Our impact approach

We strive to constantly remind ourselves and our partners of what money really is for and what it can do. From that very first wind turbine we financed in 1986 to experimenting with the role that catalytic money and gift money 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.

We believe money should serve people, and not the other way round. We have a simple business model: we only lend the money entrusted to us by savers and investors to entrepreneurs we know well. We focus our work on 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. We aim to deliver as much positive impact as possible by only lending to and investing in enterprises with strong sustainability criteria.

Business Principles

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.

Minimum Standards

Sustainable finance requires choices. As a sustainable financial institution, we make very deliberate choices on a daily basis about what Triodos Bank finances and invests in. Defining what really contributes to a sustainable future requires clear boundaries on what we do and do not finance.

We have therefore established strict lending and investment criteria and minimum standards to safeguard our mission. For instance, we do not finance the fossil and nuclear power sectors; we also exclude weapons, tobacco, industrial farming, deforestation and other harmful sectors and activities.

Transparency and accountability

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 https://www.triodos.com/en/know-where-your-money-goes.

We are committed to showing not only how and where the money is used, but what its impact is. Impact reporting for a financial institution doesn’t only mean reporting on the organisation’s own activities, for example on how we use renewable energy to power our buildings. It means reporting in depth on the impact of our financing activities in the widest sense – from the greenhouse gas emissions of our loans and investments to qualitative and quantitative evidence of the impact of our financed activities by transition theme (see Impact by transition theme on page Impact by transition theme).

We have been managing impact consciously since long before much of today’s terminology existed. Our structured approach to impact management is to focus on positive impact first and minimising negative impact second, directing money in a way that benefits people and the environment over the long term.

Triodos Bank impact management cycle

Our approach is centred on our mission of making money work for positive social, environmental and cultural change and is based on the impact management cycle. This starts with establishing a clear vision of the impact we want to make as a financial institution. We then develop a strategy on how to implement this vision from a business perspective; design our activities and products in line with the strategy; monitor results and analyse challenges and successes; translate these into learnings; and adapt our strategy and activities based on these findings.

We strive to be accountable towards all stakeholders, through transparent communication and by reporting and engaging with clients and partners to gather information and check on our collective performance. Importantly, the approach holds both for our business propositions and product development, as well as for our advocacy activities to change finance (see Change finance report on page Change finance report).

Our approach to impact stems from understanding that metrics and targets do not tell the whole story. In practice, that means that 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. We use data to anchor 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 on page Our stakeholders and material topics. While meaningful indicators are included in, for example, Impact by transition theme on page Impact by transition theme, we limit the use of ‘hard metrics’ in our impact measurement.

In 2021, we started an impact strategy and management project to embed impact management more explicitly in our governance across all Triodos Bank’s entities and business units. In our previous Annual Report we indicated a set of aspirations for our work in 2022. We follow up here on our stated ambitions, reporting on progress and initiatives of 2022.

Impact vision, strategy and coordination

In recent years, we identified a strong need to increase internal synergies and coordination on impact themes to further leverage our collective strength. In 2022, we initiated a process to develop a concrete, Group-wide impact strategy to ensure alignment and coordination across subsidiaries and business units. The impact strategy is an integral part of our corporate strategy.

In line with the impact management cycle, we first developed a Group-wide impact vision, a shared and coherent approach for the entire organisation and common language around impact. We defined five transition themes that represent our impact focus areas: sustainable food systems (Food transition); circular economy (Resources transition); fossil fuel-free economy (Energy transition); thriving communities (Societal transition); and prosperous and healthy people (Well-being transition).

Triodos Bank's redefined transition themes are common to all Triodos entities.

These five themes are deeply interlinked. Fundamentally, they are all about social change. Where they connect with environmental change, there is even greater urgency. The reference to transitions affirms our intention to add a forward-looking lens to our financing activities, actively seeking to accelerate these transitions towards an all-round sustainable society and economy.

Sustainable food systems – Food transition

The preservation of ecosystems and the future well-being of the human population are all dependent on a structural transformation of the food system. This transition theme focuses on the goals surrounding this challenge - on ensuring a transition towards a sustainable, resilient and equitable food system, producing healthy, safe, and nutritious food for all.

Circular economy – Resource transition

Efforts need to be made to establish circular management of all resources and materials, fundamentally halting the environmental degradation caused by our production and consumption systems and pushing for change in the way and the extent to which we extract, produce, use, and dispose of goods and raw materials. Transforming our current model of linear resource use through circular products and circularity-enabling processes, technologies, business models and business practices is at the core of this transition theme.

Fossil fuel-free economy – Energy transition

Mitigating and adapting to climate change are key challenges of the 21st century, putting focus on our overall energy consumption and our dependence on fossil fuels. The world needs nothing short of a complete transformation of the energy system that is the foundation of our economies for future sustainable development. This transition theme focuses on fostering clean energy sources that reach all corners of society and the economy, and on the mechanisms to ensure a just transition.

Thriving communities – Societal transition

A sustainable economy is an economy that works for all, leaving no one behind or at the margins of society, and that values collaboration and fosters cohesion among groups and individuals. This is only possible by pursuing a true spirit of solidarity and collaboration. In this theme we focus on activities and services that contribute to this journey towards increasing cohesion and social empowerment.

Prosperous and healthy people – Well-being transition

The quest for well-being is central to the human experience, and our society can only thrive when its members are physically and mentally healthy. A shift needs to be made to ensure that we deeply value and nurture individual well-being, for all. This transition theme focuses on activities that foster individuals’ physical and mental health, as well as self-development, self-expression, and healthy relations with others.

In 2023, we will work to define in more detail our ambitions and concrete business strategy to tackle these challenges.

Impact governance

Governance on impact-related matters has been evolving in the past years, with the creation of the Triodos Group Impact Committee in 2020 and of the Impact Management and Measurement domain at Triodos Investment Management in 2021. In Spring 2022, this experience was extended to Triodos Group, by setting up a Group-wide Impact Hub and replacing the Triodos Group Impact Committee with the Group Impact Board, which oversees the work of the Impact Hub and informs and advises the Executive Board on strategic impact-related topics. These strategic issues are among others the minimum standards, impact strategy, vision and targets. The primary goal of the Impact Board is to understand, align, monitor and equip the business to steer our impact activities and develop strategic ambitions from a Group-wide perspective in line with our mission and our corporate identity.

Engaging with clients and partners: impact monitoring, steering and reporting

For impact monitoring, steering and reporting, direct engagement with clients and partners is key.

Impact Prism: further development of a client engagement tool

To support our holistic approach to impact, the Triodos Impact Prism was developed in 2018 and 2019 to understand, monitor and equip businesses to steer on impact in service of their goals. Thirty-five questions identify the broader impact and purpose of each loan of our banking activities, 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.

During 2022, Triodos Bank redefined its impact vision and brought more focus to its impact strategy and management. This required a re-evaluation and further development of the Triodos Impact Prism as a tool to support this impact strategy. Based on a range of interviews with clients and relationship managers alike, we identified ways to improve on this concept to serve our client engagement strategy. Clients confirmed the value of a tool like the Impact Prism to gain insight into their own impact profile and as a way to identify opportunities for improvement with our relationship managers. This exchange on a broad set of impact themes is valued as a unique element of the relationship between clients and relationship managers, as it leads to a different conversation than one might normally have with a bank. At the same time, it became clear that we needed to make adjustments in order to deliver optimal value to client and relationship manager alike.

Concretely, we have now integrated the Impact Prism into the client’s banking system, to make it accessible to clients at all times. Data is fed directly into Triodos’ production system for further analysis, leading to a report that is made available for clients and discussed with relationship managers. Along with other adjustments in usability and methodology, the Impact Prism is now a more client-friendly tool that is oriented first and foremost on inspiring to action.

The new Impact Prism portal has been made available to Dutch business banking clients in January 2023, with other branches following during 2023. Also, we aim to integrate other impact-related data-exchange in the portal to support our ability to steer on our main impact themes. In the Netherlands, we aim to inspire our clients to ‘1000 actions’ registered in the Impact Prism during 2023 that can be followed up by the relationship manager, which may vary from very small and operational (e.g. deciding to only serve organic food in the company cafeteria) to large and strategic (e.g. making sustainability a more explicit part in the client's strategy). This is how our client engagement leads to actual change in very real ways.

Other developments

On the investment side, in 2022 all funds at Triodos IM completed a process to design or update their impact management and measurement frameworks. Each fund follows the logic of the Triodos Bank impact management cycle as presented on page 2022 highlights: follow-up on initiatives and aspirations. This includes the development of a theory of change and sustainable objectives per fund, the logic that links vision and strategy to implementation and monitoring of impact. These are monitored and improved upon in a continuous cycle at various levels and frequencies in the organisation. The theory of change and relevant outcomes are presented in the Fund Impact Reports during the spring of 2023.

Specifically on climate impact, since 2015 we have been working to measure and report our own (direct and indirect) and financed (indirect) emissions, and in 2018 reported on them for the first time. Our financed emissions are measured through the PCAF methodology and reported in Climate impact of our loans and investments, page Climate impact of our loans and investments.

Overall, we monitor and report our own performance as a values-based bank by compiling the Global Alliance for Banking on Values (GABV) scorecard, which provides insights into our overall financial viability and, importantly, on our overall focus on triple bottom line (people, planet and prosperity) and on the real economy (see Appendix IV – Global Alliance for Banking on Values scorecard – quantitative evidence of our impact, page Appendix IV – Global Alliance for Banking on Values scorecard – quantitative evidence of our impact).

AsOneToZero

In April 2021, Triodos Bank was one of the first banks to join the Net-Zero Banking Alliance (NZBA) and in November 2021 we set a target to become a net-zero financial institution by 2035, covering 100% of our loan and investment portfolios. In 2022, we have been developing an action plan to progress our net-zero ambition. We have set an intermediate target to reduce net emissions by 32% to 232 ktonne CO₂e in 2030 across our entire loans and funds’ investments portfolios. The graph below illustrates our intemediate target and forecasted emissions. In the context of portfolio growth, Triodos Bank expects net absolute emissions to be relatively stable until 2025 and to start declining from then onwards as a result of our sequestration investments and our reduction efforts diminishing the carbon intensity of portfolios.

Triodos Bank already excludes fossil fuels from financing activities, and refrains from financing and investing in highly polluting sectors and activities. Our AsOneToZero commitment focuses on investing in nature-based solutions and reducing the emission intensity of our financed activities. For more on this, see Climate impact of our loans and investments on page Climate impact of our loans and investments.