Sustainable banks offer successful model worldwide
Berlin (NNA) – Ethical and sustainable banking produces higher growth rates than conventional banks and is an important pillar of the real economy. That is the outcome of a study present by the Global Alliance for Banking on Values (GABV) in Berlin at the end of November which compared 22 sustainable banks with 28 conventional banks over a period of ten years from 2002 to 2011.
The study also proves false the preconception that ethical and sustainable banks must necessarily generate lower profits. The figures show that the sustainable banks have “dynamic growth, relevance for the real economy and profits which can effortlessly keep up with the so-called global systemically important financial institutions,” a GABV press release said. The report was prepared by the GABV in collaboration with the Rockefeller Foundation and with the assistance of ShoreBank International (SBI).
Since 2002, the assets of the ethical banks have grown by 481 percent. That is equivalent to average yearly growth of 19.0 percent. The assets of the conventional banks grew annually by 10.4 percent in the same period.
The study also shows that the sustainable banks are an important pillar of the real economy. The relative support to the real economy by a bank is illustrated by the proportion of its total balance sheet devoted to client lending and funded by client deposits.
The comparison of sustainable with conventional banks shows that, at 72.4 percent, the former use the majority of their assets for lending. Conventional banks, by contrast, only deploy 40.7 percent of their assets to support the real economy.
Peter Blom, chair of the GABV und CEO of Triodos Bank, emphasised: “Sustainable banks haven’t developed their banking models because of regulations. They operate a different business model because of their values-based approach. The evidence now shows that this approach means a commitment to the real economy, a demonstrable resilience, and steady and reasonable returns.”
The bank balance sheets further show that the sustainable banks demonstrate a higher return on total capital deployed. Their return on equity is only insignificantly lower than the conventional banks and furthermore is less volatile, i.e. more stable, in comparison.
Thomas Jorberg, member of the GABV steering committee and CEO of GLS Bank said: “For some time sustainable banks have quietly gone about their business, focusing on financing the real economy and adopting a prudent approach to their capital position, precisely because they view profit as a means to an end, not an end in itself. This new study is crucial, because it exposes how the world’s biggest banks have disconnected from the real economy.
“Regulators have a chance to learn from these findings and move the banking industry on to a surer, fairer footing. We call on them to take it.”
The GABV also announced at the press conference that Berlin would be the venue of its general meeting next year. Under the heading “Changing values in the banking sector” the GLS Bank will host representatives from the 20 member banks for the fifth annual congress from 13 to 17 March 2013.
“The sustainable banks have long been considered as niche providers. The world congress of our banking association shows the increasing global acceptance of our approach within the financial industry,” GLS CEO Jorberg said. The GABV will open an office in Berlin in advance of the meeting as a contact centre and to expand contacts with the German government and parliament.
The Global Alliance for Banking on Values is a membership organisation, made up of twenty of the world’s leading sustainable banks, from Asia, Africa, Latin America to North America and Europe. Members include microfinance banks in emerging markets, credit unions, community banks and sustainable banks financing social, environmental and cultural enterprise.
All comply with sustainable banking principles and have a shared commitment to finding global solutions to international problems – and to promote a positive, viable alternative to the current financial system. They believe that “we must improve the quality of life for everyone on the planet, recognising that we are economically interdependent and responsible to current and future generations.”
Item: 121218-01EN Date: 18 December 2012
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