Banking on Values Day is spearheaded by the Global Alliance for Banking on Values (GABV), a network of more than 70 independent banks. The day serves as a potent reminder of how banking can and should be a force for good. It’s an opportunity to reflect on the role of values-based banking and for all financial institutions to think more critically about the contribution they make to positive social and environmental change.
2023 has seen a lively debate about the behaviour of banks in the UK. The closure of one high-profile individual’s bank account quickly escalated into a whirlwind media story sometimes connected to values and ‘wokeness’.
'Debanking‘ is actually a daily occurrence as banks are obliged to root out money launderers and fraudsters - with financial crime currently being society's most prevalent form of crime. While the political beliefs or personal views of individuals should not deny them a bank account because of their opinions, banks do have a legal obligation to monitor their clients' accounts, and to make risk assessments based on the information they have gathered. Politically Exposed Persons (‘PEPs’) – individuals who hold or have held public office and therefore may be more susceptible to bribery or corruption – as well as their connected families and close associates, require additional supervision.
Since this year’s debate on debanking, new legislation has come in from regulators that gives consumers 90 days’ notice if their accounts are to be closed, rather than 30. This is a positive development, particularly as banks – including ourselves – are not always able to provide a full explanation when an account is closed as there may be legal, regulatory or fraud prevention measures that prevent us from doing so where it relates to ongoing legal matters.
What was missing from the whole debate was a broader reflection on the purpose of banks in society and their potential to drive positive change. This is connected to the role they can play in selecting the businesses and organisations they choose to provide services to.
Banking is not a utility. Banking is not neutral; when used to finance harmful environmental practices or invest in systems that are rooted in social inequality, the flow of global finance maintains structures that threaten the wellbeing of people and the planet.
But it doesn’t have to be this way. By driving up standards on what they finance, investing time and expertise in new technologies and sectors, targeting their risk appetite accordingly, and making real commitments, banks can make bolder changes to how finance delivers positive impact.
Redirecting finance to align with global climate and sustainable development goals should not be negotiable. We need to put more red lines around the banking industry through stronger regulation requiring mandatory Science Based Targets initiative aligned net-zero transition plans. The recent launch of the Transition Plan Taskforce (TPT) Disclosure Framework for climate transition plans is a step in the right direction but much more is needed. Banks could be providing more of the investment necessary for businesses to transition to a greener, fairer way of operating – and ensuring they do more to direct investment away from doing harm.
Know where your money goes
Banking sustainably requires deliberate choices on what to finance and invest in – from both banks themselves, and their customers. Every consumer should have the option to know where their money goes. If there was more transparency about what banks and the wider financial industry did with our money, we would be able to ensure that our money only supports organisations that align with our values.
This is what provides a market for banks that choose to steer the flow of money towards more sustainable businesses and activities. For consumers to have the right to choose how their money is invested, banks need to have the power to discriminate in the companies and industries that they offer banking services to. Indeed, this is what customers of values-based banks expect – they have invested or deposited expecting a discerning eye on how their money is used.
For example, at Triodos, we have clear boundaries on what we can finance, with our Minimum Standards forming strict exclusion criteria that we apply to all our loans, investments, current and saving accounts of business clients and suppliers. They clearly explain the products, processes, and activities that we do not want to be involved in.
The exclusions in our Minimum Standards fall into three categories: human dignity, planet awareness, and governance awareness. Each of these categories have plenty of activities that detract from the positive impact that we want to create. For instance, we do not finance the fossil and nuclear power sectors; and we also exclude weapons, tobacco, factory farming, deforestation and other harmful sectors and activities.
Banking for a better society
Our core values remain the same as when Triodos Bank was founded more than 40 years ago: we have always envisioned a world in which all people have the necessary tools and resources to live fulfilling lives, and in which the economy operates in harmony with nature rather than against it.
Admittedly, values are something that vary from person to person. For Triodos, however, some things need no debate. There is no debate about the need to address climate change. There is no debate about the need to address inequality. Policies cited by some as contentious, such as net-zero or racial justice, are actually consensus issues that are backed by all mainstream UK political parties and enshrined in legislation.
The argument against ‘woke banks’ has included criticism of divestment from arms and weapons. As a values-based bank, Triodos has always refrained and will continue to refrain from financing weapons. Financing the arms trade means financing warfare, not just today, but also in the future.
Normalising this type of financing activities not only contributes to a culture of conflict and violence, it also means diverting funding away from conflict prevention, as well as from other real economic activities that can truly contribute to societal progress. As such, financing arms should never be considered sustainable.
Our values-based proposition is central to our shareholders and customers who choose us to deliver on ‘values’ as part of the ‘value’ to them. It is of course challenging for other banks when retrofitting values as they don’t have the same agreed mandate from their shareholders and customers, and this is why stronger regulation is needed to transform the role of banks in society into a wholly positive one. Perhaps with the arrival of new Consumer Duty regulation from the Financial Conduct Authority (FCA), more of a consensus around what constitutes value will emerge.
A better way to do business
I firmly believe that banking can be better and bolder, pooling its vast resources to make widespread, sustainable changes that help meet the current challenges facing the world, at both a global and local level. At Triodos Bank, our investments in environmental and socially minded projects generate returns while protecting people and the planet. This already challenges the existing narrative and champions a new way to do finance.
Failure to align the financial interests of shareholders with those of wider society and the environment has contributed to a set of enormous challenges that threaten our health, prosperity, and the natural world. Businesses thrive when they benefit all. As a certified B Corporation, we join a community of businesses that represent this clarity of vision.
Whilst there is lots of positive progress in the banking sector, current regulation to encourage sustainable finance is too slow, and too few banks are doing too little to change. The debate this year on ‘woke banks’ may not have helped.
This is why consumer pressure has never been more important, and transparency so vital to helping consumers make sustainable choices. To support customer choice, we need standards and consumer ratings to show which products are sustainable and call out which banks are funding climate change and more. This is why it has been positive to see development like Which? producing their first ratings of current accounts – citing both those they consider best buys, as well as calling out those with the very worst environmental performance.
Thank you for joining us in thinking bolder and in celebrating Banking on Values Day.