Banking

Who are Triodos Bank: Is there such a thing as an ethical bank?

Every quarter, current account switching data is published and one banking name that Britons would be forgiven for not recognising is Triodos Bank.

Nestled in between the banking big boys and nu-wave challengers, it has fared well in the figures, tempting in switchers while losing very few of them.

The next step, Bevis Watts, the chief executive of its UK operations, tells me, is to turn it into a household name.

It has reeled in customers with its green credentials – but is it really possible to have an ethical current account and what does it mean?  

Green banking: Triodos continues to attract new customers – growth was up 10% in the first six months of 2021

Who are Triodos?  

Triodos Bank is based in Bristol. It says it’s on a mission to ensure its customers money is used as a force for good through its savings accounts, current accounts and investments.

The UK arm of the Dutch-founded bank led by environmentalist, Bevis Watts, promises only to lend on projects that make a ‘positive impact’ for people and the planet.

It publishes details about these organisations on its website so its customers can see where their money is going. 

It has been recognised as the ‘best sustainable bank’ in the UK at this year’s Responsible Banking Awards, run by CFI.co.  

It was also voted as the most sustainable savings provider by Which? achieving top scores for its carbon reporting and management as well as ethical lending policies.

But for all its accolades, Triodos remains relatively unknown, whilst its customer base, although growing rapidly, is modest.

Triodos has more than 80,000 customers, with their numbers having grown by 20 per cent in 2020 and then by a further 10 per cent in the first six months of this year.

Bevis Watts, chief executive of Triodos Bank UK is a chartered environmentalist

Bevis Watts, chief executive of Triodos Bank UK is a chartered environmentalist

Bevis says: ‘Our brand recognition is growing and we have been getting more attention, particularly in the past few years, helped by the fact that we top a lot of ratings tables for sustainability and we have also won a number of awards.

‘People find us because they are genuinely exploring sustainable living and lifestyle, so if you’re interested in organic food or are a member of the Friends of the Earth, you will have come across us because we have quite a high profile in those communities and networks.’

Watts is hoping that the younger generation will help drive Triodos towards becoming a household name.

‘The current account was intended to make us more accessible to a younger demographic and it’s clear that our fastest growth is in that 25-34 age group category.

‘More and more young professionals are looking to align their savings, investments and current accounts with their values.

‘We all know that the younger generation have really woken up to a lot of the issues that face us as a society.’

I’d like my money to support developing new industries that are going to turn the country into a green economy

Anna Vaughan, 42, from London is a loyal Triodos customer.

Anna Vaughan, 42, from London is a loyal Triodos customer.

Anna Vaughan, 42, an arts charity fundraising consultant living in London has a current account, savings account and stocks & shares Isa with Triodos.

Anna and her husband are in the process of moving to St Albans, where her husband is active in a local environmental group, Sustainable St Albans.

The couple are interested in environmental issues and have been taking steps to live more sustainably, including reducing plastic and increasing public transport use.

Anna believes it is important to choose financial services that invest in line with your values.

‘I was already making adjustments to my consumer habits – shopping at a refill store to avoid plastics and spending locally,’ says Anna.

‘Acting in that way around my daily life, I needed to do the same for investments.’

Tridos appealed to Anna because it was so transparent about where it invests customers’ money.

‘I’d like my money to support developing new industries that are going to turn the country into a green economy,’ she explains.

‘When I look through all of Triodos’s investment options, I can see support for local community organisations, but also infrastructure to renew the economy.

‘I think that if we’re going to crack climate change and the destruction of our planet, it has to be very strategic.

‘If Triodos can choose the right projects and companies with its expertise, that’s how we’re more likely to make a change.’ 

What makes Triodos so special?

There are unlikely to be many people who worry about whether the provider they hold a current account with has positive or negative consequences beyond their own bank account.

Triodos paints itself as the most socially responsible bank in the UK and champions the concept of sustainable banking – but what does that entail? 

Triodos defines it as using money with conscious thought about its environmental, cultural and social impacts, and with the support of savers and investors who want to make a difference by meeting present day needs without compromising those of future generations.

‘Many other banks talk about their ethical stance, but that’s more in terms of how they deal with their customers,’ says Watts.

‘Whilst that’s very important, we also talk about sustainable banking because we think the fundamental responsibility of a bank is to use its customers’ money in a way that aligns with the customers’ long-term interests.

‘Anything that isn’t using their money in their long-term interests, I would challenge as not being a sustainable approach to banking.’

Triodos financed the first major rollout of electric vehicle charging points to supermarket car parks. There's some 400 supermarkets in the UK, getting charging points as a consequence

Triodos financed the first major rollout of electric vehicle charging points to supermarket car parks. There’s some 400 supermarkets in the UK, getting charging points as a consequence 

What projects do Triodos finance?

Triodos customers’ money goes to a whole range of projects including charities, community schemes, care homes, social housing providers, organic farmers, homelessness programmes and renewable energy.

In March 2020, it provided money to support the development of electric vehicle charging points across the UK with some 400 supermarkets benefiting.

In September last year, a £490,000 loan from Triodos helped the transport start-up Ember to purchase two all-electric coaches for its first route between Dundee and Edinburgh thereby establishing the UK’s first 100 per cent electric intercity coach service.

Watts adds: ‘This pioneering approach to how we use our customers money is what really sets us apart, and it’s very different from just saying we don’t do arms, we don’t do fossil fuels, we don’t do child labour.’

Are other UK banks doing the same?

Triodos finds itself among a host of other banks that all purport to be ethically focused.

These banks will typically define themselves by refusing to lend to and/or invest in unethical industries such as those associated with oil, weapons or tobacco.

Starling is one such challenger bank that highlights its ethical credentials.

It claims that it does not provide banking services to organisations that encourage behaviour that is harmful to society.

This includes arms manufacturers and tobacco companies and it states it does not invest in such organisations or take investment from them.

Triodos’ contactless Debit Mastercard is made from renewable resources like plant leaves and corn. It’s biodegradable and recyclable, making it one of the UK's most eco-friendly cards.

Triodos’ contactless Debit Mastercard is made from renewable resources like plant leaves and corn. It’s biodegradable and recyclable, making it one of the UK’s most eco-friendly cards.

The Co-Operative Bank is also known for its ethical stance. It claims to be beyond carbon neutral and to send no waste to landfill.

It campaigns alongside Amnesty International UK to fight injustice, it works with Refuge to challenge economic abuse and it give homeless young people a voice with Centrepoint.

Its efforts have now been recognised by independent experts Sustainalytics, who have given it the best ESG rating of any UK high street bank.

Watts views these other ethically minded banks to be more about meeting minimum standards than setting the agenda.

‘We’re not so much about minimum standards, we’re more about positive criteria.

‘When we lend to a restaurant, we want that restaurant to be organic using locally produced food and to be a member of the Sustainable Restaurant Association.

‘We don’t just finance affordable housing, we want that affordable housing to have very high-end environmental performance so some of the most vulnerable people in our society are not paying the most for their fuel and energy bills.

‘Every aspect of sustainability is thought through very carefully, including every choice we make in terms of the business and its suppliers.’

Watts believes that sustainable banking also comes down to a bank’s financial performance.

‘We think sustainable banking means we’re also profitable and many of the other Challenger banks have never ever made a profit.

‘We make a profit every year of between 3 and 5 per cent return on equity whilst growing annually at 10 to 20 per cent.’

Watts also warns people to guard against being tricked into thinking they’re banking sustainably when the truth is likely to be very different.

‘It’s important to avoid “greenwashing” from banks – where they use green buzzwords to attract new customers,’ says Watts.

‘Rather than planting a tree, running a fundraising initiative, or offering some carbon credits for every account opened, ask your bank what they do with your money and whether they publish details of who they lend to.’

What is Triodos’ current account offering?

Much of Triodos’ UK growth has come through its current account offering, which it launched in 2017.

Triodos has stood out over recent years for its customer retention, which can be observed from the official current account switching figures.

Whereas many of the more established names have lost far more customers than they have gained using the seven-day switching service, Triodos has consistently enjoyed one of the highest ratios of net customer gains.

NatWest and Santander were the big losers during the first three months of the year, suffering net customer losses of over 10,000 each. 

The Bristol based bank helped to fund the first all-electric inter-city coach service in the UK between Aberdeen and Dundee.

The Bristol based bank helped to fund the first all-electric inter-city coach service in the UK between Aberdeen and Dundee.

Triodos, however, enjoyed a net gain of 1,133 having only lost 77 customers over the course of three months – lower than any other competitor – suggesting that customers are not only joining the bank, but staying.

Whilst big names such as Nationwide and HSBC have responded to customer losses by offering cash bribes and freebies in a bid to draw switchers back, Triodos’ loyal customer base appear to be unmoved.

This is perhaps all the more surprising when you consider that Triodos’ current account customers pay a £3 monthly fee.

The bank justifies this by arguing that most banks fund free accounts with hidden fees and high overdraft charges – often with financially vulnerable customers footing the bill.

In a subtle dig at other banks, it states on its website: ‘Our monthly fee goes towards the cost of running your account and is shared equally by all current account customers, with no hidden fees.’

While many banks charge overdraft rates of 39.99 per cent, Triodos’s overdraft rates are held at 18 per cent.

To put that in context, a Triodos customer who is overdrawn by £500 for 30 days will be charged £6.83 whilst those who face rates of 39.99 per cent will be charged £13.99.

Only Starling Bank offers a lower overdraft rate of 15 per cent, although those with poorer credit histories may be charged 25 per cent or even 35 per cent.

Monzo, another challenger bank hailed for its ethical credentials, also offers overdrafts rates of either 19 per cent, 29 per cent or 39 per cent depending on a person’s credit score. 

How do its savings deals stack up? 

Triodos’ everyday easy access account for savers wishing to retain access to the money they stash away pays 0.15 per cent – below the average easy access account paying 0.18 per cent, according to Moneyfacts.

A deposit of £10,000 will therefore only earn you £15 over the course of a year.

While this meagre return will beat many of the most established banks and building societies – typically paying between 0.01-0.06 per cent – it falls a long way short of the market leaders.

Tandem Bank, which claims its lending is aimed at helping UK homes become more sustainable and environmentally friendly, pays 0.65 per cent – over four times more than what Triodos is paying.

Triodos Bank’s fixed rate offering is perhaps even less enticing for those hoping to see their savings grow.

It offers a one year fixed rate deal paying just 0.4 per cent, which is below the average one year fixed rate deal paying 0.66 per cent.

This means a £10,000 deposit will earn you just £40 over the course of the year.

All deposits with Triodos Bank UK are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme.

All deposits with Triodos Bank UK are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme.

Given inflation is currently at 2 per cent, you are likely to see the buying power of your money in real terms deteriorate.

The best one year deal currently available is offered by SmartSave Bank and pays 1.41 per cent interest – a whole three and half times more than Triodos’ deal.

For those looking to save for a child’s future, Triodos’ junior cash Isa deal is a little more competitive.

Its 1.5 per cent rate makes our best buy tables, albeit it is a still a long way short of the market leading 2.5 per cent deal currently offered by Bath Building Society.

Verdict? 

When choosing a current account, a bank’s ethical and sustainable credentials are not necessarily at the forefront of peoples’ minds.

Customer service, overdraft limits, cash bribes, interest rates, account fees, cashback, saving perks and other niche benefits such as cinema tickets are all factors that count for something.

As for savings deals, the majority will likely decide who they save with based on who pays the best rate rather than placing too much concern on a provider’s ethical and sustainable credentials.

But Triodos would argue that anyone who really cares about the future of the planet should bank with them.

Watts says: ‘If you’re already making sustainable energy, transport and lifestyle choices, then you might want to do the same with your everyday banking – it might not feel so tangible, but it’s actually one of the easiest and most impactful switches to make.’

‘Maybe your bank is fine for you, but if you are in the market for a new current account, remember the value of a cash incentive or added perk may well mask that it is being paid for by that bank financing deforestation, fossil fuels, arms or tobacco – all of which undermine a fair and sustainable future for us all. 

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