Expenses

Depreciation & impairment charge has decreased, due to an one-off item in 2020. The impairment in 2020 related to the sale of the office buildings located at the Nieuweroordweg 1 and Utrechtseweg 60 in Zeist, where Triodos Head Office was located.

Total taxation expense

Current tax receivable and payable

Amounts recognised in OCI

The other comprehensive income for Triodos Bank consists of revaluations of equity instruments at fair value through OCI and foreign currency translation differences. Investment securities are the related balance sheet account for the revaluations, for which any realised result will not subsequently be taken into the profit or loss. The foreign currency translation difference relates to the UK subsidiary for the part not subject to the net investment hedge. Tax on both of these items can be subject to the participation exemption under Dutch Tax Law.

Reconciliation of effective tax rate

Triodos Bank’s approach to tax reflects its values. It sees paying taxes not as a burden, but as a contribution to the societies that the bank operates in. As such, Triodos Bank is not striving to reduce the effective tax rate. Triodos Bank is subject to income taxes in other jurisdictions which levy corporate income tax at different rates compared to the Dutch statutory rate (25%). Additionally, local taxation rules can also lead to differences in the effective tax rate. The effective tax rate amounted to 24.4% in 2021 (2020: 23.3%).

Movement in deferred tax balances

Deferred tax balances

The deferred tax asset relates for an amount of EUR 6.4 million (2020: EUR 6.8 million) to tax losses incurred by the German branch for which it is expected that these will be fully recovered against future taxable profits. Under the German corporate income tax code, tax losses have no expiration date. The remaining deferred tax asset relates to temporary differences because of differences between accounting rules and tax rules.

The deferred tax liability relates for an amount of EUR 1.0 million (2020: 1.4 million) to a taxable temporary difference following the tax losses incurred by the German branch over the period 2009 – 2011 amounting to EUR 6.8 million which have been offset against taxable income in the Triodos Bank Dutch corporate income tax return over the same period. The Dutch corporate income tax act 1969 allowed income tax deduction on losses incurred by foreign branches of a Dutch resident taxpayer in so far that these tax losses could not be recovered in the country of residence till 2011. This Dutch income tax deduction is subsequently reversed when the branch recovers profitability and the incurred tax losses are offset in the local income tax return, resulting in a taxable temporary difference. Under the German corporate income tax code tax losses have no expiration date.

Fiscal unity

Triodos Bank, as a parent company, forms a tax unity for corporate income tax purposes with Triodos Investment Management as subsidiary. The method chosen for the taxation set-off between Triodos Bank and its subsidiary is that of proceeding as if the legal entities were independently liable to pay tax. In fact, the legal entities are jointly and severally liable for the tax liabilities of the companies belonging to the fiscal unity.

Triodos Bank enters into various transactions with related parties, as part of the normal course of business,

Related parties of Triodos Bank include, among others, its subsidiaries, associates and key management personnel. Transactions between related parties include rendering or receiving of services, deposits, transfers under finance arrangements and provisions of guarantees or collateral. All transactions with related parties took place at arm's length.

There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties.

Overview of related parties transactions

Transactions with related parties

The commission income and commission expenses are related to fund management activities. The deposits and interest income are transactions following from regular banking activities, which are offered to the related parties at competitive rates. These transactions are interest fee and unsecured and are to be settled in cash.

Loans

The loan granted to associates is a subordinated loan provided to Merkur Bank. The maturity date of this loan is 30th of April 2026, to be settled in cash. The interest rate charged is 5%.

The loans granted to other related parties are provided to Hivos-Triodos Fund Foundation, Triodos SICAV II (TMF), Legal Owner Triodos Funds B.V., Sun Roof Limited and to several related parties from the Spanish branch.

The EUR 10 million loan provided to Hivos-Triodos Fund Foundation matures on January 1, 2027 and has an interest rate of 3.15%. Furthermore, Hivos-Triodos Fund Foundation has drawn EUR 3.5 million from an overdraft facility with an agreed limit of EUR 10 million and an interest rate of 2.75%. The loan provided to Triodos SICAV II (TMF) is EUR 4.4 million, matures on September 13, 2022 and has an interest rate of 1.010%. The EUR 2.2 million loan provided to Legal Owner Triodos Funds B.V. has a maturity date of March 31, 2022 and has an interest rate of 1.674%.

Furthermore, the EUR 231 loan provided to Sun Roof Limited matures on November 10, 2027 and has an interest rate of 6.5%. A total of EUR 16.8 million has been provided as loans to several related parties from the Spanish branch, including a EUR 5.8 million loan to CARPIO FOTOVOLTAICA, S.L.U. (maturity date of January 1, 2033 and an interest rate of 2.85%), a EUR 9.3 million loan to LUCENTUN ENERGIA S.L. (maturity date of January 1, 2034 and an interest rate of 3.85%), a EUR 862 loan to GSI NEROSOL, S.L. (maturity date of January 1, 2025 and an interest rate of 0.765%) and a total of EUR 859 loans (maturity date of January 1, 2025 and an interest rate of 0.751%) to other several related parties.

Loan commitments and facilities off balance

The loan commitments and facilities are off balance sheet credit facilities of Triodos Bank the Netherlands branch that can be drawn upon by the other related parties.

These facilities are secured by means of collateral in the form of fund assets that cover the facility provided in full.

Key management personnel compensation

Transactions with key management personnel are transactions with related parties. The members of the Executive Board, supervisory board and the board of Stichting Administratiekantoor Aandelen Triodos Bank ("SAAT") are considered to be key management personnel and their compensation is therefore included in the tables below.

The remuneration paid to the members of the Executive Board is as follows:

Other emoluments of the Executive Board:

The other emoluments relate to costs associated with relocation to the Netherlands.

Remuneration paid to the Supervisory Board:

Remuneration paid to the Board of SAAT

Loans and advances to key management personnel

The table presents the loans and advances provided to Executive Board members that were outstanding on 31 December 2021 and 2020. Since Jellie Banga was no longer an Executive Board member on 31 December 2021, there is no information included for 2021. No other loans, advances or guarantees have been granted to members of the Executive Board, Supervisory Board members or members of Board of SAAT. For reasons of principle, no share option scheme is offered to members of the Executive Board, Supervisory Board members or members of Board of SAAT.

Fitch Ratings (Fitch) announced on 4 February 2022 it has affirmed the Long-Term Issuer Default rating of Triodos Bank at ‘BBB’ with a stable outlook and has affirmed the Viability Rating of Triodos Bank at ‘bbb’. Fitch’s rating analysis was done at the request of Triodos Bank. The Stable Outlook reflects Fitch’s view that Triodos Bank’s ratings have sufficient headroom at their current level to absorb significant shocks under various scenarios to Fitch’s baseline economic forecast.

The current CRO, Carla van der Weerdt, is expected to require a recovery period of up to 12 months from the health impact of long COVID-19. Triodos Bank will seek a temporary statutory replacement for this role in the Executive Board. Pending the search and approval process for a temporary statutory replacement, André Haag (Chief Finance Officer) currently assumes the statutory oversight responsibility for the Risk function of Triodos Bank, similar to the period June to October 2021. Due to her absence she was not able to sign these financial statements.

The invasion of Ukraine by Russia at the end of February 2022 presents new uncertainty. As the war started in 2022, it has no effect on the financial position presented as per 31 December 2021. The impact on the short term and the longer term on society and financial markets is hard to predict at this moment of publication of our annual report. Triodos Bank does not have direct exposure in Russia, but we anticipate that the effects on society and financial markets will amongst others influence management fees and Expected Credit Losses.