“There’s a sheer lack of a robust moral compass and sense of purpose – it’s still a case of shareholder value overriding everything else.”
Fuel
With a background as a chartered environmentalist, Watts famously did not become a bank chief through the traditional route.
What first interested Watts in finance was a conversation he had about the UK’s nascent recycling sector when working for recycling organisation the Waste and Resources Action Programme in the early noughties.
A banker told him that the return on investment on a landfill site “was better the faster you fill it”, opening Watts’ eyes to the way in which financial systems undermined sustainability.
His background outside the banking sector underlined how “hugely over-inflated” the sector’s sense of its self-worth to society is. “Do they really meaningfully affect communities on really important issues?”
He further pointed out that the majority of positive action by the bigger banks still comes under a banner of ‘corporate social responsibility’ – rather than having a purpose-led business model.
For example, banks might donate to charities that provide advice to people debt, while simultaneously using business practices that directly fuel debt.
Transparency
Watts believes that customers’ money has a large amount of power to change the system, but that they are held back by banks’ lack of transparency over their investments.
Large UK banks have failed to improve transparency on this, despite commitments made in 2019 made under the UN’s Principles for Responsible Banking, Watts noted.
This is another area where regulation could make a huge change, he said. “If there was a common regulation that banks had to publish who they lend your money to, I think that would be an earthquake.”
Triodos not only publishes every loan and investment it makes, but also allows customers to question them. It notably was the only bank to score top marks on transparency in Ethical Consumer magazine’s latest assessment of the sector.
Watts believes that there should also be a common methodology for banks to report their emissions, an issue Triodos has campaigned for through the Partnership for Carbon Accounting Financials.
Consciousness
“Radical transparency could really shift public consciousness and facilitate the democratic power of their money,” he believes.
This was proven in the response of shareholders and the public when Barclays was exposed as backing fracking, he pointed out.
However, despite good work by the Make My Money Matter campaign, and films such as the Our Planet: Too Big to Fail and Banking on a Wilder Tomorrow, which Triodos collaborated on, public awareness and motivation to moving their money away from banks that invest unsustainably is still low.
“There is a long, long way to go for mainstream public consciousness to realise that banks are actually lending their money, and perhaps to things they don’t like,” he said. Large organisations will take notice when customers leave, and tell them why.
Capital
Triodos has made a point of investing in nature recovery, piloting different types of transaction in projects such as natural flood management using money from insurers and flood agencies, and biodiversity projects that rely on voluntary carbon markets for woodland or peatland restoration in a mission to identify the best models for attracting private investment.
“The only way we’re going to adequately support the scale of nature’s recovery that’s needed is to engage private sector finance – in the billions in this country, and even more worldwide.”
One particular loan made other banks sit up and take notice, Watts said. The sector mainly held the perception that investing in nature involved relatively small amounts of money to conservation organisations.
But Triodos’ loan of £20.55 million to Oxygen Conservation to acquire and restore nature on 23,000 acres in Scotland turned this on its head.
The investment is believed to be the largest conservation-focused commercial debt package in the UK to date.
“There’s a new asset class emerging with the likes of Oxygen Conservation and [rewildling organisation] Nattergal where the scale of investment they are looking for is pretty significant, and should attract the interest of both large banks and pension funds,” he said.
Constructive
Watts has no firm plans once he leaves the bank, other than to take a break after ten years at the helm.
However, whatever he does next will have “positive purpose at its heart” he said. He cites the main achievement of Triodos under his tenure as “staying true to what we are here to do”.
“Triodos remains a real reference point in the banking industry as a bank doing very innovative things, financing pioneers and putting forward constructive ideas,” concluded.
“The banking sector needs a community of banks like Triodos that are pushing the boundaries and challenging, so I think that’s the greatest contribution – that it carries on, and it’s bigger, better and onward and upward.”
This Author
Catherine Early is a freelance environmental journalist and chief reporter for The Ecologist online. Find her on Bluesky @catearly.bsky.social.