In June, I was lucky to get to spend a week in Copenhagen at a
meeting of the Global Alliance for Banking on Values.
This is a group of 25 community banks, financial cooperatives, microfinance institutions
and credit unions around the world focused on addressing the world's
environmental, cultural and social equity issues through financial tools and
instruments. Vancity joined in 2010, and gains
strength and knowledge from our fellow members in this worldwide network. The
goal of the Global Alliance is to touch the lives of a billion people with
sustainable banking by 2020.
The member institutions have several tracks they are collaborating on for mutual benefit, including metrics to track our global impact, human capital to ensure we nurture the next generation of sustainable bankers, and financial capital to fund the growth and impact of sustainable banks.
"This track is focused on creating the messaging to get more people thinking about what their money can do for society while it is parked in a bank account."
In Copenhagen, hosted by the inspiring and successful Merkur Cooperative Bank, people from values-based banks and credit unions in nine different countries, including Canada, Denmark, Germany, Bangladesh, Italy, Uganda, France, the Netherlands and the UK came together to discuss one of these tracks. This track is focused on creating the messaging to get more people thinking about what their money can do for society while it is parked in a bank account. When selecting a bank, people think about rate, location, brand, products and a few other things, but they don't think about what their hard earned money is activated to do while it's sitting in their account.
We have seen other mindset shifts like this over the past while. The shifts that come to mind are the Fair Trade and Buy Local movements. Some people think about how their clothing or coffee or jewelry was made, who made it and what conditions they were working in when they made it. They have shifted some of their purchases to reflect this heightened awareness of how that bag of coffee beans came to their hands and increased desire for their money to be spent in a way that reflects their societal values.
The exact same thinking can (and should) be applied to banking. When your money is sitting in your account, is it being invested in the real economy, or is it just making money for financial institutions by being moved around and traded behind the scenes? Is it being invested in things you feel good about like local businesses, sustainable technology and projects to reduce poverty and increase social equity? Or is it funding things that you wouldn't want your money invested in? Values-based banks, institutions who invest in the real economy and into projects, organizations and entrepreneurs who are improving our society and the environment, don't make money by merely moving money around. According to a study by the Global Alliance, values-based banks invest twice as much of the deposits they take in into the real economy as the so-called Too Big To Fail Banks.
So what is a sustainable or values-based bank? According to the GABV website, the principles of Sustainable Banking are:
- Triple bottom line approach at the heart of the business model;
- Grounded in communities, serving the real economy and enabling new business models to meet the needs of both;
- Long-term relationships with clients and a direct understanding of their economic activities and the risks involved;
- Long-term, self-sustaining, and resilient to outside disruptions;
- Transparent and inclusive governance;
- All of these principles embedded in the culture of the bank.
"Traditional banks are moving towards becoming (or at least trying to sound like) community-based banks. Credit unions fear this, that the big banks are starting to sound more like us, and adopt or co-opt our language."
I see a shift happening. It's small, in the early stages, but I see it happening. Traditional banks are moving towards becoming (or at least trying to sound like) community-based banks. Credit unions fear this, that the big banks are starting to sound more like us, and adopt or co-opt our language. And then I see another shift, almost imperceptible, but I see it starting to happen: community-based banks are shifting to a values-based approach. Just being part of the community isn't enough. We face significant challenges in our society and our communities, and people in our communities seek real partners who can address these challenges. If credit unions look at the opportunity to strategically serve their communities and put their members's assets to the greatest needs facing their communities and shift from being community-based, where all things in community are equally good, and go deeper and more discerning around what will have the greatest impact and return, they will create real uniqueness from where the big banks are heading.
It's worth noting that there are seven members of the GABV in North America. In Canada the three member financial institutions are all credit unions (Vancity, Affinity and Assiniboine), and in the U.S. all four member institutions are all community banks (First Green Bank, New Resource Bank, One PacificCoast Bank and Sunrise Banks). No American credit unions are involved. This seems like a major gap and opportunity for U.S. credit unions as so many struggle to reinvigorate their strategies and their usefulness.
I see this as the main way to increase our own market share and blaze a new trail, unique from the big banks, by focusing on our purpose, and increasing our relevance to the people we serve. When we do this, my experience tells me that people will start to shift their behaviour by thinking about what their money is doing while sitting in their account. Some of them, enough of them, will move their money into institutions that create wealth through ethical means for people in our communities. People will come to values-based banks and credit unions when they see us as a way to invest in their own communities, especially when they can see tangible proof of the projects, businesses and organizations who are the recipients of their money being invested smartly and sustainably.
William Azaroff lives in Vancouver, British Columbia, Canada. He is Director, Business & Community Development at Vancity, Canada’s largest credit union. William leads a team who work with local businesses, not-for-profits, social enterprises and co-operatives that contribute to a vibrant, sustainable, inclusive local economy, and engage Vancity's members and the public around their Good Money™ brand.