Triodos Bank UK CEO: “We’re no ‘challenger bank’, we exist to challenge the way banking is done”

In many ways Triodos is much like its challenger banking peers.

It has a quirky name, a colourful debit card and the offices of its Bristol headquarters are decked with organic woollen seats and decorated with organic paints.

But, beneath its trendy exterior, Triodos is no normal digital bank.

UK CEO Bevis Watts in fact noticeably winces when I ask him whether he even considers his bank to be a “challenger”.

“We do, but I'm cautious,” Watts says. “That term was coined for a new generation of banks that were formed in the last 10 years. We've been around for 40 years, and 25 of those in the UK, we've got real pedigree.”

Watts prefers to describe Triodos as a “sustainable bank”, indeed the bank started life in the 1980s as the brainchild of four Dutch friends who sought to create a financial services group with the aim of promoting human quality of life and a more fair and sustainable society.

“We exist to challenge the way banking is done. And that's not really why most challengers exist, most exist really just for competition’s sake,” the CEO says. 

Today Triodos operates in six countries outside of the Netherlands, with its UK banking arm offering current accounts, savings, ISAs, investment products and business lending. 

So, what exactly makes Triodos a sustainable bank? 

A sustainable bank? 

For a start, the bank publishes the details of every loan and investment it makes, with money only offered “for things that can demonstrate positive environmental, social or cultural good”. 

Triodos makes a headline claim that 84p in every £1 deposited with them is lent to sustainable projects. 

For its current account customers Triodos also charges £3/month, an unusual move but one Watts says the bank is “proud” of in order to “expose the myth of free banking” pointing to the exorbitant overdrafts and venture capital-funded digital offerings as examples of how banking isn’t ever really ‘free’. 

In the world of ethical investing, the bank has found itself in a booming market, with interest in ESG (Environmental, social and corporate governance) and SRI (sustainable, responsible and ethical investments) going through the roof in recent years. 

“The whole space has mushroomed, but now everybody's suddenly trying to navigate what's really in their funds. Sometimes you can't even find out, it's just labelled as, you know, ESG-screened.” 

Instead of selling off-the-shelf funds, Triodos formed its own investment management team in the Netherlands to create unique ethical investment funds for its customers, two of which are available in the UK, comprised of larger or small and medium-sized listed equities. 

Finally, in 2018 Triodos decided to launch its own platform in the unlisted equities investment space, led by the demand for an ethical crowdfunding alternative. 

Again, rather than partnering with one of the larger players, the Crowdcubes and Seedrs of the world, Triodos left an earlier partnership with Ethex and took things in-house. It now offers its own direct investments via a bespoke crowdfunding platform with every listing vetted by the bank. 

“The reputational risks we saw coming with some of the platforms in that sector is one of the major reasons we launched our own platform,” says Watts.  

“We have to protect the brand properly and to really own what's being put on this platform and what we're promoting to people.” 

All these above offerings come together to, as Watts puts it, “both to finance change, and change finance”. 

From clunky, to cutting-edge? 

You may think all the above sounds great, but does sustainability and profitability for a bank go hand-in-hand? 

Watts argues so, and the bank has the numbers to prove it. 

Ten years ago, the CEO admits it's fair to say that Triodos in the UK suffered from a fairly “grey middle-class customer base”. 

“I think people thought, well, ethical banking is a bit clunky.” 

Things have changed quite dramatically over the last decade, however. 

Firstly, Triodos fleshed out its offering with investment products, current accounts (2017) and crowdfunding (2018), opening it up to both a younger and at the same time more affluent customer base. 

Secondly, the bank’s slow measured growth of between 10 and 15 per cent a year has led it to amass over 721,000 European customers, with 61,000 in the UK alone. 

Clearly not a smidgen on Monzo or Starling’s millions of account holders, but remember Triodos customers are paying for its services—whether current account holders, investment funds or business borrowers. 

Lastly things have changed in the last decade as sustainable banking and ethical investing have become very much in vogue, and highly profitable. 

Not a day goes by that “ESG investing” isn’t in the headlines, meanwhile the absence of airlines, oil or gas equities in Triodos’s investment funds, along with the inclusion of green energy and green transport providers like Japanese bike maker Shimano, has helped its investors weather the coronavirus storm. 

All of which pushed Triodos Bank to report a 14 per cent increase in its total assets under management last year, taking it to €17.7bn across its seven European markets. 

On this the bank turned a net profit €38.8m, maybe proving that “financing change, and changing finance” can still be done while making a handsome profit.