Powerful news: A recent study proves that sustainable banks deliver higher financial returns than some of the world’s largest financial institutions.
A study commissioned by the Global Alliance for Banking on Values (GABV), compared the performance of 17 values-based banks with 29 of the world’s largest and most influential banks between 2007 and 2010. The 29 banks are defined as Globally Systemically Important Financial Institutions (GSIFI) by the Financial Stability Board and often referred to as “too big to fail!”
The report concluded that values-based banks were twice as likely to invest their assets in loans, lending more than 70 percent of their assets during this period on average. The values-based banks also appear to be stronger financially with both higher levels of, and better quality, capital.
The sustainable banks analyzed in the report also delivered higher financial returns than some of the world’s largest financial institutions.
Return on Assets averaged above 0.50 percent for sustainable banks while the big banks earned an average of just 0.33 percent. That means that sustainable banks performed 51 percent better. Values-based banks also had superior returns on equity averaging 7.1 percent, compared to 6.6 percent for the GSIFI 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.
“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.”
One important measure of the growth of the values-based banking sector over the past four years is in the amount they lend, financing their clients. This increased 80 percent between 2007 and 2010, while mainstream banks increased their lending by just over 20 percent. Significantly, this growth highlights the focus of values-based banks on expanding business in the real economy.
To view the report and for more information on the Global Alliance for Banking on Values, visit www.gabv.org.
Read more on Jeffrey Hollender’s blog.
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