ESG in Action: Financing change and changing finance with Triodos Bank

Sian Williams (00:02)

So for us, this isn't just a CSR initiative. It's ingrained deeply in the purpose of the business and the individuals who work here and the bank's mission and values, which all lead to our values-based decision-making. And whilst we clearly need to be profitable in order to be sustainable, we also look to balance profit with people and planet.

Alex Holsgrove Jones (00:27)

Welcome to ESG in Action. I'm Alex Holsgrove Jones, Knowledge Partner and ESG Lead at TLT, and today I'm joined by Sian Williams, Chief Risk Officer at Triodos Bank. Triodos does banking very differently to the traditional model, not just financing change, but changing finance. And we'll get Sian to explain exactly what that means a little bit later in the show. Sian, thanks so much for joining me.

Sian Williams (00:53)

Thank you so much for inviting me to join you on the podcast.

Alex Holsgrove Jones (00:56)

Oh, it's a pleasure. I'm really looking forward to our conversation. So, Sian, not just financing change, but changing finance. What does that mean in practice and what does Triodos do differently and why?

Sian Williams (01:10)

So we are a pioneering sustainable bank. We want to be the leading catalyst towards a sustainable world, using money for good and for system change. And I think in many ways, many people within the organisation would describe us as part bank and part activist.  

So, we want to role model that a bank can have a positive impact for the environment, the economy, and society, and also be profitable, sustainable and successful. And what we do is we look to finance change in the real economy by providing loans to customers or finance through investment funds. And those are across five key transition themes, for example, in the energy, wellbeing or society areas.  

And we also advocate for changing finance both directly and indirectly through a number of partnerships. So for us, this isn't just a CSR initiative. It's ingrained deeply in the purpose of the business and the individuals who work here and the bank's mission and values, which all lead to our values-based decision-making. And whilst we clearly need to be profitable in order to be sustainable, we also look to balance profit with people and planet. I should say we're not the only ones doing this.

We are part of the Global Alliance for Banking on Values, which comprises about 70 financial institutions across the globe, and all with a similar focus and desire to promote a financial system that supports the real economy and, really important in my mind, delivers lasting social and environmental impact.

Alex Holsgrove Jones (02:52)

Great. Well, sounds like you really are part activists and there must be a real sort of buzz about the organisation trying to drive that systemic change. And I've seen that you're the only bank to publish its entire loan portfolio, which is really huge. Why do you do this and why is transparency important?

Sian Williams (03:14)

Twofold. Partly for Triodos, transparency is a key component of one of our three minimum standards, of the governance minimum standard. We also have two other minimum standards by which really the three guide everything that we do. And the other two are to protect the planet, so bringing in the climate and nature, and then also protect human dignity, which speaks very much to civil liberties and human rights and the society or social side of ESG.  

Personally, I also see transparency as a really essential part of building trust in the financial system and preventing abuse of power. And it also helps support long-term value creation.

And if we pause for a moment and just imagine if everyone knew what their money was supporting, I think it would be really astonishing, and it could also drive really astonishing change.  

Triodos provides an interactive map on our website that actually showcases who we finance, where all of the money goes for people who entrust their funds to us. So everybody who deposits money with us knows where the money is going to go and what it's going to be used for.

Alex Holsgrove Jones (04:32)

So Triodos obviously does things very differently to the traditional financial model. What risks do you think the traditional model is facing and why do you think that needs to change?

Sian Williams (04:42)

Ironically, in some ways, our business model is quite traditional financial services. So we provide current and savings accounts, and then we lend that money on direct to customers who like us are seeking to make a positive impact. We also offer investments through impact, debt, and equity funds and green bonds, which is managed by our Triodos Investment Management Company in the Netherlands. And in the UK, we also have a small corporate finance business, which advises and raises debt and equity for sustainable businesses.  

But where we differ is that Triodos really does strive to deliver positive impact and positive outcomes, not just avoiding harmful impact. And we really want to prove that banking can be a force for good. And that's something that I'm particularly passionate about having worked in banking and finance all my working life.  

I think another key differentiator is that we don't pay bonuses.  And so whilst I can see the benefits of bonuses being used to encourage good behaviours, I think there are probably more examples of where that has incentivized core practice and short term goals rather than really focusing on that long term value enhancing activity.

Alex Holsgrove Jones (06:05)

Yeah.

Sian Williams (06:06)

And then in terms of the risks that the more traditional model is perhaps facing, I mean, there are certainly risks related to increasingly complex financial instruments and what those might mean for economic stability. There's also a lot of discussion around the industry currently about the reduction in red tape and more proportionate regulation, all of which sounds great and makes a lot of sense from a UK competitiveness perspective. But finding that balance between promoting growth, maintaining strong standards and protecting both people, our customers and the planet, the environment is far from easy.  

So I think that is a real risk that we don't find that balance. And then why is it so important? I mean, look around you, there's so much that needs to change.  Everybody, including governments across all countries needs to have more ambition to shift the economy from wasteful and the sort of the linear patterns that we see at the moment to being much more restorative and circular.  

And I think the current ecological crises require better financing, different financing, new risk and business models. And to one of your earlier points, system change and collectively we need to stop exhausting the planet's reserves. Can the financial sector help? We absolutely can.

We want everybody to be financing clients to support greater circularity and nature conservation. True pricing, really important so that costs stemming from unsustainable production and consumption are properly taken into account. And then also, I think it's fair to say, a transition away from profit maximisation to profit, to sustainable profit and value creation.

I really believe profit doesn't have to be a dirty word. You need profit to be sustainable and profit can be used to benefit people and the planet, but you don't need to maximise profit and you absolutely shouldn't do that if it adversely impacts the world in which we live and the people around us.

Alex Holsgrove Jones (08:21)

Absolutely, and it's clear from the way you've been speaking, Sian, that obviously you have a really holistic understanding of ESG and that they're not siloed. They're all so, so interlinked. You know, the planetary concerns, the people, and obviously governance tying everything together. Can you share some of the projects that Triodos is investing in? And do you have a favourite?

Sian Williams (08:48)

Yeah, so as mentioned, we focus on sort of these five transition themes. So I'll give you just a taster across a couple of those areas. So in the resources transition, some relatively recent lends have included funding to businesses supporting nature-based solutions, where they are looking to rebuild biodiversity to support the longer-term economy.

But also ranging to social enterprises like the Bristol Wood Recycling Project, which collects and reuses waste timber and turns it into bespoke furniture. In the energy transition, we look to fund emerging technologies like battery energy storage solutions that will help moderate the peaks and troughs of renewable energy. We also funded the first electric coach service between Edinburgh and Glasgow, the Ember coaches, fully electric.

And then we also do some infrastructure funding as well. So for EV charging points in inner cities and broadband in hard-to-reach rural areas. But perhaps my personal favourite would be in the wellbeing transition. And that is funding and support for a charity called Gympanzees, which is an amazing initiative. It's located just outside of Bristol in an old motorway service station. And it is the UK's first fully inclusive play, exercise and leisure centre for disabled children and young people, but really importantly, also for their families. So siblings can play and experience all of these things together. And we know that the founder was struggling to find a mainstream bank that would provide the finance that was needed. But when Triodos looked at it through our particular lens, whilst we did all of the standard credit risk looking at, you know, financial strength and quality of management, we also agreed that the positive impact that Gympanzees would create was a critical factor in the risk-reward-impact balancing act, which we always try to consider our decisions through.

Alex Holsgrove Jones (11:00)

It sounds like I've heard of that,  Gympanzees, you know, the service station location, and it's been spoken of so, so positively. But one thing that we've been talking about with a number of our guests is measurement, how you measure success and the real-world impacts of some of these projects. Because as you said, that Gympanzees for example, had not managed to secure funding because on a usual way of looking at things, they might not satisfy the criteria. So you obviously have a different way of measuring who you're going to lend to, but then how do you measure the positive impacts of those projects?

Sian Williams (11:38)

That's a really great question. And measuring impact is really hard. It is inherently more subjective and judgment based and also values led. Whilst sort of, as I said, we look at the risk, return and impact, risk and return are quite quantitative, very well-established ways of measuring things. And then we have to bring in a much more qualitative assessment of impact. And then that overall balance of the three risk, return and impact requires judgment in terms of actually does the increased risk potentially is how is that offset against the massive social impact that something might bring. And sometimes that impact doesn't offset the risk.  

But we really try and look to see how it can do or that the return is compensated in a different way.  

It is possible though to look at some of the quantifiable impact. And we detailed some of this in our annual accounts, which just been published for this last year. And there's an our impact chapter. And actually the group results are even, that's got a bigger section on it as well. But in the last reports, we detailed that our lending supported energy projects that avoided 80,000 tonnes of carbon dioxide; nature and forestry projects that sequestered carbon equal to at least 600,000 mature trees; farming that provided food equivalent to 12 million organic meals; and we also provided homes for around 16,000 people through social housing projects and care home provision, providing dignified care for over 3000 older people with particular needs.  

So there are some hard numbers to go along with the qualitative values side. And we look to use established such as SBTI, Science-based target initiatives to help us calculate those things.

Alex Holsgrove Jones (13:47)

And those numbers are undoubtedly really useful, but it is a lot harder to measure the impact of an inclusive gym space, for example, on the families that use it, other than maybe word of mouth. But those things are so important in community cohesion and just for those families, for the children to be able to play in the same space must make a huge impact on them.

Sian Williams (14:15)

Yes, and the founder of Gympanzees has some amazing stories around it providing the first opportunity for somebody who's nearly 10 to actually laugh and things like that, and just, I mean, it must be an amazing experience for the parents and for the siblings as well.

Alex Holsgrove Jones (14:35)

And you can't put a figure on that, can you?

Sian Williams (14:37)

You absolutely can't.

Alex Holsgrove Jones (14:39)

So Sian, we always like to leave our listeners with one practical action that they can take away and carry out to drive sustainable change. If you could give them one thing to do in the next few weeks, what would you say?

Sian Williams (14:54)

I would encourage every person listening and all of their organisations to continue to talk publicly about what they are doing and working on in the sustainability space. I think we really need to reset the tone in the media and with politicians and make it really clear that business and businesses in general really do remain committed to the sustainability agenda.

So please never be tempted to green hush and speak proudly about all of the efforts that all of us are trying to do.

Alex Holsgrove Jones (15:34)

Great, thank you so much, Sian, for joining us. It's been really fascinating to learn more about what Triodos does and to explore how changing the system and not just working within it can drive meaningful impact.

Sian Williams (15:45)

Been lovely to meet you, Alex.

Alex Holsgrove Jones (15:46)

Thank you to our listeners for tuning in. If you enjoyed this episode, don't forget to subscribe and share. And until next time, keep driving positive change and putting ESG into action.