market is growing, catalysed by the likes of HSBC and Bank of
America shifting consumer business models along more socially
responsible lines. One of the earliest pioneers of the market, the
UK’s Co-operative Bank, argues more banks will turn green.
Dan Jones reports.
The Co-operative Bank, which in 1992 became the first bank in the
world to conduct its business in accordance within an explicitly
‘ethical’ framework, has suggested in a speech at RBI’s
Retail Banking Forum in London that banks must redouble their
commitment to ethical finance if they are to win the trust of
customers.
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Commenting that financial institutions are increasingly “using
sustainability as a point of difference”, the bank’s ethics
adviser, Ryan Brightwell, said that the next step must be for banks
to adopt an integrated ethical policy that remains consistent
across all areas of the business.
“If you launch green products without making an effort to address
your core impact on the environment, that will be seen by consumers
as opportunistic. The core challenge for banks is to address their
most material impacts on society. That doesn’t just involve their
use of resources – use of energy and creation of waste – it’s the
idea of addressing the impact of their investments,” he
stressed.
This should take the form of a tripartite strategy, Brightwell
said, meaning that ethical products and services and carbon
offsetting schemes should be coupled with a lending and investment
strategy that seeks to encourage other firms to behave in a more
environmentally friendly manner.
The Co-operative Group’s latest annual report revealed that,
principled credentials notwithstanding, it too had been unable to
escape the problems that have plagued financial institutions this
year; a £31.8 million ($64 million) write-down leading to pre-tax
profit falling by 34 percent to £50.4 million for 2007. But the
group emphasised that banking profit before write-downs rose by
£5.9 million to £82.2 million, with retail banking profitability
rising by £12.9 million to £47.1 million.
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By GlobalDataHowever, Brightwell underscored the bank’s belief that its strategy
will continue to bear fruit. “The current credit crunch is going to
be at the top of a lot of peoples’ minds – but that is a short-term
crisis. I don’t think it’s going to significantly affect consumer
demand for ethical financial services, so I don’t see why it should
affect their provision either.”
The rise of sustainable banking has led to a number of innovative
product launches in the UK in recent years – Barclaycard’s Breathe
card, HSBC’s Green Sale initiative and American Express’ Red card
being among the most high-profile. In the US, Bank of America has
announced that it is to significantly extend its ethical banking
product range in 2008.
But neither is the Co-operative standing still, having just
announced changes to two of its flagship products as well as
launching a significant rebranding campaign that will bring the
Co-op’s subsidiary operations under a single brand.
The bank is re-launching its platinum credit card with a five-year
fixed rate of 9.9 percent APR, while its ‘Think’ credit card,
launched in November 2007, now has a 12.9 percent rate. Both cards
link payments to a range of ethical donations and reward
schemes.
Strong ethical elements
The Think card offers a lower interest repayment rate when a
customer spends money with selected ethical partners and protects
half an acre of rainforest per account. And the bank’s Green
Mortgage offsets 20 percent of carbon dioxide emissions for each of
its customers’ homes every year, and customers benefit from a free
energy efficiency survey.
At the conference, Brightwell noted the importance of trust in
ethical banking, advising that “just 9 percent of consumers
actually trust business when it comes to global warming”. The
Co-op’s ethical policy has resulted in the bank turning down some
£109 million of loans to companies involved in extracting and
producing fossil fuels since 1992, something Brightwell sees as a
USP that highlights the consistency of the bank’s approach.
“Around one-third of the bank’s customers cite ethics as a core
reason for joining or staying with the bank, and that doesn’t take
into account a number of factors such as ethically motivated
customers are more likely to remain loyal, to hold multiple
products and services, and they’re more likely to recommend us to
people they know,” he advised.
In the UK, the bank has become the latest lender to temporarily
withdraw its range of two-year mortgages in response to excessive
demand levels from consumers faced with an increasingly limited
range of attractive home loan deals. But it is the long-term
trends, not least in the investment sector, on which the bank
places most importance. Brightwell added: “Ethical finance in the
UK was worth £13.3 billion in 2006 and has seen the largest ever
single-year increase in monies invested in ethical finance. Net
inflows into forms of ethical investment have increased by 600
percent in the year to September 2007.”
The Sustainable Leaders Trust, launched by Co-operative Financial
Services in 1990, topped the UK All Companies sector for the year
to 31 January 2007. The sentiment is supported by an independent
study from consultancy Jewson Associates, which revealed in March
that UK ethical funds had matched their traditional counterparts in
the ten years to 2007.
From a retail perspective, the message is equally clear, according
to Brightwell. “Green products and action on climate change are
what consumers want. Over half of consumers would rather do
business with companies which work to lower their contribution to
global warming.
“The people at the bottom are going to be persuaded by pressure
from consumers and others to raise their game, and the people at
the top are going to reap benefits, and I think that will influence
the entire industry and raise standards.”
