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Responding to a Changing World

Feedback loops for good

We live in a connected world whose links can be both a force for good and for ill. For example, climate change feedback loops can exacerbate changes in the climate in a vicious, negative cycle. One of the best-known relates to melting ice. Ice and snow are light-coloured and reflective, so a large proportion of the sunlight that hits it bounces back to space, which limits the amount of warming it causes. As the world gets hotter, ice melts, revealing the darker-coloured land or water below. The result is that more of the sun’s energy is absorbed, leading to more warming, which in turn leads to more ice melting – and so on.

Similarly, the risks associated with a financial system that was dedicated to unfettered growth and wealth resulted in a deep-seated crisis. This, in part, led to governments choosing austerity measures which have had serious consequences for wider society. Reduced welfare budgets, job losses and less lending to businesses have together made economic recovery a slower and more painful process.

But feedback loops can also deliver positive change. Triodos Bank depositors, for instance, discover more about issues such as climate change and social inequality as they hear more about the projects their savings help to finance. This in turn can influence choices about what they buy as well as what they save. Exposure to new businesses and ideas can even affect decisions about health, education and well-being.

Our lives, and the ‘big issues’ we increasingly face as individuals and communities, are connected in eco-systems; whether they are in the natural environment or in business. As a result we believe solutions to our greatest challenges have to be joined up, and holistic, too. In effect, we need to create more, and more impactful, positive feedback loops. Triodos Bank’s strategic goals, which we describe in more depth later in this chapter, reflect this conviction.

The tragedy of the horizon

This perspective is not only ours. In speeches during 2015, leading regulators made the link between the financial system and a number of other major issues in 2015 citing the profound long-term effects of climate change on poverty, migration, political stability and food and water security. One described the short term planning that’s linked to short business and political cycles and the mandate of central banks, as creating a ‘Tragedy of the Horizon’.

Another Central Banker went as far as to state that “we are at a crossroads” and that “sustainable development is key to securing the well-being and welfare of this generation and many that will follow”. The need to address these issues is no longer urgent; it has become critical. The challenges predicted by organisations like the Club of Rome in 1972, who highlighted the problems of exponential economic and population growth in a world of finite resources, are here today.

During the year we witnessed a massive movement of people fleeing war in Syria, among other places, to Europe. Research from the Met Office, the UK’s national weather service, showed temperatures are already up by one degree, halfway to a dangerous threshold, and the COP21 climate conference in Paris at the end of the year was considered by some to offer a ‘make or break’ chance to prevent catastrophic climate change. Around the same time terrorist attacks struck Europe, North Africa and the Middle East. These events came on the heels of a financial crisis which continues to occupy the attention of regulators, politicians and citizens alike.

Together these crises may feel overwhelming but there has been a strong positive and holistic response to them; from the extraordinary dignity of individuals directly affected by the terrorist attacks, to shifts in the thinking of central banks, to major technological and practical developments in the renewable energy sector and the embracing of refugee communities right across Europe. Increasingly, people recognise that we are systemically connected and dealing with one issue is not sufficient if we’re to improve people’s quality of life overall.

How Triodos Bank responds to an uncertain future

Triodos Bank is part of this changing world and developed a 10 year perspective during 2014 to better equip itself to deliver its sustainable mission. We learned from others, developed scenarios and shared them in last year’s annual report. This, in turn, lead to the development of four new, key strategic directions, described below, and which will be at the heart of our business plan over the coming three years.

These hypothetical futures enable Triodos Bank to view the actual future from a broader perspective. They enable us to assess and respond to developing events, like the ones above, in context and from a systems perspective. This can help avoid short-term responses to apparently alarming new developments. And they act as inspiration to develop concrete plans, such as ‘broadening our scope’, to help meet the challenge of society’s converging questions; a core goal in the coming period.

We recognise, for instance, that the major global agreement to limit carbon emissions that came out of the COP 21 climate conference in Paris in 2015 may encourage investors to avoid resources that may become stranded assets in fossil fuel industries and seek impact-based assets instead. This in turn should encourage investors to see their finances in a broader context, taking account of the impact of their finance as well as its likely returns and risks. The 10 year perspective helps us to view the agreement through a wider lens. For us it is an important and positive stepping stone provided it can be translated into a profound shift towards impact-based finance that delivers clear benefits for society as well as financial returns.

We understand impact finance to be transformational and define it as directing money so that it benefits people and the environment over the long-term. Impact comes first, and it should also provide fair financial and non-financial returns. This is crucial to understanding how Triodos Bank approaches the future and has delivered its mission in the past. It also differentiates Triodos from almost all other banks.

Triodos Bank’s 10 year perspective, including engaging with stakeholders from a number of companies with an interest in sustainability, has led directly to the definition of four key strategic areas that we believe will help us to continue to increase Triodos Bank’s sustainable impact in the future. All four appear early on in the strategic object­ives table that follows this section of the report. Impor­tantly they are all areas which our stakeholders recognise and value, as our materiality analysis below shows.

  • Broaden our scope: We intend to broaden our scope, both by extending our own products and services to become a first bank for our customers in all the countries where we work, and by developing our activities beyond standard banking. This work has already started. In 2015, for example, we launched a project in Spain which links customer spending decisions with gift money. The Spanish branch has created a responsible consumption service. Sustainable businesses that are Triodos Bank customers are located on a map so private customers can find and shop in them. Purchases in some of these businesses automatically generate a donation from the business (instead of a conventional introduction fee) to the Triodos Foundation.
  • Innovating new ventures and partnerships: We will innovate more. We created LEAF Lab – a collaborative initiative across Triodos Bank’s Dutch business units that’s focused on developing new innovations that meet the needs of our stakeholders – during the year. We also launched the Triodos Multi Impact Fund in The Nether­lands. This ‘fund-of-funds’ offers Dutch retail investors an opportunity to make their money work in multiple sec­tors that are all key in the transition to a more equitable and sustainable world. The Fund brings a number of separate funds together in one place from a variety of sustainable areas, creating more liquidity so it’s easier to buy and sell shares, and making impact in­ves­ting available to a broader group of ‘ordinary’ investors.
  • Again, our stakeholders tell us they value sustainable investments highly; it’s the single most important issue for them in the materiality analysis below and the bank’s second highest priority. Funds, like the Triodos Multi Impact Fund, help meet this demand. In Spain, Fundación Triodos has launched the first crowdfunding platform for organic gardens in Spanish schools. The platform is integrated into a collaborative website, Huertos­, where schools can share experi­ences about the educational benefits of an organic garden. Projects in two schools were funded before the year end and the initiative has won a prize as one of the 50 best digital ideas in the market from a national economic newspaper.
  • Becoming more of a learning organisation: During the year we articulated the ‘essence of Triodos’. This text has been the basis for discussions about the essence with co-workers across all our branches to build a closer relationship to the values and Triodos Bank’s threefold approach; always asking three questions if we are approached to finance a project or a business: Is there a thriving, deep rooted idea behind the business, that motivates the people in it? Is there a developing community or entrepreneurial spirit that shares a strong culture? Does the business make economic sense and address a real need? In 2016 we will also roll out Engage, an online collaboration and learning tool for all of Triodos Bank, providing a tangible way to help learn, share and retain knowledge. Learning from our stakeholders is crucial for Triodos Bank to continue to develop. This includes participating in social networks to identify the financial needs of the future, and the projects and people that will change the economy and make it more sustainable and social.
  • Deepen our relationship approach: We will work with customers in particular, leveraging communities and networks in our sectors, sharing knowledge and insights. And we will harness fast-changing technology to support rather than diminish relationships. In 2015 we hosted hundreds of meetings, bringing co-workers, savers and investors together with borrowers in countries across Europe. We also strengthened existing partnerships with banks, like those in the Global Alliance for Banking on Values (GABV), exchanging knowledge and expertise in a number of areas from impact reporting to bringing Board members together to discuss shared issues. We also established and participated in new alliances like the B Corporation, a certification body for companies who want to benefit society as well as investors. We hosted a special event at Triodos Bank to launch B Corporation in Europe, for example.