There’s a bit of a debate going on about the draft Social Charter recently published by the Dutch Banking Association (Dutch acronym: NVB). The initial response from civil society has been less than encouraging – the Social Charter is claimed not to be strict enough. The question is whether the debate addresses the right issue and the right actor: should NVB write a ‘stricter’ Social Charter for all banks or should the banks themselves take things forward? And is stricter really the solution?
All banks have their own individual DNAs, types of customer, social responsibilities and impacts. Niche banks, for instance, are highly selective as to who they’ll take on as customers, while banking majors typically serve wide-ranging groups of customers and will therefore have to take a different route to a sustainable society than niche players.
A niche bank singling out highly sustainable businesses is in a very different position to that of a major bank: the former can serve as a leader in financing highly sustainable initiatives, while the latter would typically fund the upscaling of such initiatives. Triodos, a Dutch green bank, finances small wind farms, we take on the really big ones – everyone has their role to play.
Yet the civil society organisations that launched the Dutch Fair Bank Guide feel we should do what Triodos does. That may seem only logical from where they stand, but it isn’t.
Striking the right balance between multiple interests
By its very nature, banking is always about striking the right balance between a range of different interests: savers are looking for the highest interests rates; prospective homeowners shop around for mortgages that offer the lowest. Businesses and individual customers insist on the strictest confidentially, while other stakeholders want full transparency.
A niche bank taking on only sustainable businesses will exclude all other companies: it will prefer to sit on funds entrusted by individual savers rather than lend them to businesses that do not meet its rigorous, extra-statutory sustainability requirements. This is a very clear choice and highly defensible given the nature – the DNA – of this particular type of bank: no more than its customers would expect, in fact.
Now if this niche player received a request to lend to less green businesses to help kick-start or perhaps rev up the economy, it would have a conflict on its hands, both with its own essential nature and with its customers. It would face two opposing social forces and would have to sit down with its stakeholders to find its way forward, to strike a new balance.
Lending to the greenest businesses only: not socially beneficial
At ABN AMRO, we’re currently facing similar pressures but ones that are trying to pull us in the other direction. A number of civil society organisations feel that this country’s major high-street banks should stop funding certain aspects of the economy – regular cattle breeding, for instance, chemicals or homes that are less energy efficient. They feel that by imposing rigorous floors and by encouraging and facilitating these customers, we’re not doing enough and aren’t moving fast enough.
Exclusion of large groups of customers is not the way a major bank such as ABN AMRO should go. Let’s imagine for a moment that we only provided mortgages for the most energy-efficient homes – the housing market would immediately come crashing back down, with homeowners without A-label energy certification having to take an extra loss on their properties. Choices that fit niche players aren’t always appropriate for major banks.
So what are the right choices for a bank like ours? We need to take things one small step at a time with all of our customers, as our strength is in numbers – large numbers. We’ll lose our customers if we move too fast and we don’t have a future if we move too slowly – it’s a fine balance indeed. So how could we quicken the pace?
The glass is always full
We can up the speed of change by working closely with all our stakeholders. That’s how we’ll arrive at new insights and create a new framework and new mind-set – and that’s how we’ll contribute to a better world. As William McDonough noted: the glass is neither half full nor empty; the glass is always full of water and air– and we need to take stock of both.