This interview with Bevis Watts, the UK managing director of Triodos Bank (a Good Egg company), first appeared in The Colour of Money.
On the 10th anniversary of the collapse of Lehman Brothers, which triggered the global financial crisis, what is the single biggest issue with the current banking system, in your opinion?
“A lack of trust. A deep sense of distrust remains at the heart of the relationship the general public and small businesses have with banks.
While there have been some welcome changes to better regulate banks, we have still not fundamentally addressed the role they should be playing, in terms of the social value they create and serving the long-term interest of their customers.
Some of the deep-rooted issues that lay at the heart of the financial crisis, such as the excessive bonus culture – and the behaviours and poor practice it drives – still continue today.
We need to open a debate about whether banks are really serving and acting in the long-term interests of society. We also have to ask what would help rebuild that trust – banks being more transparent about what they are doing with the money they hold would be a huge step in the right direction.
It should be a requirement for all banks to publish where the money they control is being lent and invested. Complete transparency is the only way to reclaim trust.
Bevis Watts
Do you think enough has changed since 2008 in the banking industry?
I don’t think it has, no. In fact, I think the pace of change has been far too slow, is not far reaching enough, and a lot more needs to be done.
And I’m not alone in that view. According to our latest consumer survey, two thirds (60%) of British people don’t think enough has changed since 2008, with the same proportion concerned about what the next 10 years holds for the banking sector and its impact on the economy. Only a quarter of people trust banks more now than they did in 2008.
If you were in charge of reforming the banking sector, what’s the first thing you would do?
Demand greater transparency from all banks about what they are doing with the money they hold.
It should be a requirement for all banks to publish where the money they control is being lent and invested. Complete transparency is the only way to reclaim trust.
At Triodos we publish details of every single loan we make online and there is absolutely no reason why all banks could not do the same.
Money doesn’t have to be invested in the arms trade, fossil fuels and other activities that don’t have a positive impact – it can be used to help build the society we want to live in.
But is it really up to banks to combat social and environmental problems?
Yes. I believe that changing our existing banking system remains our best chance of tackling the most pressing issues facing people, the planet and society today.
With the right political will, banks are uniquely placed to lead the transition to a truly sustainable economy. International bodies such as the EU, G20 and UN are giving serious thought to how we reshape the financial system to align it to the long-term interests of citizens, but even more focus is needed by all those who have a stake.
Let’s not forget that it was an environmental disaster that first exposed the deep cracks in the banking sector. In 2005, Hurricane Katrina tore through the Gulf Coast to devastating effect. With damage to property exceeding $100bn, Katrina revealed the flaws of the sub-prime mortgage market that subsequently led to the failure of some banks and the near failure of many others. The droughts and devastation caused this summer by record-breaking heatwaves are a stark reminder of the effect that climate change could have on our global economy. In addition, we are facing growing issues in housing and social care, leading to record homelessness and widening wealth inequality in the UK and elsewhere.
Banks could play a hugely proactive role in supporting the transition to a greener, more equitable and sustainable economy. Achieving globally agreed climate ambitions, aligned to the UN Sustainable Development Goals, would clearly be in everyone’s long-term interests.
As the managing director of a sustainable bank, what advice would you give to other leaders in the banking sector?
I would invite leaders in the banking sector to reframe sustainability as a core value-creation opportunity.
There is a risk of sustainability being bolted on to existing business models, which are too narrowly focused on maximising financial outcomes, rather than being built in to new business models that take a holistic view.
Last year, Triodos joined forces with the Global Alliance for Banking on Values (GABV), Mission 2020 and Finance Watch to publish a white paper titled ‘New Pathways: Building blocks for a sustainable finance future for Europe’. It made several recommendations including that banks report their impacts aligned to the UN Sustainable Development Goals. It called for greater diversity in the system and for adapting existing regulatory instruments to account for environmental and societal risks. It also advocated support to banks through training and centres of expertise to help them change.
I believe we need to see such radical reinvention of the role of all banks in our society, including the publication of all of their loans and investments, which would create a truly free market from which the customer could choose.
Triodos exists to be a powerful force for good, serving individuals and communities while building a more sustainable society. We do this by only financing organisations that deliver positive impact.
Our financial results are proof that the business model works. While many of the banks bailed out by public money in 2008 have still not returned to profit – and many fintechs and challenger banks are yet to demonstrate a sustainable business model – our balance sheet has consistently increased in the last 10 years and we have provided a consistent return to shareholders.
You are now more than two years into the role of managing director, what’s been Triodos UK’s greatest achievement so far?
It’s difficult to choose but the launch of our personal current account and the issues we brought to the public attention around ‘no such thing as free banking’ was a particular highlight.
The current account was a long time in development and was the work of a big team across the bank. Its launch was a very proud moment for all of us, not least because we had more than 5,000 registrations on the first day alone, which was incredible, and proof that there was a place for an ethical current account.
For many years now, consumers have had the opportunity to align their values with the food they buy, the transport they take and the energy they consume. Now they have that choice with their daily finances as well.
If you could leave us with one action that each of us can take, today, to make a positive change, what would it be?
There was a very humbling moment during our Annual Meeting earlier this year, when I had presented to the collected audience of some 600 customers and supporters and we had opened up the floor to questions.
One young man stood up towards the end and congratulated us on our efforts, but also commented that many questions asked required us as a bank to take action. Instead, he asked: ‘What can we, Triodos customers, do to help you?’.
There was a palpable sense of everyone coming together as a community and working towards a common vision, which was tremendously rewarding. And I really do think of our network of customers and partners as a community, working together to effect positive change.
