets

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This figure provides the best indication of a bank’s commitment to a values-based banking model. Triple Bottom line assets don’t just mean assets in the real economy. They specifically refer to money invested by a bank in individuals and enterprises that deliver positive social, environmental and economic benefits to society.

Not all intermediated money will be committed, however, because some liquidity needs to be available for the bank to support its clients in case of disruptions in the market. Therefore the Scorecard targets this factor to be between 25% and 55%.

Assets Committed to the Triple Bottom Line to Total Assets 2016: 21%

Assets Committed to the Triple Bottom Line to Total Assets 2015: 19%

Assets Committed to the Triple Bottom Line to Total Assets 2014: 17%

Assets Committed to the Triple Bottom Line to Total Assets 2013: n/a

Explanation: TBL Assets / Average Total Assets

Triple Bottom Line Assets is defined as assets that relate to the creation of goods and services that focus on people (social empowerment), planet (environmental regeneration) and/or prosperity (economic resiliency).

We continue to validate and refine the methodology. Our processes and tools help us decide what we include as TBL assets, including detailed guidelines and criteria for business lending and retail lending.

Currently TBL assets include:

TBL Treasury investments: Liquidity investments in the form of CMHC mortgage-backed securities connected to social housing, plus impact investments aligned with the definition of Vancity’s Community Impact Transactions, currently: Fund investments (Microvest, Oikocredit, SFRE) and our Impact Investment Portfolio (New Market, InvestEco, Pangaea, CoPower, CCIF, and Relentless).

TBL Business loans: What’s included is informed by Vancity’s Community Impact Transaction (CIT) Guidelines (PDF), which are aligned with GABV Guidelines for Financing  Micro-and Medium-sized Enetrprises. The Guidelines are reviewed and updated annually by a cross-funtional Impact Lending Working Group (ILWG). TBL transactions are defined according to the type of business, sector, ownership type.structure, access to finance, and/or business practices. The ILWG meets monthly to review, discuss and agree on impact deals where it might not be clear.

TBL Consumer/personal Loans + TBL Residential mortgages: Mortgages and personal loans that support social & cultural inclusion and community building, financial inclusion/address issues of affordability, and/or environmental sustainability, informed by the GABV Guidelines for Residential Home Financing.  In 2017, we included mortgages for homes in walkable communities and specific mortgage and loan programs designed to generate social or environmental benefits.   

TBL Premises and equipment: Buildings (including fixtures and fittings) that we own and that are accessible, are energy efficient properties/green buildings, and/or include affordable housing units.

TBL Responsible investments (off balance sheet): Member or client assets under management/administration invested in companies that demonstrate socially and environmentally responsible behaviour.

Leadership

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Leadership

The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

The bank’s leadership and governance is focused on sustainability, and the diversity of its leaders reflect this culture.

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The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

Advocacy for values-based banking

As a values-based financial co-operative, Vancity is committed to transforming how banking is done so we can help our members and their local communities thrive financially, socially and environmentally. Our vision – redefining wealth – requires us to extend our definition of success beyond member and employee satisfaction and traditional economic indicators of profitability.

Selection criteria and processes including diversity for leadership roles

Vancity’s Board of Directors, CEO and our executive leadership team represent the communities where our members live. We seek leaders who are aligned with our vision and values. We value diversity in the workplace because it allows us to better understand and meet the needs of our members and the communities we serve.

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The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

Advocacy for values-based banking

Vancity’s Board, CEO and executive leadership team work to achieve our vision in a way that furthers the financial, social and environmental well-being of our members and their communities. To help accelerate this work, we are a member of the Global Alliance for Banking on Values.

 

We are committed to remaining carbon neutral and to being a Living Wage employer. We strengthen the local economy by sourcing local products and services and favouring relationships with suppliers and businesses who demonstrate leadership in sustainable business practices. We were one of the first organizations to sign onto the Vancouver Climate Pledge to support stronger action on climate change from governments around the world. And in 2015, we adopted the UN Declaration on the Rights of Indigenous Peoples as a framework for meaningful reconciliation and embraced the Truth and Reconciliation Committee’s Call to Action for Business. These include a commitment to consultation with Indigenous people in relation to economic development projects, hiring policies that enhance opportunities for Indigenous people and a commitment to help promote a better understanding of reconciliation.

 

The strategic priorities in our business strategy and plans reflect our commitment to growing the real economy—that is, supporting the production of goods and services that impact the daily lives of our members and their communities. Our 2016 organizational scorecard included targets for member well-being and the degree to which a member believes that Vancity has had a positive impact on his or her well-being. It also included targets to increase membership, increase assets and funds under administration, and to significantly grow the proportion of assets allocated to impact/the triple bottom line.

 

Our triple bottom line approach to assets gives us an opportunity to redefine our balance sheet and map our on- and off- balance sheet assets against the benefit we are creating. The assumption underlying this metric is that the greater the proportion of assets invested in the triple bottom line, the better people’s lives and the healthier the planet will be.

 

Our executive leadership team is accountable for achieving organizational targets, and results directly influence senior management’s incentive pay and the amount of profit shared with employees. Both annual and long term objectives for our CEO’s performance are consistent with Vancity’s vision and three year strategic plan.

 

An internal Advocacy Opportunity Review team considers advocacy requests and makes recommendations. We’ve identified five areas where we believe we have the greatest opportunity to work with others to bring about positive change through public policy and advocacy opportunities: economic inclusion, co-operative economy, environmental sustainability, Indigenous partnerships and social finance. Examples of advocacy issues and initiatives we focused on in 2016:

  • Business Council of British Columbia’s Champions’ Table (where First Nation Chiefs and business CEOs work jointly to accelerate economic development and meaningful reconciliation)
  • Indigenous Innovation Summit; opportunities for dialogue and understanding of Indigenous history and culture, e.g. Our Living Languages exhibit at the Royal BC Museum, Talking Stick Festival
  • Economic inclusion, e.g. Let’s Talk Housing consultation, Registered Disability Savings Plan Action Group
  • Environmental sustainability and climate change, e.g. Council for Clean Capitalism, BC Climate Leadership Plan
  • Social finance, innovation and infrastructure policies, e.g. Surrey Innovation Summit, National Impact Investment Practitioners’ Table
  • Provincial and federal financial sector legislation and institution reform.

 

A list of key memberships in associations and advocacy organizations is available on page 35 of our 2016 Consolidated Accountability Statements [PDF].

 

Selection criteria and processes including diversity for leadership roles

As a co-operative, members elect our Board in a democratic one-member, one-vote system. Members in good standing who meet the requirements set by regulation may run for election. Vancity’s Rules are available here.

The Board takes into account regulatory requirements, such as the recommendation process of qualified candidates, and feedback from members to establish a fair and transparent election process. A Nominations and Election Committee, which includes Directors and members-at-large, recommends candidates to the members. Members can vote for their choice of up to three candidates.

For the 2016 Board Director elections, we stated a preference for individuals who:

  • reflect the communities Vancity serves to ensure diversity of thought, background, experience, gender and culture on the Board;
  • demonstrated experience in an organization with values similar to those of Vancity;
  • demonstrated financial experience including understanding financial statements and applying
  • financial management strategy; and
  • demonstrated ability to lead change and enable innovation.

 

The Board has struck a working group to ensure its definition of diversity and related practices continue to meet the expectations of the membership and the needs of the co-operative. Examples of dimensions of diversity include gender, age, ethnicity, race, sexual orientation, family status and geographic location.

 

The Board hires the CEO. The CEO is accountable for developing a highly engaged, diverse and capable workforce and management structure. When recruiting for senior leadership roles we ask why candidates want to work at Vancity and select those who truly understand and are inspired by our vision.

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The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

Advocacy for values-based banking

Vancity’s organizational scorecard results for 2016 are as follows:

  • Impact: Member wellbeing score = 75%, within our target range of 75-80% or more
  • Impact: Triple bottom line assets and funds under administration = 21.1%, above our target of 19.3%
  • Confidence: Return on members’ equity = 5.5%, above our target of 5%
  • Confidence: Size of membership = 523,902, meeting our goal to maintain current membership
  • Confidence: We implemented the business application renewal (BAR) program on time
  • Integrity: Members who did not report a problem as a result of BAR implementation program = 76%, slightly below our target of 80%
  • Integrity: Of members that reported a problem, 28% had it resolved to their satisfaction, well below our target of 80%

 

Additional 2016 results and highlights include:

  • We recertified as a Living Wage employer
  • We remained carbon neutral. GHG emissions from operations were 4,410 tonnes, meeting our target of 4,500 tonnes or less.
  • 85% of waste was diverted from the landfill or recycled at Vancity Centre, above our target of 80%
  • Our employee well-being index was 3.9/5, above our target of 3.5
  • We sourced around two-thirds of the value of our managed purchases ($120.7 million) from locally based businesses
  • We received a number of awards including:

- World’s Top 25 For-benefit Companies

- Corporate Knights – Best Corporate Citizen in Canada

- Canada’s Top Family Friendly Employers

- Canada’s Greenest Employers

- Ethical Corporation’s Responsible Business Awards 2016 –Best Integrated Report

 

See our 2016 Annual Report for more details.

 

Selection criteria and processes including diversity for leadership roles

Our Nominations and Election Committee recommended five of 13 potential Board candidates. A total of 17,916 members (4.4 per cent of eligible members) voted in 2016. This was fewer than the prior year, when 19,576 members voted (4.9 per cent). The three elected candidates were all recommended.

Ours is one of the few Boards in Canada with a majority of female members: our nine-member Board of Directors included eight women in 2016 [1]. Four of our Board Directors were aged 50 or below, compared with two in 2015. All Directors are independent from management.

Our executive leadership team had seven members, of whom five are women. See page 6 of our 2016 Annual Report [PDF].

Of all senior management (directors, vice presidents, senior vice president and the CEO), 49% were women, up from 45% in 2015; 6% self-declared as having a disability; none were of Aboriginal descent; and 32% stated that they belong to a visible minority group.

Organisational Structure

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Organisational Structure

The bank is organised to support its mission focus.

The bank is organised to support its mission focus

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The bank is organised to support its mission focus.

Ownership

Vancity is a credit union, which is a financial co-operative owned by its members (customers). Our co-operative business model is one of our greatest strengths and makes us fundamentally different from banks and other shareholder-owned businesses.

Co-operatives differ from other businesses in some important ways: they have social and economic objectives that put profits at the service of people; they are owned and controlled by their members; they create jobs and wealth that stay in the local community; and they are guided globally by seven co-operative principles.

We are committed to providing meaningful opportunities for members to provide feedback on their experience with Vancity, and to have input in setting the direction of the credit union. All members have the same influence: one owner = one vote.

Key to innovation is a deep understanding of members and communities. We use the insights we gather through engagement to help us manage our business.

Structure

Vancity’s organizational structure supports our vision to redefine wealth in a way that furthers the financial, social and environmental well-being of our members and their communities.

Affiliated entities

By law, Vancity Credit Union can only deliver certain financial services. Other services, such as insurance, portfolio management and mutual fund sales, are delivered by separate, licensed corporations.

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The bank is organised to support its mission focus.

Ownership

At the core of our business model is what we call ‘Member-led innovation”. This means we’re dedicated to working with members to ensure their present and future well-being. We support not only our members but also their communities, because we believe one cannot prosper without the other.

Our decision making structure at the senior leadership level includes committees to oversee new ideas, make progress on strategic priorities and manage the associated risk. We’ve begun to redesign the way we work to encourage more innovation. For example, Vancity’s explorer network involves teams of employees from all parts of Vancity spending time with members, gaining insights and then designing potential solutions to meet community needs.

Members can provide feedback through our branches, call-centre, website, social media such as Facebook and Twitter, as well as by mail and e-mail. Members can also attend and participate in our Annual General Meeting and run for or vote for our Board of Directors, subject to eligibility. As a credit union and a co-operative, our Board of Directors is accountable to our membership. Our members also have the option to communicate their concerns to their Board.

We have community advisory committees (CAC) to better inform specific Vancity strategies. The 2016 Community Advisory Committee agenda included five CAC’s: Businesses in Surrey (one of the key growth regions Vancity’s serves), South Asian, Youth, Staff as members, and Meaningful Reconciliation.

We regularly use surveys, online member panels, interviews and focus groups with members (and sometimes non-members) on various topics to inform our strategies, products and services. We have systems that allow us to track, monitor, and report member responses to significant issues as they arise and we review results by diversity (e.g. gender, age, with a disability, Aboriginal, low-income, etc.) and by region to help ensure we are meeting the needs of all our members and communities.

Beyond members, we use a variety of other approaches to gather feedback, discuss issues and collaborate with employees, peers, community groups, labour organizations and thought leaders. Many of our employees, leaders and Board Directors meet regularly with members and community through their day-to-day work, at community and industry events or through volunteering. Board Directors also meet with peers in other credit unions and some sit on other boards. They are also involved in our community advisory committees.

As a co-operative, we are committed to working with other co-operatives to strengthen the co-operative movement—see our website and page 18 of our 2016 Annual Report [PDF] for examples. In We also support and encourage our employees, Board Directors and community partners to learn about co-operatives—see KP4 Training and Motivation.

Through our Shared Success program we give 30% of earnings back to members and their communities.

Structure

Vancity’s Board of Directors is accountable to the membership and is responsible for setting the long-term vision for Vancity and providing effective oversight of its operations. The Board of Directors hires the Chief Executive Officer. Together, they provide leadership to ensure the day-to-day business conducted by Vancity reflects the values on which the credit union was founded, all in the interest of serving members and their communities.

Primary lines of business include retail and business banking (deposit-taking and lending), commercial mortgage lending, and investment advice and services. See page 6 of our 2016 Annual Report [PDF] for details on our structure and executive leadership team..

Key divisions in 2016 included:

  • Business Development, Member and Community Engagement: engages and grows Vancity’s membership through member experience, products and services, and a commitment to the communities where we live and work.
  • Finance: ensures that Vancity has the financial insight and discipline to achieve sustainable growth and earnings to enable us to meet our goals and achieve our vision of redefining wealth for our members and the community we serve.
  • Member Services: works across various channels to provide optimal integration, seamless service and advice to our members and communities. Through a differentiated member experience, this division strives for member retention and growth in order to redefine wealth.
  • Operations: includes Facility and Environmental Management, Information Technology and Human Resources. Collectively these departments ensure Vancity has the facilities, technology and talent to bring Vancity’s vision to life.
  • Risk: provides the right oversight and expertise so that Vancity can create and ignite opportunities through risk insights to deliver on our bold vision of creating healthy communities.

 

Affiliated entities

While we’ve called BC home since we were established in 1946, our nationally chartered bank, Citizens Bank of Canada*, operates across provincial borders providing certain financial services throughout Canada, including foreign exchange services, Visa card services, and commercial real estate services on a syndication basis. (*Note, it was re-launched as Vancity Community Investment Bank in 2017).

Our subsidiary Vancity Investment Management (VCIM) is a signatory to the UN Principles for Responsible Investment. Through a partnership with IA Clarington Investments, VCIM’s sub-advisory group provides portfolio management services to IA Clarington on the Inhance Socially Responsible Investing (SRI) Fund family, including environmental, social and governance investment analysis. VCIM’s sub-advisory group also leads corporate engagement and shareholder advocacy activities to champion change in the companies in which members and clients invest.

The Vancity Community Foundation (VCF) is an arms-length foundation focused on community economic development [3]. VCF accepts donations and makes grants with a focus on longer-term development of charities.  In particular, VCF’s focuses in the areas of social enterprise developmentcommunity-owned real estate (including housing), and in collaborating towards change.  For individuals or charitable organizations, VCF also offers donor advised funds.  This is somewhat like a charitable investment account where the donations received are invested to generate granting dollars for various charitable purposes. This fund allows members to create an immediate impact or a lasting legacy, in order to generate grants for charitable purposes in the community.

Vancity’s active subsidiaries and partnerships also include Dockside Green, a master-planned sustainable community on Vancouver Island. Victoria City Council has unanimously approved a new plan for development at Dockside Green. The community will also see the completion of 49 units of affordable housing in 2017.

A full list of Vancity’s active subsidiaries and partnerships as at Dec 31, 2016 appears on page 6 of our 2016 Annual Report [PDF].

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The bank is organised to support its mission focus.

Ownership

41% of members surveyed rate Vancity nine or 10 out of 10 for ensuring they have a say in Vancity's growth and future direction.

28% of members surveyed strongly agreed (responded eight, nine or 10 out of 10 to the question) to the question “to what extent has Vancity had a positive impact on your personal well-being?”.

Based on net earnings in 2016, we allocated $18.5 million to members and communities through our Shared Success program.

Structure

As at December 31 2016, Vancity served 523,902 members, employed 2,627 people and had $21.1 billion in consolidated assets, and $25.6 billion in assets plus funds under administration. Key results for the organization are communicated in our annual report [PDF].

Affiliated entities

We served 590 clients directly through Vancity Investment Management (VCIM) in 2016. 98.7% of VCIM’s client assets are subject to environmental, social or governance criteria.

The total value of socially responsible assets that VCIM manages or provides advice on has been increasing for the past seven years and totalled $1,137.8 million at the end of 2016, up from $946.9 million in 2015. On behalf of both VCIM and the IA Clarington Inhance SRI Fund family, VCIM’s sub advisory group interacted with 24 companies on the following topics: fair wages, climate risk, human rights, food waste, operational efficiency of data centres and toxic substances.

We served 227,271 Visa account holders in 2016, of whom four out of five are also members of Vancity Credit Union.

The Vancity Community Foundation’s (VCF) annual reports are available online. Highlights include:

  • $56,123,177 total assets
  • Over 1200 individual donors
  • $8M total gifts received
  • $7,694,697 distributed to charities and community initiatives

More than 100 grants distributed to community

Products and Services

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Products and Services

The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

The bank’s core products and services are fair, transparent and directly contribute to its sustainability mission.

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The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

Products and Services

Our strategy demands that we understand the needs of the real economy and how conventional financial tools and products can be translated in service of our members to enhance their well-being.

Vancity takes deposits from members and reinvest them in the communities in which our members live and work, generating financial returns while building the social and natural capital needed to build healthy, vibrant communities that are sustainable in the long term.

Vancity's Ethical Principles for Business Relationships [PDF] guide the decisions we make every day about our current and future business relationships, including suppliers, business members, and sponsorship and grant recipients. Our goal is to work with others to help build healthier communities and improve our members’ well-being. We support local businesses and community-minded organizations through activities such as lending, granting, advice, technical assistance, local purchasing, socially responsible asset management and advocacy. We proactively seek and invest in projects and do business with organizations that align with our Guiding Principles: co-operative principles and practices, social justice and financial inclusion, and environmental sustainability.

Vancity’s overarching fiduciary duty is to preserve our members’ collective assets. That, along with our vision, makes it vital for us to be a trusted advisor that provides members with best advice on how they structure their debt and use credit responsibly, and to educate members on financial management.

Other products and services supporting mission

Our goal is for impact/the triple bottom line philosophy to be integrated across our business and part of everything we do. In addition, we invest 30% of net profits back into the community through our Shared Success Program, and we distribute at least 5% of Visa’s net revenue back to the local community each year through the Vancity enviroFundTM program.

 

Development of products and services

Our philosophy is to develop products and services that meet the needs of members and communities, or that solve issues that impact their long-term well-being.

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The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

Products and Services

In 2016, our organizational scorecard included targets to increase the value and proportion of TBL assets (primarily lending and investments), and to enhance member wellbeing. We also set a goal to deliver a new core banking system while maintaining the size of our membership, as well as specific targets related to problems reported and problem resolution.

Through Vancity’s “differentiated member experience” we ensure that we have the people, the processes and the technology in place so that our member experience is:

  • Accessible and inclusive
  • Trust building and credible
  • Empowering
  • Convenient
  • Transparent about values and commitments
  • Community-based

 

We offer ‘impact/Triple Bottle Line (TBL)’ products and services to both individuals and organizations—products or services with social or environmental benefits and/or that support ‘TBL behaviours’. We’re committed to increasing access to basic financial products and services. See pages 8, 16, and 31 of our 2016 Annual Report [PDF] for a complete list. As much as possible we want to embed the TBL approach in everything we do.

 

Our TBL products for individuals include Clean Air Auto Loans; Springboard Mortgages (provides low-income families with 100% of the money needed to buy a home, including the down payment); loans for laneway housing; lower interest rate loans to finance energy-efficient home renovations; interest free loans for the purpose of readying a suite or room to house a refugee; and Mixer Mortgages, which enables a “mix of friends” to get together to purchase a home.

 

Through a partnership with the Portland Hotel Society, at Pigeon Park Savings we serve low-income and marginalized individuals living in Vancouver’s Downtown Eastside – one of Canada’s poorest neighbourhoods.

 

Vancity’s Fair & Fast Loan™, introduced in 2014, provides members with an alternative to payday loans. These are small credit loans designed to allow members fast, simple and convenient access to funds at an affordable cost. In 2016 we worked on developing a mobile platform for this offering.

 

In 2016 we consulted with employees and members and GABV partners to determine what TBL lending to individuals and households could look like. We were guided by our three guiding principles, the GABV’s TBL Guidelines for Residential Home Financing, and pressing community needs like unaffordability of housing and historically low vacancy rates. Subsequently we expanded our definition of TBL retail lending beyond mortgages in walkable communities plus specific products with social or environmental benefits (like Mixer and Springboard mortgages) to include: first time home buyers, smaller homes, green homes, co-ownership, multi-generational living, owner-occupied homes with rental suites or rooms. We also excluded revenue properties (unless rented at below-market rates) and excessively large/high value homes. We are currently testing these Guidelines across our branch network and mobile mortgage development managers with a view to full implementation in 2018.

 

We’ve developed a number of financial literacy initiatives and we continue to work with community partners to provide programs for both individuals, businesses and organizations. Topics include basic banking and credit card fundamentals, debt management, budgeting, strategies for saving, investing and home ownership, identity theft and fraud prevention, seniors financial abuse prevention and retirement and estate planning. We also offer members a Good Money PlanTM, which is an advice-giving tool that considers members’ long-term needs and goals.

 

For organizations, our approach favours organizations that demonstrate alignment with our values, or that have the potential to become more aligned and contribute towards building healthy Communities:

  • We do not work with organizations that harm our communities (ethical principles)
  • Sometimes we work with organizations that create some harm, if we can engage them in reducing/eliminating that harm (ethical principles)
  • We work with organizations that neither harm nor create measurable positive impact in community (conventional)
  • We seek out organizations that overall create positive impact in community (impact lending)

 

Impact/TBL lending to businesses and organizations is well established. Vancity takes members’ deposits and reinvests them in the community, generating not only financial returns for our members but building the economic, social and natural capital needed to build healthy, vibrant communities that are sustainable in the long term. We use internal guidelines to guide what we categorize as impact business loans, aligned to the GABV’s TBL Guidelines for MSME Financing. Broadly speaking, these are loans to organizations or sectors that we believe improve, or have the potential to improve, the lives of people or their communities. We include:

  • Impact businesses: e.g. co-ops, B-Corps, social enterprises, not-for-profits, mission-based for profit, education and care facilities, unions.
  • Ownership: e.g. women entrepreneurs, newcomers
  • Sustainable business practices: e.g. living wage employer, carbon neutral
  • Sectors (affordable housing, clean technology/renewable energy, local organic food, social purpose real estate, indigenous communities, arts & culture, energy efficient/green buildings)
  • Access to finance: e.g. micro-loans, Scientific R&D tax credit financing program.

 

Our definition of impact evolves over time as our understanding of impact deepens, and as member and community needs change.


Other products and services supporting mission

Through our Shared Success program we share net income with our members in the form of share dividends, loan rebates and bonuses on deposits and investments ($8.6m in 2016), and with our community in the form of grants and donations that support our vision and strategic objectives ($9.9m in 2016). This includes an annual donation to the Vancity Community Foundation. The Foundation is a public, separately incorporated registered charity with its own arms-length Board of Directors and is not included in Vancity’s consolidated balance sheet. It makes grants to charitable organizations and delivers charitable programs.

 

Our grants and donations support organizations that focus on the three areas where we feel we can make the most impact in creating healthy communities: co-operative principles and practices, social justice and financial inclusion, and environmental sustainability.

Our Community Partnership Program offers investments of time and relevant resources for local projects and initiatives that are aligned to our impact priorities in the communities we serve. The program aims to deepen strategic relationships between aligned applicants, their local branches and other teams across Vancity. Our goal is to create reciprocal partnerships that will further our vision of Redefining Wealth. Click here for a description of all our granting programs and a list of 2016 Shared Success grant recipients [PDF].

 

In addition, every year, five percent of Vancity enviro Visa’s profits support the enviroFund program, providing the funds to support numerous local community projects and initiatives. In 2016, the enviroFund continued to provide support towards the development of a sustainable, local food system.

 

Development of products and services

Proposals for new products and services must provide measurable impact projections related to our guiding principles of financial and social inclusion, environmental leadership and the co-operative economy.

The first due diligence criteria in our product development policy is to put member needs first. Product ideas are generated from member and community insights, stakeholder input and feedback. We consider how accessible our new products are to different groups within our membership and the community. Then, we incorporate relevant regulations, apply our Ethical Principles for Business Relationships and leverage strategic partnerships.

We use plain language so that members understand their financial rights obligations and options and are well-equipped to make financial decisions that improve their well-being.

A current focus is continuously understanding technology trends and the way our members interact and would like to interact with us. We are also looking at what we can do to help members improve their digital literacy. Ideas we are looking at include fully digital account opening and digital signatures, mobile investment solutions based on smart algorithms, connecting with organizations through virtual channels like click-to-chat and video conference, and making payments directly on a mobile device without a card. These services have already begun to have significant effects on our industry.

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The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

Products and Services

28 per cent of members believed Vancity has had a positive effect on their wellbeing. For the past four years, the well-being score of our membership (75 in 2016) has been statistically higher than that of the general population of Vancouver (71 in 2016).

Based on a survey conducted in April 2016, 84 per cent of Vancity members were satisfied with our overall performance.

We assisted 6,881 people in 2016 through products designed to provide access to basic financial services, affordable housing, credit and credit repair.

Together with community partners, we delivered financial literacy workshops and seminars to 7,722 people, about half as many as in 2015 due to the demands on our employees to prepare and train for our new core banking system. More than 15 per cent of Vancity’s workforce has now been trained to deliver these workshops.

Triple bottom line assets under administration comprised 21.1% of total assets and funds under administration.

Around 37% of our $5.2 billion business loan portfolio was invested in impact/the triple bottom line (TBL) by the end of 2016, and 58% of the $1.3 billion in commercial and business loans funded in 2016 were categorized as TBL loans.

Through our TBL business loans, we supported 2,124 units of new or renovated affordable housing and 337,309 square feet of green buildings.

Member and client investments managed or administered by Vancity totalled $4.4 billion. Of the $4.4 billion, 31 per cent are in socially responsible options. Our sustainable wealth management department has placed an increased focus on socially responsible investments and trained advisors to offer new investment opportunities, largely through our branches. We committed an additional $4 million to be invested in private investment funds, which support affordable housing and sustainable food production.

Other products and services supporting mission

Through our Shared Success and enviroFundTM programs we shared $8.6m with members and $9.9m with community organizations.

 

Development of products and services

In 2016 many of our resources were re-allocated to replacing the banking system and ensuring we have the digital capability to support our members’ evolving needs. We did, however, begin work on developing a mobile platform for Vancity’s Fair & Fast Loan™.

Management Systems

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Management Systems

The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

The bank’s management systems are transparent, include sustainability criteria and exist to increase the institution’s positive impact.

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The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

Credit and risk evaluation and management

We see risk management as an opportunity to generate insights and achieve positive impact on a large scale. We need to maintain our reputation as a leader in driving social change through a disciplined approach to decision making and focused attention on reputational impact. We also need to ensure members continue to have confidence in Vancity.

Our risk appetite is the level of risk we are prepared to accept in pursuit of our vision. Our overall approach to managing risk is to have a low risk appetite in some areas so that we can take on risk in other areas to achieve the transformation that our vision requires. We have a low risk appetite for legal and regulatory, business, talent, technology, hazard and liquidity risks but we are willing to be bold in areas where we can differentiate ourselves in the market and in the communities we serve. This includes impact, reputation, strategic, market and credit risk. Surrounding all these is systemic risk. Systemic risk is external to Vancity itself—it's the risk that comes from the entire financial system not functioning as needed. While it's beyond our control, we need to consider it when determining and assessing all of our controllable risks, and create contingency plans for plausible events in order to manage it.

We believe that where, how and to whom Vancity extends credit is a key way we can bring our commitment to building healthy communities to life.

Resource allocation and management (Capital, Risk, Expense Budgets, etc.)

Our strategic plan outlines how we are going to achieve our vision of redefining wealth and uphold our guiding principles. Our financial plan supports our strategic plan and is built upon the concept of sustainable growth where, in the long run, our asset growth occurs simultaneously with the return on average members’ equity without one outpacing the other.

 

Liquidity and asset/liability management

Growing our balance sheet enables us to increase lending to the real economy, helping to promote sustainable growth in our community and creating impact. We want to maximize the percentage of loans we fund through members’ deposits. This approach helps us build relationships with our members and connect the deposits we receive from them with the loans we make.

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The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

Credit and risk evaluation and management

The Board of Directors has overall responsibility for the establishment and oversight of Vancity’s risk management framework. We continue to work on integrating our enterprise risk management (ERM) system with our vision. In 2016, we further developed a risk appetite framework and developed an enterprise risk register dashboard that we plan to embed in key decision making processes.

Our risk division has been working more closely with our lenders and members to gain an understanding of the unmet and most pressing needs of our community. In 2015 we established a credit initiatives team that is focused on finding ways for us to be better and faster at addressing our members’ needs. In 2016 we revised five out of 10 targeted policies and tested new and different credit worthiness factors such as future income potential and social capital. Through this prototype, we learned a great deal about being more inclusive with our lending.

Because we have deep roots in relationship banking and understand the needs of the real economy, we move beyond the assumption that risk is carried by two parties alone (e.g. the borrower and the lender) because we are able to pull together a network of support to provide credit that delivers a compounding benefit to the community. Not only does this mean we are able to produce better returns that leverage the resources and knowledge of a larger network, it also means we are able to distribute the risk and in turn, generate lower unexpected losses.

We manage key lending risks, including social and environmental risks, through our lending and investment policies, which are aligned to our Ethical Principles for Business Relationships. Beyond risk management, we take a proactive approach to lending and seek to do more business with organizations that benefit their communities.

Our Lending Policy requires us to consider social and environmental issues. Environmental risk procedures require employees to exercise due diligence in identifying environmentally risky situations. Loan underwriting must include an assessment of the potential financial, legal and reputational risks associated with these issues. We reserve the right to decline financing for activities that, while technically in compliance with laws and regulations, may have significant adverse environmental or social consequences.

Social and environmental risks of larger business banking loans (non-credit-scored loans) and commercial mortgages are assessed at the time of the loan application, guided by our Ethical Principles for Business Relationships and Lending policies, and subject to environmental due diligence. An environmental cautions list assists employees in determining which organizations and projects may have significant adverse environmental consequences and so require further investigation prior to engaging or renewing a relationship. When managing risk on lending to any type of business on this list, we take additional precautions, such as more frequent and in-depth monitoring. For commercial mortgages and our larger business banking loans, site and/or business visits are a mandatory pre-funding condition. These visits can identify environmental and social issues.

Our personal, commercial and business lending areas are subject to internal audits scheduled based on the degree of risk they pose. To the extent that regulatory and strategic risks are addressed by environmental and social policies, the controls that ensure compliance are reviewed and tested by Internal Audit, as required. Staying abreast of changes in the external environment and developing the capabilities necessary to address these is integral to maintaining our professional standards. Online training on the Ethical Principles for Business Relationships is available to all employees.

Vancity’s underwriting methodologies and risk modeling are member-based rather than product-based. We review the member’s capacity to repay the loan rather than relying exclusively on collateral. Decisions on consumer loans are based on an overall assessment of credit risk using a scoring model that takes into account factors such as debt levels relative to income and Beacon scores (a number generated by the Equifax Credit Bureau to rank how likely it is that a borrower will repay a loan). Our policies note that a total debt-to-service ratio (TDS) of 40% or more places tight constraints on the family budget. When a household’s TDS approaches or exceeds 40%, lenders are required to conduct more due diligence such as outlining in a business case the members’ ability to satisfy debt obligations, or sending the application to an independent credit function for review.

We have additional policies for landed immigrants who cannot verify their income and employment through our standard guidelines. In addition, our self-employed mortgage approval is based on the Applicant’s strong personal credit history and stated income, not just what’s reported on their Canada Revenue Agency Notice of Assessment (NOA).

Resource allocation and management (Capital, Risk, Expense Budgets, etc.)

Each year the Board and executive leadership team work together to revise our strategic plan. It includes our corporate scorecard, management targets, our financial plan, and key risks.  Annual divisional, departmental and individual performance plans flow from the strategic plans.

The Board of Directors has overall responsibility for the establishment and oversight of Vancity’s risk management framework. We continue to work on integrating our view of risk with our vision and business strategy. Our enterprise risk register details the key risks that we must manage effectively. In 2016, we further developed a risk appetite framework and developed an enterprise risk register dashboard that we plan to embed in key decision making processes.

Financial capital enhances our ability to support our members’ needs through the availability of loan products. As our lending portfolio grows, our regulator requires us to hold additional capital in order to be able to absorb unexpected financial losses. This has the additional impact of acting as a control mechanism for growth, providing stability as our balance sheet increases. Our regulator has set a capital adequacy ratio of eight per cent of risk-weighted assets while our internal target is 13 per cent—a buffer that is more than 50 per cent higher than the regulatory requirement.

A strong housing market in the first part of the year drove exceptional demand for Vancity mortgages. As a result, we saw an increasing need to balance our lending with the amount of capital we hold. We did this through a $156.2 million sale of some of our commercial loans and by adjusting our lending policies and practices.

Liquidity and asset/liability management

Vancity is committed to funding at least 80 per cent of new member loans with new member deposits. Our funding ratio is not a regulatory requirement, but it’s an important metric because it helps to keep wealth circulating in the communities where our members live and work.

Liquidity supports our day-to-day operations through a diversified funding model that includes member deposits and wholesale funding sources. Our target is to hold 12.5 per cent of total deposits and debt liabilities (borrowings) in the form of liquid assets – those that can be converted quickly and economically into cash. This is significantly higher than the regulatory requirement of eight per cent.

Treasury investments are Vancity funds we invest to balance our liquidity needs with stable financial returns. They maintain the financial and social well-being for the credit union and its members. One of our strategic priorities is to increase the amount of treasury assets held in investments that have a demonstrable positive impact on members and their communities (assets invested in impact/the triple bottom line) while diversifying our balance sheet away from real-estate secured assets.

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The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

Credit and risk evaluation and management

A significant proportion of our lending is loans to individuals and households, particularly residential mortgages, which account for around two thirds of our loan portfolio. 96% of our business and commercial loan portfolio falls within the “real estate, rental and leasing” industry category. We are looking at ways to diversify our portfolio away from real-estate secured lending, for example by shifting more into the small business sector.

Our loan impairment expenses remained low and gross impaired loans as a percentage of total loans was 0.0%. For more on credit risk see Note 22 (a), 2016 Financial Statements [PDF].

Our risk evaluation procedures allow us to offer term loans to non-residents who are temporarily working in Canada as a Live-In Caregiver under Citizenship and Immigration Canada’s Live In Caregivers Policy. We have also adapted our procedures to provide banking services to refugees.

Resource allocation and management (Capital, Risk, Expense Budgets, etc.)

Vancity’s net income before distribution and tax in 2016 was higher than expected at $95.9 million. This was due in part to a significant increase in lending in the first part of the year. Total operating expenses increased by 3.1 per cent compared to the previous year due to a combination of an increased number of employees and higher salary and employee benefits. The banking applications renewal (BAR) program came in 6.2 per cent over budget at $69.9 million, against a target of $65.8 million. Given the unprecedented scale of the project,  we considered this to be a satisfactory result.

We calculate net income before distribution and tax by subtracting our operating expenses from our operating income. From this we pay our taxes and share what we earn with members and communities in our Shared Success Program – the equivalent of 30 per cent of 2016’s net income. Under this program, we will allocate $18.5 million over the course of 2017, $9.9 million to community granting programs and $8.6 million to members in share dividends, loan rebates and bonuses on deposits and investments.

The efficiency ratio measures how much we spend (including distributions to the community) to generate a dollar of revenue. It is expressed as a percentage of revenue, and in general a lower number is better. The ratio remained stable in 2016 at 78.4 per cent – excluding distributions to the community, it was 76.3 per cent.

Our capital adequacy ratio was 13.4%, above our target of at least 13%. For more on capital management see Note 24, 2016 Financial Statements [PDF].

Return on Average Members’ Equity (ROME) was 5.5 per cent, exceeding our target of 5 per cent. If we calculate the result before distribution to community and members, ROME would be 6.8 per cent.

In 2016, the areas of risk of most concern related to:

  • Achieving growth with the positive impact our vision requires
  • Technology and the pace of change in our industry
  • Uncertain economic conditions, including the housing market

 

Through assumption testing of our 2020 plan we went beyond traditional financial risk analysis by including areas such as:

  • The credit union system – how will potential changes in our co-operative environment impact Vancity?
  • What impacts will our banking system replacement have on membership?
  • Will we have the necessary talent to achieve our 2020 goals?
  • Will our desire to redesign our organization affect our ability to achieve day-to-day business objectives?
  • What will happen if we can’t keep up with the pace of change in our industry?

 

Liquidity and asset/liability management

Our balance sheet assets grew from $19.8 billion to $21.1 billion, largely due to our loan portfolio growth of $892 million, including continuing growth in the small business market, which was a key strategic priority. We also saw increases in members depositing their money with us and total deposits increased by 5.5 per cent to $18.2 billion.

 

Our net growth funding ratio was 140.0 per cent, meaning that in 2016 we received more money in deposits than we dispensed in loans, and our loan growth was entirely funded by the growth in member deposits. This allowed us to pay down our more expensive wholesale borrowing and provided us with more liquidity going into 2017.

 

At December 31, 2016, the liquidity ratio was 14.3%, well above our 12.5 per cent target.

 

TBL treasury assets totalled $242million at the end of 2016, an increase of $48 million from the prior year.

 

See page 20 of our 2016 Annual Report [PDF], and our audited Consolidated Financial Statements [PDF] for details.

Human Resources Tools

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Human Resources Tools

The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

The bank’s sustainability mission is the starting point for its incentive, compensation, and performance structure.

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The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

Recruitment and on-boarding processes

We believe in rewarding innovation, supporting diversity, and making a positive impact—socially, economically, and environmentally. Vancity welcomes applications from all qualified job seekers from all skill levels and backgrounds. For applicants with diverse abilities, we work with them to make reasonable workplace accommodations that they may need for their best work performance.

 

A workforce that’s representative of the communities where our members live and work allows us to deepen our connections and develop solutions that meet member and community needs.

 

Coworker Performance Management

At Vancity, we align our vision and values with the needs of our members, so that our success helps to build healthy communities. A performance-planning cycle connects individual performance to organizational goals, and helps each employee's contribution positively impact the community in which they live and serve. Performance plans incorporate both strategic organizational goals and more specific behaviour-based goals reflective of an employee’s division or department. Ongoing coaching and feedback is critical to supporting the growth and development of our employees.

 

Compensation policies and practices

The expertise and passion our employees bring to the organization are integral to our success, and our compensation policies reflect the high value we place on their contributions. We are a Living Wage employer and strive to be informed and fair in setting base salaries, and to provide additional financial rewards to employees who demonstrate excellence and contribute to our success.

 

Training and motivation activities

It’s through our employees that we can build an organization that moves quickly and adapts to the changing needs of the real economy. Having the right talent in place is critical to realize the opportunity we have to accelerate impact. We support learning in the broadest sense, and encourage our employees to gain new experience, learn as they go, and apply their knowledge and expertise in the service of member and community well-being.

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The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

Recruitment and on-boarding processes

Upon joining Vancity, the first step in the onboarding process for new employees is attending a week-long orientation immersion program. By providing this in-depth introduction to our vision for social, economic, and environmental sustainability, we give employees a solid foundation on which to build future career success and make a positive impact in our community. The program includes an option for new employees who decide they’re not a fit with Vancity to opt out at the end of the week, with compensation for their time.

Our recruitment process is designed to attract diversified employees who share our vision and values, and have the skills and capability to perform their job. In addition, Vancity offices and branches reflect our values and spirit of inclusivity. In the fall of 2016, we introduced new inclusive washroom signage at all Vancity locations. The move followed a thorough research and consultation process to

ensure an appropriate mix of way-finding information and universally recognized symbols, allowing for easy visual and tactile understanding. The updated signage indicates to users that they may confidently use the facility regardless of ability or chosen gender identity.

Vancity’s employee diversity and inclusion alliance works to deepen understanding of disability, the LGBTQ+ community and meaningful reconciliation. Influenced by our CEO’s commitment in her role as co-chair of The Presidents Group, a government advisory body on accessibility to employment for people with disabilities, we continue to pilot employment opportunities.

Coworker Performance Management

Individual performance planning is intended to spark dialogue between managers and employees and ensure that all our goals and development plans are aligned with our business strategy and vision. It is part of the annual process of managing performance that includes:

  • individual goal-setting
  • development planning

 

In 2016, based on discussions with other GABV members and a review of innovative approaches to performance management and compensation frameworks we introduced a new approach to performance management that focuses less on targets and activities, and more on the behaviours that focus on ‘how’ we get our work done drive growth with impact. This recognizes a need to change the way we work, the way we network, and the way we interact with members.

Compensation policies and practices

Vancity’s compensation package consists of:

  • base pay
  • profit sharing or sales incentive/commission
  • health, dental and retirement benefits
  • staff benefits.

 

We measure progress on three connected outcomes—impact, confidence and integrity—through an organizational scorecard, which is a mix of financial and non-financial targets. Results for key organizational targets directly influence senior management’s incentive pay and the amount of profit shared with employees. There is a payout range for each target based on if Vancity met, exceeded or fell short of the target. Results are externally verified by KPMG and reported in our annual report, reinforcing the alignment between our strategic priorities and compensation.

 

In 2016, the five organizational scorecard metrics that influenced the amount of profit share were:

  • Impact: Triple bottom line assets and funds under administration
  • Confidence: Return on members’ equity
  • Confidence: Size of membership
  • Confidence: Implementation of the business application renewal (BAR) program
  • Integrity: Members who do not report a problem as a result of BAR implementation program
  • Integrity: Of members that report a problem, percentage resolved to their satisfaction

 

Senior leaders (members of the executive leadership team, vice presidents, and directors) receive a base salary and cash incentive that recognize progress on organizational scorecard metrics as well as individual accountabilities.

 

In addition to compensation, we offer a flexible, adaptable benefits program that employees can customize and change to fit their needs. Permanent employees are eligible for health, dental, life insurance, AD&D, and disability benefits, as well as a wide range of supports and services designed to help them thrive in the workplace and in every aspect of their lives.

 

Vancity’s President and CEO has a long-term incentive plan, established by the Board based on organizational priorities. The long-term incentive plan contains a retention component by deferring the payout for three years. When the Board reviews CEO compensation, the process includes assessing compensation levels at the 50th percentile of a comparator group of peer companies of similar size, scope, and complexity.

 

Board Director remuneration is approved every three years by the membership at the Annual General Meeting (AGM). The next remuneration review will be presented to members at the 2018 AGM to take effect following the 2019 AGM. The Board Directors' Remuneration ad hoc Committee reviews Director remuneration and makes a recommendation to members for approval. This Committee comprises three appointed general members who are unaffiliated with, and independent from, the Vancity Board of Directors. The committee reviews Board Directors’ remuneration to ensure it continues to be appropriate for the credit union and reflective of the level of responsibility our Directors hold, and the expertise and time it takes to carry out those responsibilities. Director remuneration increases by $3,000 for each director for each of the 2016, 2017, and 2018 Board years. The yearly payment for each member of the board of directors is disclosed on our website here [PDF].

 

Training and motivation activities

Vancity’s business strategy and goals will provide a rich learning experience for employees. We’ve begun work on developing a talent index which, by 2020, will generate the insights to redeploy the right talent to the right work and address any gaps that could compromise our ability to deliver on our vision.

Building a successful career involves continual learning and growth. We have developed a range of programs and supports to help our employees achieve their full potential and make a significant contribution to the organization and the wider community. In particular, we support and encourage our employees (as well as Board Directors and community partners) to learn about co-operatives.

Each employee can build an individual learning and development plan to meet his or her unique needs. Many of our training and development programs are connected to the needs of the community, so that as we learn, we can apply that valuable expertise in the service of the greater good.

Our Each One Teach One program enables staff to learn and develop while promoting financial literacy in our communities. We also support and encourage our employees, Board Directors and community partners to learn about co-operatives.

We recognize employees for the work they do through our comprehensive benefits, pay and compensation packages including merit increases and profit share. In addition we celebrate employee service milestones with plaques, gifts & team celebrations, use online recognition tools, support volunteerism and gather together at our annual employee event. Recognition also occurs in verbal or written praise, career development opportunities, and challenging work assignments/new projects.

We measure employee well-being through an index that combines key engagement questions and a few questions on employee’s well-being across key areas such as inclusion, organizational pride, relationships at work, overall health, connectedness, financial stability and resilience. We track departures and employee turnover overall, and by gender and age.

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The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

Recruitment and on-boarding processes

Of employees aged under 30, twenty-five per cent were new hires. The new hires in this category were mainly employees in member-serving roles, who tend to be younger. The number of new hires for permanent positions decreased by 13%, while the number of new hires for contract positions increased (167 hires in 2016 vs. 62 in 2015) in order to support the implementation of our new banking system.

Women represent 65% of our workforce compared with 66% for BC credit unions who are organization participants of HR Metrics Service. At Canada’s six largest banks, women represented 61%, as of 2015.

We have a larger proportion of employees aged 30 to 50 years and a smaller proportion of employees aged 15—29 and over 50 than the Metro Vancouver population for these age categories.

46% of employees belong to visible minority groups and 2% are of Aboriginal descent, similar to the population of Metro Vancouver (for those aged 15 and above).

Vancity’s employee diversity and inclusion alliance doubled in size in 2016 to 50 members and supported Mental Health Awareness Week, Pride Weekend, the Ch’nook MBA program and the Welfare Food Challenge.

Through our workplace inclusion pilot, we created permanent part-time administrative support roles in 22 branches. We worked in partnership with local disability employment organizations to fill the positions with neuro-diverse individuals. The first phase of the larger pilot involved hiring people with autism to fill eight IT specialist roles for a one-year contract. The partnership was successful and the contracts have been extended to December 31, 2017.

Slightly more than 10% of employees self-declared that they are with a disability compared to a labour rate of 6%.

For more details on new hire rates and diversity, see “Employee capability and well-being” on pages 21-22 and “Workforce diversity and pay equity” on pages 23-24 of our 2016 Consolidated Accountability Statements {PDF].

Coworker Performance Management

In 2016, 94% of employees completed their annual performance review. (Incomplete reviews are likely due to vacations, unexpected absences, staffing changes and competing priorities.)

 

Compensation policies and practices

Employee profit share based on 2016 organizational scorecard results (five indicators) was 6.05 per cent of employees’ eligible earnings. The overall corporate score was 101%. This translates to a payout of 6.06% on eligible earnings.

We conducted a gender equity analysis in 2016 for the non-management category. When we compared the average salaries, calculated using hourly rates, of males and females, they were very close and did not show any inequity.

Vancity’s CEO compensation package for performance in 2016 included a base salary of $449,397, estimated short term incentive of $226,047, and an estimated long term incentive of $314,578 for a total of $990,022. See page 27 of our 2016 Annual Report [PDF] for details.

Total annual compensation for our President and CEO was 27 times that of our lowest-paid, full-time employee. The ratio of CEO pay to median employee pay was 15:1.

In 2016, the percentage increase in annual total compensation for our President and CEO was the same as the increase for annual total median compensation for employees: 3.4%. Director positions and above also received no increases.

Training and motivation activities

Since the administration of the employee well-being survey in 2015, the well-being score for our employees has remained steady at 3.9/5.

Voluntary turnover increased three percentage points with almost a quarter of those employees leaving due to retirement. About two-thirds of voluntary resignations were from employees in member-serving roles.

Since 2009, we’ve sent more than 130 people on the Bologna Study Tour, a co-operative learning program in Italy. We also support employees taking part in the three-year Masters in Management of Co-operatives and Credit Unions at St. Mary’s University in Halifax, Nova Scotia: 10 have graduated and 10 are currently enrolled.

We’re the recipient of numerous workplace awards, and we are consistently named one of Canada's Top 100 Employers. Some of the reasons Vancity was chosen as a Top Employer for 2016 include being a Living Wage employer, supporting employees with young families through generous maternity and parental leave top-up payments, and offering professional development support.

Performance Reporting

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Performance Reporting

The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

 

 

The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

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The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

 

Publicly Available Reports

We recognize that transparency helps foster trust with members and demonstrates sound accountability practices. Vancity’s Statement of Value and Commitments includes involving our members, employees and communities in measuring our performance and reporting the findings in a public, externally verified report.

Through our membership of the Global Alliance for Banking on Values we are further committed to transparent and inclusive governance and using common standards set by independent experts to demonstrate our financial and non-financial impact and use of client funds.

Internal performance tracking and reporting

We align our financial plan with strategy by measuring the impact we’re creating and incorporating it into decision making and reporting.

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The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

 

Publicly Available Reports

In keeping with the principles of good governance, we regularly report on the performance of our Board and the credit union. The following reports are available to our members online:

  • Annual General Meeting (archived webcast)
  • Annual Report
  • CEO compensation
  • Director attendance
  • Director professional development
  • Director remuneration and expenses
  • Share Disclosure
  • Business plan

 

See ‘BR 3 - Reporting Transparency’ for details on the preparation of our annual reports. The content of our annual reports is aligned with our business strategy and quarterly internal performance reports, and focuses on material issues including those raised by stakeholders. Our reports provide a transparent account of progress made on strategic objectives and plans, and how results affect compensation. They provide readers with an overview of what we expect to achieve in the year(s) ahead, and are supplemented by detailed on-line reports for specialist users including annual financial statements and accountability (non-financial) statements. Adherence to AccountAbility’s AA1000 Principles and key organizational data/information, including progress made on targets, are externally audited by the same firm who audit our financial statements.

 

Each year, the Board and Chief Executive Officer present the Annual Report, any Ordinary and Special Resolutions, and a brief overview on Vancity's performance and strategy at the Annual General Meeting. This meeting is open to the public.

 

Internal performance tracking and reporting

Vancity includes social and environmental impact targets in its organizational scorecard as well as in its broader set of management targets. Key organizational and management targets and results are reported quarterly to the board of directors and executive leadership team (ELT), and the ELT also receive monthly reports. Our organizational scorecard includes targets related to the following three connected outcomes:

  • Impact: the difference we create because of our vision and values
  • Confidence: the evidence that what we are doing is good for our business
  • Integrity: how we deliver impact and demonstrate confidence based on trust

 

Our Quarterly Performance Reports includes:

  • CEO Report & Economic Outlook
  • Impact (member service, growth with impact/TBL growth)
  • Confidence (return on members’ equity, other financials)
  • Integrity (employees + leadership, BAR update)
  • Enterprise risk summary

 

The appendices include organization and management dashboard and targets as well as the enterprise risk dashboard and an overview of Vancity’s impact metrics.

 

In 2016, our organizational scorecard included targets for:

  • Member well-being
  • Percentage triple bottom line assets and funds under administration
  • Return on members’ equity, Capital adequacy ratio, Net growth funding ratio
  • Membership size
  • Status of the implementation of the business application renewal (BAR) program
  • Members experiencing a problem during the BAR program & member problem resolution

 

Supporting management targets include member satisfaction and employee wellbeing. We also include a breakdown of member responses to 10 survey questions on the 10 dimensions of wellbeing, established a baseline for ‘Contribution to wellbeing’ and began work on a talent success index.

Quarterly performance highlights are presented by the executive leadership team to people leaders at an in-person quarterly meeting, and afterwards cascaded through the organization.

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The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

Publicly Available Reports

Feedback on our annual reports remains positive. We have heard that our reporting covers topics readers want to know about, but it needs to be shorter and more accessible while maintaining a high level of transparency. In response, we shortened our 2016 report and we are looking at moving to online, html-based reporting in future. We also heard that readers are interested in how Vancity approaches risks associated with climate change, so we plan to explore that.

Vancity continues to receive international recognition for its reporting practices. Our 2015 annual report received “Best Integrated Report” in Ethical Corporation’s Responsible Business Awards 2016, and was 1st runner-up in Corporate Register’s Credibility through Assurance category (in 2017).

Internal performance tracking and reporting

Of nine organizational metrics, we met 7 and did not meet two. The two we did not meet related to the percentage of members experiencing a problem during the BAR program and member satisfaction with problem resolution.

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