Can banks finance ventures that solve society’s problems?

Is it possible for banks to finance organisations, ventures and businesses that solve society's problems? In short yes.

Triodos Bank has funded wind energy farms, alternative schools, organic farming, microfinance, community living projects and arts initiatives. Ecology Building Society has joined crowd funding platform Abundance to provide finance for the installation of solar panels on the roofs of a social housing. These kind of projects are not funded by conventional banks but they contribute uniquely to our society.

Value based banks such as Triodos and Ecology have customers who expect all funded projects to live up to high standards of social benefit.

Some banks combine profit with social mission, measuring success by financial, social and environmental performance. But value based banks go further, deciding to finance societal solutions.

Value based banking is done through the business model, a deliberate business strategy, not through corporate social responsibility, sustainability programmes, public relations or philanthropy.

The Global Alliance for Banking on Values (GABV) is made up of the world’s leading sustainable banks with a shared commitment to finding global solutions to international problems. Value based banks are different because they focus on investing in local services, facilities and businesses that contribute to the health and economic welling of communities.

They are also committed to increasing the financial well-being and economic self-reliance of disadvantaged populations.

These banks are enablers, connectors and advisors beyond pure financial relationships. These arrangements enable relationships to develop so that banks become partners, not just vehicles for financial transactions.

One of the biggest problems with our economy today is that most of the money circulates in the speculative part of the system which is toxic and corrupt — the financial economy. The financial economy is concerned with financial markets. It does not exit to serve the real economy, (i.e. economic activity that generates goods and services). Value based banking commits assets to the real economy not to the financial economy. The problems with banking are deeply entrenched within the financial system. Fundamental change is needed.

Many banks have Corporate Social Responsibility departments, ethical policies, codes of conduct and even grant making foundations. Yet, they still engage in irresponsible behaviour. To change, so they can genuinely support what is most important to us all — our wellbeing and the planet while ensuring a sustainable economy — they need mindsets and values that challenge all they stand for. That includes their purpose, power structures, rules and culture. There is very little evidence that conventional banks are changing.

It is possible to serve society and solve our problems through finance as some banks show, but there is very little will to change for most banks.

It is time to change the system and demonstrate a model for sustainable banking that uses the intermediary power of finance to benefit people and the planet.” Bevis Watts, Managing Director, Triodos Bank UK

There are some even questioning whether we need banks in the digital age. But that’s for another post.

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