A force for good – why we need ethical banking now
The impact of COVID-19 and the measures taken to reduce transmission have focused attention on those most vulnerable. It has also led to a greater sense of community, activism and a desire to build a better world for the future. We speak to two strong proponents of ethical banking – Triodos Bank UK and The Co-operative Bank – about what that means for the industry and individuals.
“In many ways, COVID-19 has been a catalyst for an already growing movement,” says Bevis Watts, CEO of Triodos Bank UK. “Companies have also utilised opportunities to make their voices heard throughout the pandemic. This summer, for example, I joined with over 60 CEOs to sign an open letter to Boris Johnson, urging him to create a resilient economy with a green recovery.”
He points to growing environmental and social consciousness and the fact that the lockdown has allowed people time to reflect on the impact of their own behaviour and that of the organisations they patronise, increasing the interest in areas such as sustainable banking.
“Consumers have become increasingly aware of the pivotal role finance plays in global issues,” agrees Maria Cearns, Managing Director of Customer and People at The Co-operative Bank. “We’ve seen protests directed against major high street banks for their participation in financing fossil fuel projects and people are generally more informed about their choices when it comes to financial services.”
A critical time
With time ticking on the action required to halt climate change, Watts says that now is a critical time for the industry to embrace ethical and sustainable principles: “Too much of the financial sector is still undermining many of the Sustainable Development Goals we are looking to address as a society. However, I believe the current banking system does hold the potential, through adaptation, to be a catalyst for a sustainable future. Five years on from the Paris Agreement, businesses and governments alike must take urgent action. It is critical we see transparent reporting on financed emissions from banks: to ensure robust disclosure, provide a platform for science-based target setting and give a clear choice to people on how they choose to save and invest their money.”
Choice is particularly important says Cearns, and while The Co-operative Bank led the way by introducing its unique consumer-led Ethical Policy some 25 years ago, and committing not to finance companies involved in fossil fuel extraction, a greater focus on environmental awareness is prompting other brands to consider how they might follow their lead.
In fact, says Watts, the growing sense that you don’t have to compromise your beliefs to be able to access a wide range of banking products and services, has seen interest in ethical or sustainable banking increase, particularly amongst the millennial generation.
Growing interest
One of the greatest growth areas has been impact investing. “A survey we commissioned showed that one in five UK adults were motivated to explore ethical funds due to the COVID-19 pandemic, a figure which increased to 35% of under 35s,” says Watts. “This may stem from a financial as well as an ethical motive, given that industry analysis suggests that environmental, social and governance (ESG) investments were more resilient during the COVID-19 market crash and interest rates for savings have fallen.”
The industry’s response to the pandemic has attracted a great deal of attention and in many cases, has helped shine a spotlight on the work banks undertake to support the communities they’re part of. “Our main focus this year has been on supporting our personal and business customers through the COVID-19 pandemic,” says Cearns. “Particularly those small businesses that are so important to local communities. But as a banking partner to hundreds of charitable organisations, we’ve also been very conscious of the impact the pandemic has had on them, and have provided corporate donations, grants and other support to a number of charities.”
As we look ahead, Watts is keen to ensure the focus on ethics and sustainability continues to drive progress to address the social and environmental issues we all face. “The B Corporation initiative, which we’re a part of, this year celebrates five years and 430 accredited members in the UK,” he says. “It helps to distinguish credible businesses that are genuinely committed to doing good, and I think that more and more organisations will look to it to prove their credentials.”