As a values-based bank, Triodos Bank integrates impact, risk and return when making decisions. Creating positive impact has been the driving principle at Triodos Bank since its foundation 40 years ago. This section summarises our vision on impact and how we embed this in our organisation. Triodos Bank is an active member of several frontrunning initiatives on impact management. We highlight the most important ones for 2021 here. We also look at some key challenges in impact management for the coming years.
Finance can make a positive difference in people’s lives. It can contribute to progress on key issues that are relevant for society. Financing change has been a fundamental objective at Triodos Bank for forty years. At the same time, we have been changing finance – showing others that making choices for positive impact are possible and that a stakeholder-led business model is both viable and desirable. From that very first wind turbine we financed in 1985 to experimenting with the role catalytic money and gift money can play in reimagining finance models today, we find ways to fund initiatives that seem at first impossible and eventually find their way into the mainstream.
At Triodos Bank, we have been managing impact consciously since long before much of today’s terminology existed. Our approach to impact management is to maximise our positive impact first; and minimise negative impact second. We direct our money in a way so that it benefits people and the environment over the long term.
We are delighted to see that impact management is now receiving more mature consideration among our partners, and that managing and measuring impact of investments is a rapidly developing area of expertise. There is a growing awareness in society about its importance, and an increasing number of sector initiatives are focusing on data quality, reporting standardisation, and increasing transparency about methodology and data. This is further supported by new regulations for financial service providers. We continued to share our insights and challenges to contribute to this in 2021.
For Triodos Bank, impact reporting doesn’t just mean reporting on how the organisation behaves as a responsible corporate citizen, for example by using renewable energy to power our buildings. It specifically means reporting in depth on the impact of our activity in the widest sense – from the greenhouse gas emissions of our loans and investments to giving analysts a deeper understanding of the sustainability value of our work.
Our values and our mission are continuously reinforced within our culture by being fully integrated into our operations. Sustainability is intrinsic to everything we do in the organisation. Nonetheless, we keep improving the way we manage our impact.
We have a simple business model: we only lend the money entrusted to us by savers and investors to entrepreneurs we know well. We only work in the real economy and we don’t invest in complex financial instruments. All the loans and investments we make are designed to improve social and environmental sustainability and the quality of life for communities.
of assets in the real economy
We aim to deliver as much positive impact as possible by only lending to and investing in sustainable enterprises and enterprises transitioning to sustainable approaches. We have established strict business principles, lending criteria and minimum standards to safeguard our mission. These can be found on www.triodos.com/download-centre. In addition, we use screening criteria to avoid financing sectors we consider to be inherently unsustainable, such as the fossil-fuel industry.
We believe that sustainable finance depends on trust and transparency, so we publish details of all the organisations we lend to and invest in. Our savers and investors can see how we’re using their money. Explore this online at www.triodos.com/know-where-your-money-goes.
With these principles in place, Triodos Bank ensures a baseline for positive impact and minimises negative impact.
Our positive approach: business principles and minimum standards
How we at Triodos Bank direct, administer and control our work says a lot about our identity. We have developed processes and policies, and supported the implementation of laws, to both meet our obligations and reflect our mission. In addition to the broad vision and key values that underpin our business, we have principles that guide and support our day-to-day decision-making.
Triodos Bank has a continuing commitment to:
Promote sustainable development and consider the social, environmental and financial impact of everything we do.
Respect and obey the law in every country where we do business.
Respect human rights of individuals and within different societies and cultures; supporting the aims of the United Nation’s Universal Declaration of Human Rights.
Respect the environment and do all we can to create and encourage positive environmental impact.
Be accountable to all our stakeholders for our actions.
Continuous improvement. We are always looking for better ways of doing things in every area of our business.
Engagement is key. Our vision on impact stems from understanding that metrics and targets do not tell the whole story. In practice, that means we try and find qualitative evidence of the impact first and foremost, and back it up with numbers when it is relevant to do so. Where we do lean on data, we measure in order to manage and we use this to start the conversation with our stakeholders on how we lead the transition to an even more inclusive and sustainable world. For more information on our approach to stakeholder engagement, see Our stakeholders and material topics.
While meaningful indicators are included in, for example, Impact by sector , we limit the use of ‘hard metrics’ in our impact measurement.
To support this more holistic approach, the Triodos Impact Prism was developed in 2018 and 2019 to understand, monitor and equip the business to steer on impact in service of their goals. Thirty-five questions identify the broader impact and purpose of each loan or investment, ranging from questions on social justice to its exemplary role in sustainability. The main goal is to use the results to discuss opportunities during the relationship to increase the impact of the customers and projects we finance.
We have been integrating the Impact Prism into our daily business processes since 2019. Usage steadily increased during 2021. The tool was used for more new clients and the coverage of the total portfolio improved. By increasing our coverage this year, we also gained more understanding of how clients experience the use of Prism and how relationship managers can use it to foster high-quality relationships with clients.
We have learned that many clients emphasise the uniqueness of having this type of conversation with their bank. For these clients it truly distinguishes Triodos Bank from other banks. (Some) clients do not yet immediately see the added value of Prism; this requires further communication and development of the Prism. Specifically, we have learned that clients see more value in filling in the Prism for their company as a whole, rather than confining themselves to the specific project or part of the organisation being financed. In 2022, we aim to use these insights to develop the Prism further as a tool for stakeholder engagement.
Alongside our Impact Prism, we measure our own (direct and indirect) and financed (indirect) emissions. These results clearly indicate that financing a sustainable economy for many years has resulted in substantial avoided emissions relative to our generated and sequestered emissions. The emissions of our operations are reported in our Environmental report. Our financed emissions are measured through PCAF and reported in ‘Climate impact of our loans and investments’.
Although Triodos Bank believes that the emissions of our loans and funds' investment portfolio are relatively low compared to other financial institutions, the analysis identifies high-emissions sectors in our portfolio that need effective plans to support a sustainable and inclusive transition towards a climate-neutral portfolio. The science-based targets that we have set this year will help develop ambitious but necessary plans.
Impact measurement frameworks
We are careful not to just retrofit our reporting to meet the requirements of benchmarks or initiatives. We believe meaningful sustainable developments contribute to a fairer economy and come from principle-based decision-making and not from rule-based compliance and ‘box ticking’. However, where relevant external organisations provide frameworks or guidelines for impact measurement, Triodos Bank reports against them. We use a number of frameworks to inform our impact activity, both in delivering and reporting. They include the Global Reporting Initiative, International Integrated Reporting Council, the Partnership for Carbon Accounting Financials, the Global Alliance for Banking on Values and B Corps.
Embedding impact in our organisation
In 2020, we embedded impact management explicitly in our governance with the creation of the Triodos Group Impact Committee (TGIC). Since its establishment in September 2020, the TGIC focuses on: target setting (As One to Zero); streamlining our impact data capture; external commitments which are in line with our mission; embedding growing regulatory requirements, resulting from the EU Action Plan on Sustainable Growth (Sustainable Finance Action Plan, SFAP) and further developing our minimum standards.
In 2021, Triodos Investment Management (T-IM) set up a more extensive impact management structure enabling a flexible response to the quickly developing area of managing and measuring impact of investments. An Impact Management and Measurement domain was established in the spring of 2021. This domain functions as a multidisciplinary team, and acts as an interface between internal ambition, external requirements and implementation within the organisation when it comes to impact. During 2021, the domain mainly focused on its ambitions and internal organisation, on further development of impact frameworks of the funds and on the implementation of European legislation. In 2022, we will continue to build on this foundation, with an added focus on internal education and the implementation of our impact management ambitions.
In 2021, we started a Group-wide Impact Strategy and Management project to embed impact management explicitly in our governance. In 2022, we will further improve and develop it, aiming for:
a fine-tuned Group-wide impact strategy;
more coordination and cooperation between business units on impact management;
streamlined monitoring and reporting processes;
an even better capacity to implement new impact initiatives and regulatory requirements.