Sustainable finance
Banks Editor's Choice Ethical Banking Europe

Banks Using Finance to Deliver Sustainable Economic, Social & Environmental Development

The world is dependent on global finance working towards a fairer financial system for people, the environment and culture with a focus on sustainability, climate change and social justice. This July at The Fintech Times we are putting the spotlight on ethical finance/ethical banking, including environmentally and socially-conscious practices.

The European Parliament’s recent decision to back plans by the European Commission to label investments in gas and nuclear energy as ‘environmentally sustainable’ has been highly criticised with some opponents describing the decision a “mockery of investors who believe in the ecological transition”.

According to the Global Alliance for Banking on Values (GABV) the decision is a “blow to the credibility of its resolve to combat the climate crisis”. We chatted to Sonia Felipe, head of communications and marketing for the GABV, to find out more about the network and its views on the parliament’s ruling.

Sonia Felipe
Sonia Felipe, GABV
Sonia, what is the Global Alliance for Banking on Values?

The Global Alliance for Banking on Values is a network of independent banks using finance to deliver sustainable economic, social and environmental development. Our purpose is to expand and strengthen the practice of values-based banking, and to lead the way for a financial system that is more transparent and promotes social equity, responds to the climate emergency and delivers true and lasting prosperity and wellbeing for all.

Integrity, human dignity and the protection of the environment are at the core of our member banks’ operations. By setting an example, they lead the transformation of banking and finance in their respective communities, countries and regions and expand their reach and impact by supporting others on the way to change.

Tell us more about your members

The GABV was founded in 2009 by 10 member banks and now we have currently 68 members in 40 countries across Africa, Latin America, Asia Pacific, North America and Europe. Collectively, we serve 60 million customers, hold over $200billion of combined assets under management, and are supported by 80,000 co-workers. In UK, there are four member banks: Triodos Bank UK, Charity Bank, Ecobuilding
Society and, recently, Unity Trust Bank.

  • Triodos Bank is the leader in sustainable banking in Europe, with offices in the Netherlands, Belgium, the United Kingdom, Spain and Germany and more than 700,000 customers. Founded in 1980, Triodos Bank’s mission is to help create a society that protects and promotes quality of life and human dignity for all. Triodos Bank focuses its activities across three overarching themes: Environmental, Cultural and Social. Together, these cover a broad range of sectors – from renewable energy, organic farming and social housing through to retail, charities and education. Triodos Bank UK, based in Bristol, manages more than £1.6 billion in total assets and a loan book of over £1 billion and serve 85,000 customers.
  • Ecology Building Society is dedicated to building a greener society by providing mortgages for properties and projects that respect the environment and support sustainable communities, funded through its range of simple, transparent savings accounts. Having started as a group of like-minded people committed to building a more sustainable future, it remains the same type of institution, helping finance environmental building renovations and supporting sustainable development. Founded in 1981, it manages £256.3million in total assets, gross lending of £69.4 million and serve 12,000 members.
  • Charity Bank is the loans and savings bank owned by and committed to supporting the social sector. It was founded in 2002 to support charities and social enterprises with loans, and to provide people with an option to save in line with its values. Since 2002, it has used savers’ money to make more than 1,100 loans totalling over £400million to housing, education, social care, community and other social purpose. It manages £312million of total assets.
  • Unity Trust Bank provides specialist banking services to trade unions, charities and other organisations that operate in the not-for-profit sector and profit-with-purpose businesses in the UK. Founded in 1984; head office is located at Birmingham. For over 35 years the bank has been helping organisations to prosper and contribute to positive economic, social and environmental change. It manages £1.6billion in total assets. In 2021, it increased lending to £723.5million.
Who can join the Alliance?

To be potential members, the banks must accomplish the ‘Principles of Values-Based Banking’ and meet a comprehensive set of criteria. While members may not meet all criteria, we expect – and monitor- progress over time. The GABV members complete a scorecard with quantitative and qualitative information, that is presented to the GABV Board for its approval. This scorecard is updated on annual basis. This does not mean, however, that members go through a pass/fail assessment, but rather it is an opportunity to provide feedback if requested or seen as necessary.

The GABV Scorecard set the standard for, and monitor and communicate the progress of values-based banks. The GABV Scorecard emphasises the two most distinctive factors common to values-based
institutions: serving the real economy and putting social and environmental impact at the heart of their business model. This tool that can be used by any bank.

The European Commission voted earlier this month to include nuclear energy and natural gas as environmentally sustainable investments in a new green taxonomy – what does this mean and why is this significant?

The GABV regrets the decision to include gas and nuclear in the EU green taxonomy. This decision puts at risk the credibility and achievement of the extensive work done by EU institutions in recent years to regulate the ESG finance sector. Although the market for sustainable financial products is rapidly growing, there is no common understanding and minimum benchmark for what ‘sustainability’ actually means. Trustworthy minimum standards for sustainable investments are needed to counteract greenwashing in the financial markets.

We think that both the European Commission and the European Parliament are wrong for several reasons:

  1. From an environmental perspective, gas and nuclear power are highly problematic energy sources, as the scientific and empirical evidence shows.
  2. Gas and nuclear power are well funded. The EU taxonomy, however, was designed to offer a  classification system to direct investments towards sustainable projects and activities, not to raise finance for well-established industries. Including gas and nuclear power in the EU taxonomy will affect its integrity and credibility among investors and, therefore, their ability to deliver capital and finance to genuinely green industries that need funding.
  3. The decision is not consistent with the environmental objectives defined and developed in the stakeholder process leading up to the taxonomy. They include: protecting the climate, avoiding pollution, and protecting ecosystems and biodiversity. Gas and nuclear power are contrary to these goals. Several EU countries and NGOs have announced legal challenges to the decision because it contradicts the vital ‘do no significant harm’ requirement.
  4. The EU taxonomy is being politicised as a tool to defend the national interests of a few, instead of creating a shared framework to address the climate urgency which affects the many. It is being used to greenwash gas and nuclear power.
  5. The decision undermines the credibility of the EU when it comes to its stated objectives to protect the environment.
Why are values-based banks and ethical financial institutions so important?

Finance plays a pivotal role in shaping the economy, our society, and the environment. Banks are not simply intermediaries of money. By deciding how to allocate money, banks are important agents of change. Every loan and investment impact our communities, environment, and economic future, for better or worse. Many people depend on access to finance to live up to their full potential and enjoy a decent and dignified life.

Banking and finance, therefore, come with great responsibility. With that in mind, there’s a growing number of pioneers and banking leaders from around the world with a values-driven approach to banking. They have joined forces in the GABV with a shared mission to put finance at the service of people and the planet.

Any final thoughts?

We think the green taxonomy controversy should not derail the work in progress on social impact in the
EU Taxonomy. The GABV calls upon the EU Commission to ensure the development of an ambitious and
unambiguous social taxonomy and take into account the views of the Platform on Sustainable Finance
(PSF). In its final report, the PSF emphasised that it is crucial to define clearly what constitutes a social
investment.

Author

  • Claire is an experienced editor and writer with 25 years of experience in the publishing industry. As a tech journalist, Claire has covered every subject possible over the years, from the launch of broadband and next generation mobile networks to the arrival of the metaverse and Web3.

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