Sustainable banks outperform mainstream financial institutions
According to a new study commissioned by the Global Alliance for Banking on Values (GABV), sustainable values-based banks like New Resource are outperforming large mainstream financial institutions in many areas, including financial indicators such as return on assets, growth in loans and deposits, and capital strength.
The report, “Strong, Straightforward and Sustainable Banking,” compares the performance of 17 values-based banks with 29 of the world’s largest financial institutions between 2007 and 2010. New Resource is among the values-based banks, as is Sunrise Community Bank (U.S.), Triodos Bank (the Netherlands) and Vancity (Canada). The large mainstream financial institutions include Bank of America, Barclays, Citigroup, Deutsche Bank, Goldman Sachs and Wells Fargo.
The report concludes that the values-based banks were twice as likely to invest their assets in loans during the three-year period under study, lending more than 70 percent of their assets. The sustainable banks also had both higher levels of and better quality capital. The BIS 1 Ratio, an important measure of a bank’s solvency, averaged over 14 percent for the sustainable banks during the period studied, compared with under 10 percent for the mainstream banks. The sustainable banks also had an average equity to asset ratio of over 9 percent, while the mainstream banks averaged just over 5 percent during the period covered.
The sustainable banks analyzed in the report also delivered higher financial returns than some of the world’s largest financial institutions. Return on assets, an important measure for judging a bank’s financial performance, averaged above 0.50 percent for sustainable banks, while the mainstream institutions earned an average of just 0.33 percent. Sustainable banks also had return on equity averaging 7.1 percent, compared with 6.6 percent for the mainstream banks.
“Our banking industry has an unprecedented opportunity to change, to help meet some of the greatest social and environmental issues of our time,” says Peter Blom, GABV chair and CEO of Triodos Bank, Europe’s largest sustainable bank (and a New Resource investor). “This report shows that doing good is beneficial for banks not just in a theoretical and ethical sense, but also financially, when measured against conventional benchmarks such as the financial bottom line,” he concludes.