You can’t think of any institution more devoted to the status quo than banks. Banks don’t reform society; they protect people’s money. Yet money is needed for any project that aims to change society. That’s why we need a new kind of idealistic bank. And that bank exists in the Dutch town of Zeist. The Triodos Bank is helping spark an international banking revolution.
Ivo van den Baar is an artist. He works mostly out in the world rather than in his studio because he believes art has been cut off from society. Recently he and his partner, Nicole Driessens, spent three months in the main lobby of a medical centre in Rotterdam working 9 to 5 on 10 pieces of art: a colourful selection of vases for the oncology department (“the sad display of flowers in such hospitals is incredible”), a collection of blankets with books for dialysis patients (“they’re hooked up to that machine for four hours; this way they have instant access to reading materials”). And down the road they’ll be creating a 175-metre-long (190-yard-long) mural of a street in Rotterdam due to be demolished—“to ease the traumatic view.”
When an artist needs a loan, especially an unconventional artist like Van den Baar, banks are usually skeptical. When Van den Baar sought a mortgage for a new space to live and work, he faced a lot of furrowed brows among the bankers he approached. Financial receipts were studied. Estimations of future sales predicted. Calculations produced. No deal. They considered Van den Baar too great a risk.
But he got his mortgage after all, thanks to a bank that considered the situation a little more deeply. “Without that bank,” he declares, “we would never have made it.” It was a bank that was interested in the actual content of his work. A bank that knows artists don’t need a lot of material things, don’t have terribly high expectations for their pension plans and are resourceful enough to make ends meet. A bank, in fact, that doesn’t see artists so much as financial risks but important players in the effort to create a sustainable society.
What kind of bank is that?
Introducing Triodos Bank, with a balance sheet total of over 1 billion euros ($1.2 billion U.S.), a net profit of 3.6 million euros ($4.2 million U.S.) in 2004 and 100,000 faithful customers in the Netherlands, Belgium, England and Spain. And Triodos doesn’t limit its financial goodwill to nurturing art and artists—it is known primarily for financing organic agriculture and sustainable-energy projects.
Triodos Bank—which just celebrated its 25th anniversary—is a breath of fresh air in the banking sector. Not only in its home market of the Netherlands, but worldwide, there is no better example of a bank that has put finance in a revolutionary new light, using money as an instrument for social change. Triodos Bank’s unusual approach of funding social reforms—unhindered by conventions so prevalent in the financial sector—once provoked mockery in financial circles, but now is widely admired.
David Porteous, who consults with a range of clients including World Bank and its affiliates, recently unveiled a study conducted for the Harvard Business School confirming Triodos Bank’s international pioneering role (see box on page XX). “Worldwide, there aren’t many privately owned banks with a strong double bottom line that have been around for a long time, that are not small and that have maintained a level of profitability that’s acceptable to its shareholders. I think Triodos Bank is profiling itself increasingly as a player in the regular financial sector.”
Things looked quite a bit different when the foundation was laid for what was to become Triodos Bank. It was back in the late 1960s when society was strongly influenced by lively protests that threatened to topple the established order. For people with ideals, money was a four-letter word. Money led to power and power to inequality. But money is also exactly what a good idea needs to grow.
That was the conclusion reached by four men who were members of a study group that, in their view, was a little too focused on talking, talking and more talking about how society should change. But these four men who wanted to create change didn’t run in the circles of the Provos, Netherlands’ homegrown version of hippies. They were the established order: an economist, an organizational advisor, a banker and a tax-law professor. They didn’t hang together in Amsterdam’s turbulent city centre, but in the wealthy part of a chic nearby town. They didn’t dress in jeans and bulky wool sweaters, but in starched dress shirts.
Adriaan Deking Dura, Lex Bos, Rudolf Mees and Dieter Brüll knew there wasn’t a lack of money to change things. A lot of money was actually circulating through banks, which invested it in big companies they believed were nearly certain to make big profits and in sizable projects to which other established investors had already pledged funds. Some people might not own cars out of environmental and social principles, yet their bank invested their money in oil companies and car makers. Their bank might even invest in a weapons manufacturer that just cut a dubious deal with a ruthless government. Money in the bank!
These four men figured many people didn’t know and probably wouldn’t approve of where their banks invested. That’s why they set up the Triodos Foundation for prosperous anthroposophists (followers of the notable social and spiritual thinker Rudolf Steiner, creator of Waldorf schools and biodynamic farming) who wanted to invest their money in good causes. Triodos’ founders banked on the idea that people with their hearts in the right place would rather invest their savings in biodynamic farms, health-food stores, natural-health clinics, passionately idealistic theatre troupes or companies that make non-violent toys than in large corporations with no vision of a better society.
While helping renovate a natural-foods restaurant in Amsterdam in 1977, economics student Peter Blom discovered he needed more money to finish the job. None of the banks he visited would consider funding the project. A subsidy from the government? Forget it. Government officials would have thought themselves nuts to subsidize people they considered dangerous radicals, since the place was a gathering of politically involved youngsters discussing how to bring down the powers that be. Blom managed to find his way to the Triodos Foundation—“I thought: At least they have money”—and got his loan. But the story didn’t end there. Blom was inspired by this brave, innovative institution with a vision of social renewal. He became a volunteer at the bank and climbed the ladder to CEO, a position he holds today.
Sitting in his office at Triodos Bank—built, of course, using environmentally friendly materials—Peter Blom seems to express a hint of nostalgia in his eyes as he thinks back to the early years. “I felt more like I was part of an activist group than a bank. Still I was at the heart of capitalism. That’s where it’s happening. That’s where the choices are made. That’s where you have a real impact on society.”
In 1980—while banks were merging, being renamed or going bankrupt—the Triodos Foundation launched the Triodos Bank in the small town of Zeist with start-up capital of 540,000 euros ($630,000 U.S.) jointly raised by a group of 300 private and institutional investors. Because many of the first savings-account holders renounced their interest earnings, the bank turned a profit in the first year. And that has set the tone: 25 years of profits linked to ideals.
The founders of Triodos Bank weren’t afraid to revise a few unwritten banking rules. For instance, customers were given the opportunity to target a cause that would receive a portion of the interest from their savings accounts. And the wealthiest borrowers paid the highest interest rate. After all, if you charge them the lowest rate—not unusual in traditional banks—you’re making the rich richer. Businesses that are having a tough time already would be even closer to bankruptcy if they weren’t charged the lowest rate.
Triodos also introduced the principle of “personal security.” A lot of good ideas are lost because banks ask borrowers to produce equity capital—which all banks do. That is why this new bank introduced a system whereby a larger group of people could act as guarantors for a new initiative. This has the added benefit of stimulating involvement and creativity in a new venture because this group of people would theoretically do everything they could to ensure the success of the new initiative.
In 1990, Triodos Bank launched the first so-called “green fund” on the Amsterdam Stock Exchange, funding environmentally friendly projects. Ten years ago the total amount of green capital invested in the Netherlands stood at 20 million euros ($23 million U.S.). Currently, Dutch green funds have 4 billion euros ($4.7 billion U.S.) invested in green projects—with Triodos money accounting for 10 percent of that total.
Together with insurer Delta Lloyd Asset Management, Triodos Bank also initiated the first life- and pension-insurance schemes in the Netherlands that include social and ecological criteria in the investment guidelines. And in the late 1980s the bank was also one of the first in Europe to become deeply involved in microcredit—small loans for poor people in developing countries. Triodos Bank made an important contribution in expanding the role of microcredit from an aid instrument used by Western donor organizations to a business activity that spread across developing countries—even without donor funding. The bank was rewarded for that groundbreaking contribution to the fight against poverty by having its senior fund manager named as an advisor for the United Nation’s International Year of Microcredit in 2005.
“If it weren’t for Triodos Bank, corporate social responsibility in the banking sector would have been much slower to gain a foothold,” declares banker Bart Jan Krouwel, the managing director for sustainability and social innovation at the Dutch Rabobank and the first general manager of Triodos Bank in 1980.
When Krouwel was working at the established Crediet en Effectenbank (currently CenE Bankiers) and only volunteering at the Triodos Foundation he had a clothes closet in his boardroom that often came in handy. When he visited a potential Triodos client he put on his corduroy jacket and boots—“otherwise, the goat breeder didn’t understand me”—and later, at the office, changed back into the three-piece suit his Crediet en Effectenbank clients considered more appropriate.
Those days are gone. Now sustainability isn’t just an idea for the fringes of the financial world. For customers who want to do the responsible thing with their money, even the big banks now have their own sustainable funds. And what company can afford to present itself to shareholders without providing an extensive report on environmental and human-rights activities? Blom says, “Transparency is increasingly becoming a key concept in the financial world. Twenty-five years ago all the banks recoiled at the notion—which is the core of the matter: You want to know what’s happening with your money. Nowadays businesses are more emphatically taking account of people and nature, including when they are making financial decisions.”
A turning point in the history of Triodos Bank was the nuclear disaster in Chernobyl. It was April 26, 1986, when nuclear reactor 4 at the Ukrainian plant began to fail. The temperature increased to over 2,000 degrees Celsius (3,600 Fahrenheit). The cooling pipes cracked, the reactor burst into flames and a radioactive cloud of dust shot into the air.
All of Europe was in turmoil. How far would the effects of the radiation extend? Within a week, the cloud had reached the Dutch border. Politicians warned against eating fresh vegetables and dairy products. In Zeist, Paul Mackay, co-founder and managing director of Triodos Bank, walked through his garden for a bit of fresh air and shook his head. The radishes would be contaminated. The threat of this invisible environmental disaster shook him to the core. Could his bank somehow help? That question was also a key theme in the letters and phone calls coming in from account holders.
Inspired by the managing director’s failed radish crop and that endless series of letters, it was decided Triodos Bank would develop its own initiatives—go beyond the traditional banking activities—beginning with investing in wind parks so the world could see there were alternatives to dangerous nuclear energy.
Together with Blom, still a loan officer at the time, Mackay went in search of partners: an engineering firm in the Dutch town of Delft, windmill manufacturers from Denmark and Germany, wind-power entrepreneurs in California, the provincial government in the Netherland’s southwestern region of Zeeland, energy companies, the European Investment Bank, the Dutch Economic Affairs Ministry. The just-emerging field of sustainable energy received an enormous boost and the Netherlands became one of the international leaders.
There’s no doubt Triodos Bank has profited from the changing spirit of the times in other ways too. Fuelled by increasing concern about the quality of their food, increasing numbers of consumers are switching to organic and health-food producers, some of which owe their existence to loans from Triodos Bank. Current government policies in the Netherlands have led to hard times for the arts, prompting theatre groups and film companies to seek help from Triodos Bank as well.
But how does the future look for Triodos Bank now that “ordinary” banks are increasingly positioning themselves as players in the sustainable economy? Blom takes a critical stance: “Those same banks invest billions in companies that don’t in any way contribute to a better world.”
“I sometimes wonder how the fire of Triodos Bank will be kept alive as it deals with the pressures of growth and organizational change,” Glen Saunders says hesitantly on the phone from New Zealand. The first managing director of the British branch of Triodos Bank is concerned that the inevitable will happen: “I’m afraid it’s an almost-inevitable process that the day-to-day business of being a bank will dominate over the desire to be an instrument of social change.”
That question was also touched on during this year’s shareholders’ meeting. The board of Triodos Bank proposed raising its return from four percent to seven to eight percent within three to five years—still lower than other banks, but an enormous jump. Shareholders began to stir during presentation of the plans: Can the bank continue to fulfill its mandate to strive for social objectives?
Blom is convinced it can. “Our growth plans aren’t fuelled by desperation.” He believes the bank can profit from economies of scale. Moreover, if, alongside its current savings and investment products, Triodos Bank starts to introduce regular banking services next year in the Netherlands, such as mortgages, checking accounts and bank cards, Blom expects at least half of the current 55,000 savings clients in the Netherlands will leave the institution they currently use for daily banking services.
That’s where Blom believes real change takes place—with individuals, with people like you and me. Triodos Bank sees a new role for itself: The bank hopes to become a platform for people who want to make a difference in the world, through their buying behaviours or their daily contact with people. The bank wants to offer help to people who want to work on positive change throughout the world.
Blom asserts, “We no longer want to be an icon, an indulgence for people who put their savings in an account at a sustainable bank and draw no further conclusions about making a personal contribution in their lives. I think people no longer want to separate their work and finances from their private life, or the way they think and how they do the shopping or raise their children. That will be the next major change in our times: striving for real-life quality and authenticity.”
That’s the question now for Triodos: How many people want to take that important next step?