Why Triodos Bank could be the most important bank you haven’t heard of

With just shy of 85,000 cus­tomers, it’s very far from the biggest bank. Nor is it rich: its 2021 prof­it of £7.8m would bare­ly cov­er the reward pack­age of a high-street bank’s CEO. 

Yet Bris­tol-based chal­lenger Tri­o­dos Bank UK, the embod­i­ment of an upsurge in con­sumer demand for eth­i­cal bank­ing, is mak­ing the incum­bents look like dinosaurs – and not the peace­able her­biv­o­rous kind. Since its estab­lish­ment in 1995, it has become a star play­er in a nation­al “eth­i­cal mon­ey sec­tor” that the Eth­i­cal Con­sumer Research Asso­ci­a­tion val­ued at £41.1bn in 2018. 

If scan­dals such as the Pana­ma, Par­adise and Pan­do­ra papers hadn’t already done enough to high­light the less-than-eth­i­cal actions of many large finan­cial insti­tu­tions, the recent freez­ing of bil­lions of pounds in Russ­ian oli­garchs’ UK bank accounts has rammed the point home. So says Bevis Watts, CEO of the busi­ness, which is a sub­sidiary of 42-year-old Dutch plc Tri­o­dos Bank.  

“The train had already left the sta­tion before the Ukraine con­flict,” he observes. “It is good that all this stuff is being exposed, because now we can have a prop­er pub­lic debate about where our mon­ey should sit and how it should be used.” 

By Watts’ own admis­sion, ‘eth­i­cal bank­ing’ is a wool­ly term (he prefers ‘sus­tain­able’). It can range from a ban on financ­ing eth­i­cal­ly dubi­ous indus­tries to the active sup­port of low-car­bon enter­pris­es, but one com­mon fac­tor is the notion that “mon­ey is not neu­tral”, to use one of his favourite phras­es. Banks’ choic­es about whom they accept mon­ey from and how they use those funds have pro­found impli­ca­tions – for the envi­ron­ment, for democ­ra­cy and for every­day cus­tomers. 

Con­sid­er Tri­o­dos Bank UK’s loan book, for instance. Includ­ed in last year’s £1.13bn deal list is a roll-out of charg­ing points for elec­tric cars at British super­mar­kets; the UK’s inau­gur­al inter-city all-elec­tric coach ser­vice (between Edin­burgh and Dundee); and its first ever net-zero hous­ing devel­op­ment for pri­vate sale.

Com­pare that with the £13bn invest­ed by the nation’s five largest banks – HSBC, Bar­clays, Lloyds Bank­ing Group, NatWest and Stan­dard Char­tered – in car­bon-inten­sive oil and gas projects in 2021, accord­ing to research by the Share­Ac­tion char­i­ty.  

This con­trast points to anoth­er prin­ci­ple that Tri­o­dos and its eth­i­cal bank­ing peers share: the need to bal­ance the imme­di­ate inter­ests of their cus­tomers against the longer-term wel­fare of the envi­ron­ment and wider soci­ety. If that sounds a lit­tle tree-hug­gy, that’s because it is, but it also makes com­mer­cial sense, Watts stress­es. 

His argu­ment in a nut­shell: “What is the point of sav­ing for a pen­sion if you’re cre­at­ing a world that you won’t want to live in?”

The Tri­o­dos phi­los­o­phy is catch­ing on: more and more banks with explic­it eth­i­cal and/or eco­log­i­cal man­dates are emerg­ing. Many belong to the Glob­al Alliance for Bank­ing on Val­ues, an inde­pen­dent net­work that has 66 mem­bers with more than £160bn-worth of assets under man­age­ment. 

The segment’s growth is no acci­dent. Pub­lic atti­tudes are cer­tain­ly chang­ing, but suc­cess­ful mar­ket­ing cam­paigns such as Switch It and Bank.Green have also giv­en con­sumers the impe­tus to change their banks. 

In an indus­try awash with eth­i­cal claims and counter-claims, how can peo­ple be sure that Tri­o­dos is the real deal? 

It’s easy, Watts says: vis­it the Tri­o­dos web­site and call it up. Infor­ma­tion on every loan that the bank issues, every invest­ment it makes and every pol­i­cy it fol­lows is in the pub­lic domain for any­one to see. 

Such rad­i­cal trans­paren­cy not only con­trasts with the opaque­ness of most con­ven­tion­al banks; it also erad­i­cates the “com­plete­ly help­less” feel­ing that many peo­ple expe­ri­ence when they con­sid­er how a bank might be using their mon­ey, he says, adding: “The lev­el of trans­paren­cy we pro­vide real­ly brings home the pow­er you can have in know­ing where your money’s going.” 

Watts points to the bank’s mobile app, which has a GPS-based loca­tion sys­tem that high­lights any loans that Tri­o­dos has issued in the user’s imme­di­ate local­i­ty. 

Such open­ness is not a one-way affair either. On the asset man­age­ment side of its busi­ness, Tri­o­dos is con­tin­u­al­ly demand­ing infor­ma­tion from its investees.

Watts esti­mates that “only about 25% of investors in the asset man­age­ment indus­try are active. The rest are pas­sive. Active investors will actu­al­ly engage with com­pa­nies’ man­age­ment teams and scru­ti­nise them on the promis­es they make.”

He would like to see all oth­er UK banks fol­low Triodos’s lead in pub­lish­ing the basic details of all their new loans and invest­ments “as a min­i­mum”. 

Is there any evi­dence that the bur­geon­ing eth­i­cal bank­ing mar­ket has start­ed to change how the whole indus­try oper­ates? 

Just because his cheque book is rel­a­tive­ly small, it doesn’t mean that Watts and oth­er advo­cates of sus­tain­able finance have no influ­ence on the indus­try. While he freely admits that “we aren’t going be the equiv­a­lent of one of the big four”, he says that a “big part of chal­leng­ing the wider sec­tor is to change how it thinks and oper­ates. We want to be a big­ger part of the con­ver­sa­tion, which we’ve suc­cess­ful­ly achieved in recent years.”

One exam­ple of this has been the bank’s involve­ment in dis­cus­sions in Brus­sels about the so-called EU sus­tain­able finance tax­on­o­my – in essence, a rule­book defin­ing what prod­ucts and prac­tices can be clas­si­fied as envi­ron­men­tal, social and gov­er­nance (ESG) invest­ments.

Watts can point to numer­ous small vic­to­ries for eth­i­cal bank­ing, such as the UK government’s pledge last Novem­ber to oblige all large finan­cial insti­tu­tions to adopt net-zero emis­sions strate­gies. 

The bank­ing indus­try has tend­ed to be slow to clean up its act unless com­pelled to do so. Nonethe­less, Watts is con­fi­dent that fur­ther pos­i­tive changes will come. Why? For the “plain and sim­ple” rea­son that any bank focused pure­ly on short-term prof­it is sure to fare poor­ly in the longer term as the effects of cli­mate change and envi­ron­men­tal degra­da­tion wors­en. 

As he warns: “Unless you’re think­ing now about whom you’re financ­ing and whether they are resilient, I think you’ll be in for a tough time.”