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opinion

New system reporting

Banking - the numbers that really matter

Banking - the numbers that really matter

To transform banking’s culture, we have to change how we measure its results.

Over the last few months we’ve heard a lot about how banks are performing, but little about how that really relates back to us. Ultimately, reporting on any bank’s result too often boils down to a single figure at the end of the year, be it massive profit or huge loss. Of course a bank’s financial performance is an important indicator, but this focus on profit as the key measure of success is the primary reason for banking’s short-term, profit-maximising culture. To create a world where banks strive to be socially useful, we’ve got to broaden the spotlight to a bank’s impact alongside its financial performance.

Beyond the financials

As a bank that sets out to make money work for positive change, Triodos Bank takes a broader approach to assessing its performance. Our financial results show a bank delivering solid, sustainable growth – our balance sheet grew by 11% in 2014 and customer numbers increased by 13% to more than half a million. But this only tells how we’re doing, not what we’re doing or why. To demonstrate how we’re delivering on our mission, meeting our promise to only finance organisations delivering positive social, environmental and cultural change, we have to put some very different measurements in place.

“It’s all too easy to hive off the virtuous elements of a bank’s portfolio, without considering the broader context of its overall activities.”

Alongside our profits, we report on our impact in areas including organic farming, social housing and education. Our customers can see, for instance, that they’ve helped to finance 379 renewable energy projects across Europe, contributing to a generating capacity of 2,100 megawatts of energy. The trouble with these figures is that they sound impressive, but on their own don’t necessarily mean a lot to many people. And because of some banks’ scale, many can produce an impressive number, even if it only represents a minuscule proportion of their overall activities. It’s also all too easy to hive off the virtuous elements of a bank’s portfolio into a discrete CSR or sustainability report, without considering them within the broader context of its overall activities. Often, for instance, the same banks that are investing in renewable energy are investing many times more in the fossil fuel industry.

Per capita reporting

We believe that to create a true picture of what a bank is doing with your money, you need to look at its impact on a per customer basis. As a Triodos Bank customer, it’s much more powerful to know that you have enabled us to finance two households’ worth of renewable energy, or enough for your home and your next door neighbour’s too. Likewise for a true view of what their money is supporting, bank customers should know what proportion of their money is financing each sector.

impact_tree_graph2

At the moment, Triodos Bank is exceptional in taking reporting to this level, but there are signs that this may change in the future. The Global Alliance for Banking on Values has developed a scorecard to provide a way of comparing the sustainability performance of different banks. The scorecard, which considers quantitative factors, such as the proportion of assets committed to the real economy, alongside qualitative elements including a bank’s strategic commitment to sustainable banking, was beta tested in 2013 and moved to version 1.0 for 2014 reporting. It’s early days but in time could provide a framework through which banks’ impact can be evaluated using independently determined metrics. Reporting on a bank’s impact alongside financial performance would likely bring a new perspective to bankers’ decisions to include the social, cultural and environmental outcomes of the finance they provide.

It could mean that bank reporting season, and the culture driving those results, looks very different in years to come, with success measured not just in profits, but in terms of what that really means for people and the planet.

www.triodos.co.uk/annualreport

words: Will Ferguson

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