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    T¬B Annual Report 2020


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    We hope the annual report provides you with a rich picture of Triodos Bank’s values-based mission, strategy and impact in the wider world. The printed version of the English annual report is created as some of our stakeholders prefer to read the report in this format and because we are legally required to provide the annual report as a comprehensive, single document. The online annual report includes content that is not in this document including films highlighting the extraordinary work of the sustainable enterprises we finance. www.annual-report-triodos.com


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    T¬B Triodos Bank is a co-founder of the Global Alliance for Banking on Values, a network of leading sustainable banks – visit www.gabv.org Important dates for Triodos Bank’s shareholders and depository receipt holders. Annual general meeting 21 May 2021 Ex-dividend date 25 May 2021 Dividend payment date 28 May 2021


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    Annual Report 2020 Triodos Bank N.V. Key figures 6 Triodos Bank Group structure 2020 9 Our purpose: the conscious use of money 10 1. Executive Board report 11 The year 2020 - unlike any other 12 1.1 Our stakeholders and material topics 20 1.2 Strategic objectives 30 1.3 Impact and financial results 36 1.4 Understanding impact 58 1.5 Co-worker report 66 1.6 Environmental report 71 1.7 Risk and compliance 75 2. Supervisory Board report 79 3. Corporate Governance 87 4. Remuneration Report 2020 90 5. Triodos Bank N.V. Annual Accounts 2020 97 Other information 300 6. Report by the Foundation for the Administration of Triodos Bank Shares (SAAT) 321 7. About this report 331 Appendix I – Triodos Bank business model: creating value 336 Appendix II – Executive Board, Supervisory Board and Board of SAAT biographies 338 Appendix III – UN Sustainable Development Goals 343 Appendix IV– Global Alliance for Banking on Values scorecard – quantitative evidence of 369 our impact Appendix V - The United Nations Principles for Responsible Banking 373 Appendix VI – Co-worker and environmental statistics 377 Addresses 385 Production 387 Content only available online at www.annual-report-triodos.com Annual Report ‘at a glance’ – A brief summary of our performance Europe’s sustainable bank – Integrated summary of country banking operations’ activities Impact – Vision and practice, including case studies Country Reports – A summary of activities in each of the countries where we operate Global Reporting Initiative (GRI) content index Pillar 3 report 2020 5


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    Key figures amounts in millions of EUR * 2020 2019 2018 2017 2016 Financial Equity 1,208 1,201 1,112 1,013 904 Deposits from customers 11,747 10,694 9,564 8,722 8,025 Loans and advances to customers 9,157 8,209 7,267 6,598 5,708 Balance sheet total 13,888 12,082 10,867 9,902 9,081 Funds under management 1 6,362 5,671 4,673 4,604 4,373 Total assets under management 20,250 17,753 15,540 14,506 13,454 Total income 305.1 292.2 257.1 240.3 217.6 Operating expenses -245.4 -234.4 -204.3 -190.2 -171.9 Impairment losses on -24.2 -3.7 -6.4 -1.8 -5.7 financial instruments Value adjustments to - - - 1.3 -1.5 participating interests Operating result before taxation 35.5 54.1 46.4 49.6 38.5 Taxation on operating result -8.3 -15.1 -11.2 -12.2 -9.3 Net profit 27.2 39.0 35.2 37.4 29.2 Total Capital ratio 18.8% 17.9% 17.5% 19.2% 19.2% (Common) Equity Tier 1 ratio 18.7% 17.9% 17.5% 19.2% 19.2% Leverage ratio 8.8% 8.5% 8.9% 8.9% 8.8% Return on equity in % 2.3% 3.4% 3.3% 3.5% 5.5% Return on assets in % 0.2% 0.3% 0.3% 0.3% 0.5% Operating expenses/total income 80% 80% 79% 79% 79% Real Economy assets/Balance sheet 75% 76% 77% 80% 81% total 2 Triple Bottom Line assets/Balance 74% 75% 76% 75% 77% sheet total 2 * IFRS - EU was adopted as of 1 January 2018, and therefore the key figures for 2020, 2019 and 2018 are reported under IFRS. Key figures for 2017 and 2016 are reported under Dutch Gaap. 1 Including funds under management with affiliated parties that have not been included in the consolidation. 2 Triple Bottom Line assets refer to assets not only focused on economic benefits, but also on positive social and environmental benefits. We believe this figure provides the best indication of a bank’s commitment to sustainability. The assets and revenues committed to the Real Economy and to the Triple Bottom Line for the year 2016 has not been reviewed. The 2019 and 2018 figures have been adjusted to IFRS reporting. 6


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    amounts in millions of EUR * 2020 2019 2018 2017 2016 Per share (in EUR) Net asset value at year end 85 83 82 83 82 Net profit 3 1.91 2.80 2.73 3.19 2.83 Dividend 4 0.65 - 1.95 1.95 1.95 Number of depository receipt holders 43,614 44,401 42,416 40,077 38,138 Number of accounts - funds entrusted 867,377 830,816 839,242 808,090 759,738 from customers Number of accounts - loans and 81,726 77,984 68,751 60,339 50,765 advances to customers Number of customers 728,056 721,039 714,887 681,082 651,945 Social Number of co-workers at year end 1,592 1,493 1,427 1,377 1,271 Co-worker turnover 8% 10% 9% 9% 8% Women as percentage of 39% 44% 39% 44% 40% management team Ratio of highest to median salary5 5.5 5.6 5.6 5.7 5.7 Environment Triodos Bank’s own emissions, 100% 1.0 2.9 2.8 3.1 3.1 compensation (in ktonne CO2 eq.) Net emissions in outstanding loans 358 293 152 - - and investments (in ktonne CO2 eq.)6 Avoided emissions in renewable -933 -963 -985 - - energy loans and investments (in ktonne CO2 eq.)6 3 The figure of net profit per share is calculated on the average number of issued shares in circulation during the financial year. 4 Dividend proposal of 18 March 2020 as published in the annual accounts 2019 was revised. This was a direct response to the recommendation made by the European Central Bank and De Nederlandsche Bank (DNB) on 27 March to all banks, not to pay out dividend in order to prioritise supporting the real economy by lending to customers during the COVID-19 pandemic. For the year result of 2020 Triodos Bank proposes a dividend of EUR 0.65 per share, equivalent to a 15% pay-out ratio (the percentage of total profit distributed as dividends) of 2019 and 2020 together in compliance with the latest guidelines of DNB following the instruction of the ECB. 5 The ratio of highest to median salary (excluding highest salary) follows the GRI criteria and is considered best practice. All salaries are calculated on a full-time basis. 6 2018 is the first year of reporting using the Platform for Carbon Accounting Financials (PCAF) methodology. Around 68% of our outstanding loans and funds’ investments are assessed. 7


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    Governance structure Executive Board SAAT – Foundation for the Administration of Triodos Bank Shares The daily management and strategic development of Triodos Bank N.V. (hereafter Triodos Bank) lies with Triodos Bank believes it is crucial that its mission and the Executive Board. The Executive Board is formally identity is protected. As a result, all Triodos Bank’s responsible for the management of Triodos Bank and shares are held in trust by SAAT – the Foundation for the members are appointed by the Supervisory Board. the Administration of Triodos Bank Shares. SAAT then issues depository receipts for Triodos Bank shares to Supervisory Board the public and to institutions. These depository receipts embody the economic aspects of the shares of Triodos Triodos Bank has a Supervisory Board, which monitors Bank N.V. In addition, SAAT exercises the voting rights the Bank’s business operations and advises its for the Triodos Bank N.V. shares. The Board of SAAT’s Executive Board, to benefit its business interests. voting decisions are guided by the Bank’s ethical goals and mission, its business interests, and the interests of New members of the Supervisory Board are the depository receipt holders. Triodos Bank depository appointed by the Annual General Meeting, based on receipts are not listed on any stock exchange. Instead, recommendations from the Supervisory Board. Triodos Bank maintains its own platform for trading in depositary receipts. More information about Triodos Bank’s Boards is available at www.triodos.com and in the biographies in the appendix of the audited, English language version of the annual report. 8


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    Triodos Bank Group structure 2020 Foundation for the Administration of Triodos Bank Shares Triodos Bank Retail & Business Banking Investment Triodos Regenerative Management Money Centre Private banking Retail Banking Investment Management Through our European network, our goal is to offer our Impact investing takes place through investment funds customers products with a purpose including savings, or investment institutions bearing the Triodos name. payments, lending, private banking and investments. The 16 active funds are grouped in business lines based Business Banking on the themes they invest in: - Energy and Climate We lend money only to organisations working to bring - Inclusive Finance about positive and lasting change. Our lending focuses - Sustainable Food and Agriculture on three key areas: - Impact Equities and Bonds - Energy and climate - Food and agriculture Triodos Regenerative Money Centre - Socially inclusive business Triodos Regenerative Money Centre lends, invests and Private Banking donates money through Triodos impact investment funds and the Triodos Foundation with an innovative We advise customers on employing their capital to and impact-first perspective and the objective to stimulate sustainable development. Our key service is make pioneering, transformative initiatives possible sustainable discretionary asset management. that cannot (yet) be financed by traditional loans and investments. 9


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    Our purpose: the conscious use of money Triodos Bank wants to promote human dignity, Exactly how this happens differs in each country; its environmental conservation and a focus on people’s services have developed in different ways in each of the quality of life in general. Key to this is a genuinely countries where it works, depending in part on the stage responsible approach to business, transparency of development of the banking entities in question. and using money more consciously. Triodos Bank puts values-based banking into practice. We want As a frontrunner in responsible banking to connect depositors and investors with socially Triodos Bank wants to promote the conscious use responsible businesses to build a movement for a of money, in its own organisation, but also in the sustainable, socially inclusive society, built on the financial sector as a whole. It stimulates public debate conscious use of money. on issues such as the need to make corporate social responsibility mainstream as a frontrunner of values- Triodos Bank’s mission is based banking which can transform the economy. - To help create a society that promotes people’s Stakeholders have encouraged Triodos Bank to focus quality of life and that has human dignity at its core on this role as a frontrunner.Triodos Bank, with 40 - To enable individuals, institutions and businesses years of experience in valuesbased banking was a to use money more consciously in ways that founder of the Global Alliance for Banking on Values, a benefit people and the environment, and promote global movement of more than 60 like-minded banks sustainable development committed to advancing positive change in the banking - To offer customers sustainable financial products sector.Triodos Bank’s vision and approach has led to and high-quality service. international recognition. Its participation in the public debate, often through high-impact events that it hosts More on our mission, vison and core values can be found and participates in, means people can see what Triodos on www.triodos.com/about-us. Bank stands for and hear its opinions about important social trends. Triodos Bank’s identity is crucial for its Market and core activities brand and reputation. Triodos Bank aims to achieve its mission as a sustainable bank in three ways. As a values-driven service provider Bank customers not only want sustainable products and services, but also fair prices and a reliable service. Triodos Bank offers products and services with a purpose to promote sustainable development.And it does so, in the context of meaningful, transparent relationships with its customers. As a relationship bank Triodos Bank’s service is built on deepening and developing long-term relationships with its customers. Relationships are nurtured through various on and offline channels, including offices where customers meet co-workers face-to-face and at community events.Triodos Bank’s aim is to create a broad customer base that’s closely connected to it – a combination of private and corporate customers who have made a conscious decision to bank with Triodos Bank. 10


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    1. Executive Board report The report in brief The Executive Board chapter provides an overview of Triodos Bank’s perspective on the wider world it operates in, its impact and activity in 2020 and its prospects for the future. To help make this chapter easier to navigate we have broken it down into its constituent parts: A narrative section: a high-level perspective on the world we’re in and Triodos Bank’s place in it can be read in The year 2020 - unlike any other (see page 12). A second section gives an analysis of our key or material topics: these topics are defined by our stakeholders and Triodos Bank, and reported on throughout the report and specifically in Our stakeholders and material topics (see page 20). They inform our strategic objectives, which are also described here, including our progress against our goals and plans for the future (Strategic objectives (see page 30)). A third section describes our results of 2020, in terms of our financial performance, the impact we enable through our finance and the consequences this impact has for our environment (emissions). Subsequently, in Understanding impact (see page 58) we highlight our vision on impact management and the steps we’ve taken to safeguard our sustainable mission. A fourth and final section summarises our approach and results as an organisation, our direct impact. This section includes a Co-worker report (see page 66) and an Environmental report (see page 71) as well as important risk and compliance information in Risk and compliance (see page 75). 11


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    The year 2020 - unlike any other The year 2020 – unlike any other discuss measures that could be effective to support business, particularly in the SME sector. The year 2020 was unlike any year in our history and one we will not easily forget. Triodos Bank started 2020 The support measures taken by the different expecting a stable development, building on the results governments vary, but everywhere large amounts of of 2019. We also expected to celebrate the fact that money have been made available to support income Triodos Bank was founded 40 years ago, in 1980. Forty or debt of entrepreneurs and citizens. Triodos Bank years of making money work for positive change. has been doing its utmost to support customers, fostering their economic resilience during the crisis by By the end of February however, the world was facing facilitating 1,042 Covid-19 related guarantees across one of the biggest crises we have experienced in recent countries and, at its highest point in September 2020, times. As the COVID-19 virus spread, governments 800 repayment holidays for customers. announced increasing measures restricting freedom of movement, resulting in the World Health Organisation declaring a pandemic on 11 March 2020. Who owns Triodos Bank Whilst the summer brought some relief, most European When founding the bank in 1980, principles of countries were confronted with a second wave of ownership were established which are directly infections and lockdown measures in the autumn, with related to the mission and identity of the bank. The a third wave of even more stringent restrictions for first principle is that providing capital to the bank citizens emerging just before year end. should not lead to control over the bank, which is why the shares are held in a foundation which The COVID-19 pandemic disrupted our lives and our issues DRs for investors. The second principle economy in an unprecedented way. As the scale of is about the pricing mechanism of the DRs: the the crisis was spreading across the globe, economic price is based on the book value of the assets outlooks worsened and financial markets became very of Triodos Bank minus the book value of the volatile. The crisis had a major impact on our customers liabilities of Triodos Bank and not determined and our operations. by supply and demand between investors. And finally: Triodos Bank enables people to use money Running the business in unusual circumstances more consciously. The essence of the bank is the personal commitment of its key stakeholders Maintaining our business operations is critical to the – the engagement of people with the mission continuation of our services to our customers. With the – and this requires their active involvement. outbreak of COVID-19 at the beginning of this year, the Therefore, Triodos Bank opted for a broad DR- bank’s crisis management committee was activated to holder community, consisting of people that are analyse the evolving situation and define measures for prepared to support the bank’s development with Triodos entities in all countries. long-term investment. Almost all our co-workers were able to work from home within a few days and our systems worked without any Exceptional decisions major problems. The uncertainty created by the COVID-19 pandemic for the economy at large, including the financial sector, From the start of the pandemic our attention went to impacted investor behaviour globally and also affected customers, especially our credit customers. We have trade in Depository Receipts of shares in Triodos Bank been in close contact with most business customers in the first wave of the pandemic. Triodos Bank had throughout the year to assess their immediate needs as to take an exceptional decision on 18 March 2020, to a result of the crisis. We have contributed to initiatives suspend the possibility to buy and sell Triodos Bank with other banks, governments and regulators to Depository Receipts. Trade was resumed on 13 October 12


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    2020, with a new prospectus and measures in place to limit the amount of Depository Receipts investors Dividend could sell in one settlement. Despite the mitigating On 15 December 2020, De Nederlandsche Bank measures we took, the patterns of buying and selling (DNB) called on the major banks under its of Depository Receipts did not return to the balance supervision to be very restrained in paying we were expecting. The ongoing uncertainty around the dividends and buying back own shares, in line corona crisis and its longer-term economic effects have with the recommendation of the European Central not disappeared; on the contrary, further lockdown Bank. This recommendation is related to the measures and other restrictions were seen globally current exceptional circumstances and will run in the last two months of 2020. The trading pattern until the end of September 2021. At that time, DNB we were experiencing put into question whether the expects, in the absence of material unfavourable balance in trade in Depository Receipts will be restored developments, to return to a normal assessment of in the current economic context. It also poses the the capital distribution of banks. question of what measures we can take to achieve balanced trading, as we must now assume that Banks that nevertheless intend to pay out previous trading patterns will likely not recover in the dividends are expected to consult with the short term. Trade was therefore suspended on Tuesday regulator before any dividend proposal is made. 5 January 2021. Dividend payments should not exceed 15% of the cumulative earnings for 2019 and 2020, and Another exceptional decision taken was to withdraw should be no more than 20 basis points of the the dividend proposal for 2019. Considering the CET1 ratio. Banks that intend to pay out dividends uncertainty of the wider impact of COVID-19 on society must be profitable and have a consistently solid and the economy at large, the European Central Bank capital buffer. (ECB) and De Nederlandsche Bank (DNB) strongly advised banks to provide a clear signal to the public that they would make maximum efforts to ensure the We also decided, for the first time in our history, continuity of lending and to retain prior year’s profits to participate in Targeted Long-Term Refinancing until the extent of the crisis is known. Triodos Bank, Operations (TLTROs). The ECB introduced TLTROs in being part of the Dutch and European financial sector, 2014. TLTROs offer long-term funding at attractive felt it could not ignore such a request. The Executive conditions to banks in order to further ease private- Board decided on 1 April 2020 to withdraw the dividend sector credit conditions and stimulate bank lending proposal which was published in the Annual Report to the real economy. As a European bank under 2019. Initially, the proposal was to distribute 50% of the direct supervision of DNB, Triodos Bank is part of profit for 2019 as a dividend. the Eurosystem. The Eurosystem carries costs and benefits. To date, Triodos Bank and its customers have mostly been confronted with the cost of this system, through negative interest rates and quantitative easing which affect the yield curve for financial institutions. Triodos Bank feels a responsibility to play a role in financing the recovery post COVID-19. The terms offered for the TLTROs provide an opportunity and incentive to increase our lending to entrepreneurs who are instrumental in delivering sustainable development, which is crucial for the recovery of the economy. In the TLTRO tender III.5 Triodos Bank applied for and obtained EUR 750 million. 13


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    Lastly, as part of an ambitious cost-reduction the sectors we choose to avoid. Because we focus programme which was launched in 2020, we took the on delivering sustainable social, environmental and decision to structurally change the way of working, cultural impact, our horizon is inherently longer term. starting in The Netherlands and Spain. All co-workers in these countries will continue to work partially Opportunities exist for companies and initiatives that from home after the coronavirus pandemic. This focus on impact and understand what the coronavirus means that the bank will concentrate all activities pandemic teaches us to strive for: with sustainable and in The Netherlands in the new office, De Reehorst in more local food production, by paying more attention Driebergen. In Spain, we decided to rent out one of our to biodiversity, and emphasising social inclusion and two head office buildings in Madrid. the new forms of cooperation that make this possible. We see that more and more people, especially in the Reset the economy – and the role of the communities we are part of, recognise the opportunity financial sector for transformation and are willing to embrace new The COVID-19 pandemic has brought big issues to economic and social models. the fore. It has exposed the structural weaknesses in the contemporary global economic system with its Triodos Regenerative Money Centre global supply chains and economic monocultures. Our relationship with nature is broken, caused by climate Triodos Regenerative Money Centre (TRMC) change and the loss of biodiversity. And the crisis aims to increase the conscious use of money, exposes significant societal inequality, leaving certain through donations and catalytic investments. groups of people more affected by the pandemic – The initiative’s goal is to support a regenerative economically, socially or health-wise – than others. economy that serves people and is a steward of the Fundamental flaws in the way we have organised Earth’s ecosystems. our economy in our unrelenting efforts to strive for economic growth have been laid bare. TRMC aims to deliver its goals by supporting initiatives that pioneer new business models We strongly believe that the corona crisis is also an with an explicit goal to regenerate society and opportunity for a redesign of the economy. Linking the planet. These are initiatives that have the social fairness and ecological vitality with finance can potential to be game-changers as they can fulfil realise a recovery that is more resilient. Rather than a catalytic role. The goal of every donation and just restoring an old model, we can make our economy catalytic investment is to increase consciousness fairer and more sustainable. Triodos Bank published and provide new perspectives on current questions a vision paper ‘Reset the economy’ in June in which in areas where, for different reasons, traditional we stressed the need for a transition to an economy bank and investment products cannot provide that is more resilient, more sustainable and more an answer. inclusive. Our aim in this paper is to map a pathway for a resilient and inclusive recovery once the coronavirus Diversity and inclusion has been contained. Triodos Bank wants to be at the forefront of the Triodos Bank has been part of this new economy and developments in society that are needed for renewal. has helped shape it ever since our foundation in 1980. It is important to recognise that we not only need Triodos Bank uses the concepts of impact, risk and an economic reset, we should also embrace the return to understand our overall development and chance to steer more rigorously on social inclusion. place in the world around us. This requires a positive, The Black Lives Matter movement, examining the long-term and holistic perspective. It also requires a ingrained attitudes to race and privilege, this year has conscious choice about the sectors we invest in and not only sparked debate in society it has also ignited a discussion inside our own organisation. Our mission 14


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    states that we pursue a society that has human dignity at its core. The question to ourselves has been: can we The loss of biodiversity is one of the greatest truly say that we have human dignity at our core when challenges for the existence of life on Earth we are unaware of whether all our co-workers feel seen The damage to biodiversity caused by our way and respected? To make sure that this time next year of living, specifically farming, is considerable. we know the answer to these questions, we have put We have reached a point where we should diversity and inclusion firmly on the agenda as a topic not talk about reducing harm to biodiversity, for the organisation. but rather talk about regeneration. Biodiversity is very relevant for the financial sector. For Changing finance Triodos Bank, this goes beyond the commercial Since our foundation forty years ago, part of our mission risks that financial institutions run when they has been to influence the financial sector systemically finance companies whose business depends on at a national and global level to make money work for ecosystem services or that have a major negative positive change. This has become even more urgent in impact on biodiversity. In 2020, Triodos Bank the context of the ‘green and just’ recovery from the signed the Finance for Biodiversity Pledge. The corona crisis. signatories commit themselves to collaborating, engaging, assessing their own biodiversity impact, We believe the financial sector is an essential part setting targets and reporting on biodiversity of society and should serve the real economy. It matters by 2024 at the latest. We are also a should therefore put positive impact, diversity and member of the Partnership Biodiversity Accounting transparency at its core, supported by appropriate Financials, which works to develop a common regulations and supervision. A financial sector that accounting methodology for the sector’s impact has truly integrated those elements in its business on biodiversity. will be able to help improve people’s quality of life and achieve positive impact on the world around us. We believe national and European rules and regulations We cannot achieve this alone. We collaborate with should stimulate the transition of the financial sector many other European and global institutions and to put positive impact first, ahead of return. Therefore, associations like the Global Alliance for Banking on on a national and European level, we put a lot of time Values (GABV), the Club of Rome, the Sustainable and effort into the revision of the legal framework for Finance Lab, governments and banking associations. all financial institutions and markets. We see positive Together we have been able to create momentum to developments. We welcomed the Renewed Sustainable change finance. Finance Strategy of the European Commission. It is ambitious and emphasises the relationship between An important part of our change finance agenda is social resilience, environmental balance and financial focused on the three strategic themes of Triodos soundness. A sustainable financial sector is key for a Bank: energy and climate, food and agriculture, and sustainable post-coronavirus recovery. social inclusion. For instance, in Germany we took the initiative to gain a commitment from the financial To influence at an international, national and even sector to the Paris climate agreement; we published regional level is not easy. But despite our relatively our vision document ‘Reset the economy’ with a strong small size, we have persevered, often by partnering focus on social inclusion; and we signed the Finance for with others, to persuade decision-makers to develop Biodiversity Pledge. legislation that supports the transition to a sustainable economy, and that enables and stimulates the financial sector to play an active role in transition. 15


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    Measuring up term this may not contribute to our targets, but in the longer term we will ensure that we get to net zero. We Triodos Bank was among 16 financial institutions are researching how quickly we may be able to take that created the global accounting standard for the lead in reaching a net-zero portfolio (and beyond). greenhouse gas (GHG) emissions of the Partnership This requires us to reflect critically on our portfolio. for Carbon Accounting Financials (PCAF). Banks, asset We want to make sure we do this carefully rather than managers and asset owners now have access to a set arbitrary targets too quickly. We will disclose our free, standardised, robust and clear way of measuring transition plan with long- and short-term targets in the and reporting greenhouse gas emissions tied to their run up to COP26, November 2021. lending and investment portfolios. From niche to frontrunner Triodos Bank supports the world’s transition to a low- carbon and climate-friendly future, in line with the Paris In recent years the financial sector has set out on climate goals, to limit the temperature increase to at a journey to integrate sustainability in its business most 1.5 degrees Celsius. To contribute to this future, models and strategies. Sustainability was considered financial institutions need to know the carbon footprint a niche activity forty years ago when Triodos Bank of their loans and investments. If financial institutions started, but has become more and more mainstream, know what the emissions are, they can be transparent even though the financial sector as a whole still has a about their climate impact and it will help them set long way to go. climate targets and steer decision-making. In the last four decades Triodos Bank has moved from Triodos Bank wants to make sure that our activities being a niche bank to a frontrunner. Our mission – to and associated emissions contribute to, at most, a use money consciously to create positive development 1.5-degree global increase in temperature. Triodos in society, with human dignity at its core – has been a Bank started using the PCAF methodology in its own guiding principle throughout our history and has found business in 2018 for about 68 percent of its portfolio. In a lot of resonance in society and the financial sector. 2019, we measured the emissions of our entire portfolio of loans and direct investments. In 2020, we are still one Given our frontrunner position in the context of of only a handful of banks able to report fully on the increasing competition, we continued working on our carbon intensity of its portfolio. three impact themes that address the most urgent societal challenges: energy and climate, food and Given our mission and the focus of our finance, it’s agriculture, and social inclusion. safe to say that our carbon results compare well to the emissions of mainstream banks. By mapping our Despite the business challenges of the coronavirus emissions, we can identify the loans and investments pandemic, we have continued to finance new projects with relatively high GHG emissions within our portfolio. and customers in the energy and climate and food and It provides input to steer our (long-term) strategy to agriculture sectors in 2020, as described in our vision align with the Paris agreement. In our efforts to develop papers published last year. The third impact theme climate targets, we want to hit the target without in our strategic agenda is social inclusion. The vision missing the point. paper for this theme is in consultation both inside and outside our organisation and we expect to publish it in As a frontrunner bank on sustainability, we have the first half of 2021. a responsibility to finance the transition towards a sustainable future. For Triodos Bank this may mean The challenges of banking that our carbon emissions actually go up if we decide The business of running a bank has become to finance more businesses that still have to make the increasingly complex compared to when Triodos Bank transition instead of leaving them behind. In the short was founded in 1980. Providing quality products 16


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    and services while meeting growing regulatory and transparent prices for our products. In The requirements, including executing customer due Netherlands, we were the first bank to introduce a diligence and monitoring transactions effectively, negative interest rate for retail savers with deposits comes with costs in terms of time and resources. higher than EUR 100,000 and charged a fixed Because our starting point is to deliver greater impact administrative fee of EUR 2 per month for each saving over the long term, it is essential that we are financially account. In Belgium we announced the closure of resilient and that we consistently focus on building a one of our so-called ‘tax-regulated’ savings account high-quality loan portfolio. products, which had become unsustainable due to the regulatorily required minimum interest rate of 0.11%. Low interest rates continue to have a strong impact on Triodos Bank because the growth of funds entrusted In addition, and importantly, we continue to develop ICT outpaces the growth of the loan portfolio. The excess and digitalisation solutions to help enhance customer liquidity is placed with the European Central Bank at experience and make processes more effective and a negative interest rate and at a cost for Triodos Bank. therefore less costly. The low interest rate environment also encourages borrowers to refinance at lower rates and to pay First year of adopting International Financial back their borrowing earlier than planned. Both trends Reporting Standards (IFRS) continued in 2020. They have a downward effect on net This Annual Report is the first report we publish using interest margins with a subsequent direct downward the IFRS accounting principles, besides the pro forma impact on Triodos Bank’s financial performance. financial statements 2019, which we published on 3 July 2020. With the switch to IFRS the structure of the To address the issue of shrinking margins, we have report has changed accordingly. An important change had to be more selective about the projects within the from the previous method we used (Dutch GAAP) is sectors we finance and the allocation of loan growth to that we must apply the Expected Credit Loss (ECL) the countries where we are active. We have reviewed model. In line with the new accounting standards, the products and services we offer to our customers IFRS-9 was applied for the ECL model. This model to focus on loans which will deliver both financial requires the incorporation and assessment of forward- and impact benefits. We acknowledge that this may looking macro-economic parameters (like GDP growth, diminish the rate of loan growth. unemployment), which are sensitive to the COVID-19 pandemic. The macro-economic parameters are only Becoming more efficient by applying digital solutions applicable in stage 1 and stage 2. In 2020 the build-up and streamlining our operations with better customer ECL provision was mainly related to forward-looking journeys are also important for staying financially aspects, around 62% of the ECL impairments in 2020. healthy, as is fair pricing of these services. Meeting The stage 3 impairments were far less influenced, the increasing costs of constantly increasing regulation signalling the strength of our portfolio. This is described creates challenges and impacts our overall profitability. in more detail in Impact and financial results (see page 36). This raises important questions for Triodos Bank. We are continuously working to address them by Gatekeeper role reducing costs where we can and increasing fee income – principally through the expansion of our Triodos On 6 March 2019, Triodos Bank received an instruction Investment Management activity and fee-generating from its supervisor about shortcomings in its customer business on the banking side – to compensate for the due-diligence processes and monitoring of customer diminishing margins of the loan business. transactions in the period up to 2018. Triodos Bank accepted this instruction and is implementing During 2020, we introduced new rates and fees mitigating measures. In December 2020, the supervisor for banking customers in an effort to charge fair imposed a fine on Triodos Bank related to this earlier 17


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    instruction. Triodos Bank accepts the decision and has in line with internal target ratios and well above the paid the fine, amounting to EUR 475,000, in full. regulatory minimum requirements. Leadership transition The banking sector continues to be faced with increased regulations and persistently low interest On 22 September we announced that our CEO, Peter rates. We have partly compensated for the decreasing Blom, has decided to step down from his role, having interest margin by introducing service fees and worked at Triodos Bank for forty years. He will leave negative interest rates. Our revised pricing policy for the bank at the end of this year’s AGM, on 21 May loans was strictly applied and this will continue in 2021. 2021. On 9 February 2021, Triodos Bank announced the decision of Jellie Banga to step down from her role as Our overall loan portfolio benefits from geographical Vice-Chair of the Executive Board and Chief Operating diversification and reflects modest credit risk, Officer (COO), effective 1 May 2021. In reviewing the underpinning sustained profit generation and low scope of Jellie’s role, it has been decided to split her earnings volatility. As the COVID-19 pandemic is still role into a COO role, focusing on the operating side of continuing, the build-up of the ECL provision will the bank, and a Chief Commercial Officer (CCO) role, continue over the year 2021 in line with the IFRS focusing on the commercial side of the bank. This brings accounting standards in combination with the bank's the total number of Executive Board members to five. prudent business approach. In 2020, we took part in the The Supervisory Board has initiated the recruitment TLTRO tender III.5. We will consider further upcoming process for both the COO and the CCO roles. TLTRO tenders in the future. External rating In the short term, customers will face economic Fitch Ratings (Fitch) announced on 16 February 2021 it challenges, especially if COVID-19 related government has assigned Triodos Bank a Long-Term Issuer Default support schemes expire. However, in the medium and rating at ‘BBB’ with a stable outlook and a Viability long term, we believe our customers – and therefore Rating at ‘bbb’. Fitch’s rating analysis was done at the Triodos Bank itself – are well positioned to be part of request of Triodos Bank. The rating gives Triodos Bank the more sustainable and socially inclusive economic a better position on the financial markets should the recovery that is expected to emerge. need arise. It will improve access to institutional debt funding and potentially reduce the cost of funding. Triodos Bank expects to grow its fee income over Therefore, it supports the bank's financial health. time by growing the activities of Triodos Investment Management as well as fee-based banking activities. Triodos Bank in 2021 Moreover, we have the ambition to realise more An urgent focus for this year is addressing the strategic impact by growing our bank balance sheet modestly, challenge presented by the suspension of trade of the maintaining a stable loan to deposit ratio. We will Depository Receipts of ordinary shares (DRs) and the continue to adjust our business model, becoming less impact this suspension has on our Depository Receipt dependent on interest margins in a very low interest holders and our broader capital strategy. rate environment in Europe and balancing increased regulatory costs with efficiency measures. Growing volumes and profit are dependent on external developments, our ability to respond to these The bank will focus on positive impact, a fair developments and seizing opportunities in a pro-active return and a moderate risk appetite regarding its way to fulfil the bank’s mission while maintaining a loans and investments. Triodos Bank will partner sound level of risk and return. Our capital and liquidity with frontrunners in their fields and finance the position is expected to remain robust and resilient, entrepreneurs who are developing the sustainable industries of the future. 18


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    To aid active steering on this ambition, Triodos Bank will set science-based targets for the most important sectors we operate in to ensure our portfolio develops in such a way that we actively contribute to a net- zero economy. Our priority in 2021 is to navigate the bank and our customers through the COVID-19 pandemic and to focus on the effective execution of our corporate strategy, ensuring we fulfil our role as frontrunner in responsible finance whilst generating maximum impact in line with our goals, as well as realising stable profits with modest risk. Zeist, 17 March 2021 Triodos Bank Executive Board Peter Blom, Chair Jellie Banga, Vice Chair André Haag Carla van der Weerdt 19


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    1.1 Our stakeholders and material topics Triodos Bank’s stakeholders are key to determining In addition to numerous interactions throughout the the focus and attention of the organisation’s efforts. year at all levels of our organisation, we follow a formal This section identifies key stakeholder groups and process to analyse which issues are most important highlights their most important material issues at both to our stakeholders and our organisation Triodos Bank. We focus on these in our reporting. (materiality analyses). We integrate these issues into our management objectives. Our reporting on progress Stakeholder dialogue: keeping us on our toes of these objectives follows the Global Reporting Initiative (GRI) Standards. For more information about Triodos Bank continually seeks to connect with the how Triodos Bank engages with its stakeholders visit world around us. This is essential if we are to www.triodos.com/stakeholders. remain relevant, continue to progress and meet our frontrunner ambitions. All our business and financial decisions have an impact on our stakeholders. In turn, Materiality analysis the societal themes embraced by our stakeholders Triodos Bank identifies three general have an impact on what we do and how we do stakeholder categories: it. Our essence defines us. It is the starting point - Those that have economic relationships with of our conversations with the broader stakeholder the business community. How we bring our essence to life through - Those without an economic relationship but our actions is informed by our engagement with key with a close interest in Triodos Bank from a stakeholders and developments in society at large. societal perspective - Those that provide new insights and knowledge We have benefitted from free-flowing discussions with our stakeholders over many years and in varied For each category we have identified specific ways. We invite NGOs and citizens to participate in stakeholder groups, including the influence they exert evening debates, we conduct surveys and organise on Triodos Bank and the expectations they have of regular meetings for depository receipt holders. Our us. The table below gives an overview of all major co-workers at Group level, in Triodos Investment stakeholders and how they link with relevant topics. Management and at our various country offices regularly engage in these and other activities. Stakeholder table Stakeholder Definition Most relevant topics (see Material topics) Category: stakeholders that engage in economic transactions with Triodos Bank Clients Clients expect excellent banking and - Protecting client data financial services. - Client relationships - Engaging with communities They expect Triodos Bank to put their - Social inclusion interests first. - Sustainable investments - Thought leadership Clients are essential to achieve our mission. - Products with a purpose - Integrating mission/strategy - New sustainable ventures 20


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    Stakeholder Definition Most relevant topics (see Material topics) Depository Influence on and expectations regarding - Social inclusion Receipt holders how Triodos Bank strikes a balance - Resilient financial institution between return on investment and social, - Thought leadership environmental and cultural returns. - Integrating mission/strategy - New sustainable ventures Co-workers Influence on and expectations of Triodos - Fair remuneration Bank’s ability to create a working - Learning organisation environment that’s inspiring, healthy - Responsible employer/diversity and welcoming. - Engaging with communities - Social inclusion Expect and contribute to a workplace where - Sustainable investments each co-worker finds room to address the - Thought leadership important questions of our time and where - Integrating mission/strategy each individual can work effectively in line - New sustainable ventures with the mission and values. Suppliers They expect Triodos Bank to a responsible - Sustainable suppliers and reliable business partner. - Engaging with communities - Social inclusion They are partners in our mission for a more - Responsible employer sustainable world. - Integrating mission/strategy Category: stakeholders that have a close interest in Triodos Bank NGOs Influence on and expectations of Triodos - Fair remuneration Bank’s ability to execute its mission in a - Social inclusion responsible and ethical way with a positive - Sustainable investments impact on society and the environment. - Responsible employer Governments Influence on and expectations of Triodos - Fair remuneration and regulators Bank’s ability to execute its mission in a - Protecting client data responsible and ethical way - Resilient financial institution - Thought leadership Expect us to be compliant with laws - Integrating mission/strategy and regulations. Local communities Local communities expect to benefit from our - Engaging with communities financial activities. - Thought leadership - Products with a purpose - Social inclusion - Integrating mission/strategy Financial sector The financial sector is key to achieving our - Social inclusion mission to increase the positive impact of - Resilient financial institution finance on society and the environment (our - Thought leadership mission to change finance). - Integrating mission/strategy Media The media influence public opinion about - All topics can be relevant Triodos Bank and about the topics that are relevant for our mission 21


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    Stakeholder Definition Most relevant topics (see Material topics) Category: stakeholders that provide knowledge and insights Advisors They prompt us to reflect, rethink and explore - Engaging with communities and influencers new territory - Social inclusion - Thought leadership - Integrating mission/strategy Material topics and current developments activities. We also asked stakeholders to identify other possible issues, which are not currently included. We performed a thorough analysis of our material topics in 2019, including a consultation with our The survey and the materiality matrix provided us with stakeholders. This analysis led to 14 material topics. important input for this year’s materiality analysis. Triodos Bank co-workers in senior positions are topic We also incorporated the feedback we received at owners and have responsibility for each of these topics the Annual General Meeting and our participation and the associated stakeholder engagement. in various global strategic bodies. The analysis is supplemented by input from the topic owners Based on our thorough analysis last year, the material and several stakeholder events and interactions topics in 2020 remain unchanged. However, we have during the year, including sector-specific events in seen two relevant societal developments which have an various countries. impact on Triodos Bank. First, the Covid-19 pandemic confronted society, including our stakeholders, with As a result of the pandemic, Triodos Bank’s annual unexpected challenges. Second, the Black Lives Matter stakeholder meeting was, for the first time in our movement increased the urgency of making progress history, held virtually in 2020. The 25 attendees towards a more diverse and inclusive society. These represented all stakeholder groups. Several of Triodos developments have been extensively discussed with Bank’s topic owners participated in discussions about stakeholders throughout the year, both internally the areas for which they have responsibility. and externally. The first plenary session discussed the public role of This year we have done interviews with a selection Triodos Bank during the coronavirus pandemic. Our of our topic owners regarding developments and/or stakeholders advised us to establish a knowledge progress made in 2020 with regard to their specific platform, which could function as an online community topics. These topic owners represent the topics that where stakeholders could get in touch with each were addressed in the central stakeholder meeting of other and we could share our vision on topics such 2019: thought leadership, social inclusion, responsible as sustainability and social inclusion during the post- employer, and sustainable suppliers. The results of pandemic recovery. these conversations have been incorporated in the texts about these topics below. The second plenary session considered initiatives Stakeholder meeting and survey Triodos Bank could finance to stimulate social inclusion. One interesting remark was that Triodos The 14 material topics, the COVID-19 pandemic and Bank should not view social inclusion as a separate promoting diversity and inclusion were included in topic, but instead include it in other themes, such as the annual stakeholder survey. This was distributed food and agriculture, and energy and climate. to representatives from all the specific stakeholder groups in the countries where we have banking 22


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    We hosted a break-out session on diversity and social inclusion in Triodos Bank where stakeholders emphasised the importance of increasing diversity within the bank. Another session focused on digitalisation in society and the dilemmas this brings for Triodos Bank, for example regarding privacy and data protection. Many stakeholders agreed that Triodos Bank should give its customers more freedom in choosing which digital payment systems they want to use, as long as we inform them of the risks and costs. Materiality Matrix 2020 very high Integrating Products with mission/strategy a purpose Sustainable Client investments relationships Protecting client data Importance to stakeholders* Learning Thought organisation leadership high Resilient financial Sustainable institution suppliers Engaging with Responsible communities New employer sustainable Social ventures inclusion Fair remuneration medium very low/low very low/low medium high very high Importance to Triodos Bank** who we finance and how we deliver sustainable financial services how we operate as a responsible institution * influence on stakeholder assessments and decisions ** significance of Triodos Bank’s economic, environmental and social impacts 23


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    Material topics financial institution is considered important for Triodos Bank, as are protecting client data and working with The goal of working towards a fair and just society and sustainable suppliers. Material topics are discussed in finance sector has been key to Triodos Bank’s vision more depth below and covered in relevant sections in and mission since our foundation in 1980. Supported by the rest of the report. our values and principles, we have defined our essence as a values-based bank that deals with money in a Sustainable investments conscious way. This applies to everything we do, both Sustainable investments are at the heart of Triodos in our business operations and within the organisation. Bank’s work. The organisation promotes change by The material topics are at the heart of our strategy financing sustainable initiatives in key sectors. Their and underpin management objectives. Since the very combined impact gives Triodos Bank the credibility to start of our operations, we have been engaging and change finance. By increasing our influence, we are working together with key stakeholders to accomplish better able to stimulate positive systemic change in the our goals. Our stakeholders have repeatedly confirmed banking sector. that our material topics are also the most important in their eyes. The boundaries of sustainable investments are determined by Triodos Bank’s mission, business All the topics identified in the materiality matrix relate principles and minimum standards. These investments directly or indirectly to Triodos Bank’s purpose as an have a direct impact on entrepreneurs, businesses, integrated sustainable bank using money to deliver sectors and society, which is further detailed in positive change. Topics in blue are priorities for external the key sectors (Impact by sector (see page 49) ) stakeholders. They are defined by our business strategy of this annual report. The definition of sustainable and how we conduct client relationships. Material investments and whether or not to finance a topics shown in green have a more internal focus. prospective customer is limitedbyTriodos Bank’s They are affected by how we operate as a responsible lending and investment criteria and based on balanced institution. We can have a direct impact on these topics; decisions made by experts in Triodos Bank’s lending and for example, by the way we select suppliers or through investment teams. our remuneration policies. Procedures to assess and screen risks are undertaken Responsible, sustainable business is fully integrated by business managers supported by risk managers in Triodos Bank’s vision, mission and strategy. As such, within Triodos Bank’s European network of offices. there are no dedicated separate management plans This process is described in more depth in Risk for material topics. They are explicitly and implicitly and compliance (see page 75). Triodos Bank’s interwoven in Triodos Bank's strategic plans and goals. relationship managers interact with our borrowing customers on these issues. And all of our assets are In line with GRI’s mission to empower sustainable subject to positive and negative environmental and decisions, we engage in stakeholder dialogues to social screening. understand and incorporate their vision. We aim to integrate the outcomes of the various stakeholder New sustainable ventures engagements (including the survey and dialogue sessions) into our vision, strategy and policies, and New sustainable ventures are pioneering new implement them in our daily operations. enterprises that tackle at least one of society’s key challenges. For Triodos Bank, the transition to a The results of the materiality matrix suggest Triodos regenerative economy is one of the most important, Bank’s stakeholders want and expect us to continue to and a boundary for this material topic. Triodos be a leader in sustainable finance, with a strategy that Regenerative Money Centre (TRMC) aims to increase reflects and supports that mission. Being a resilient the conscious use of money through donations and 24


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    catalytic investments. The initiative’s goal is to support responsive and robust, links to our long-term a regenerative economy that serves people and is a resilience, a key principle of values-based banking. steward of the Earth’s ecosystems. Thought leadership TRMC aims to deliver its goals by supporting initiatives The analysis shows that our stakeholders emphasise that pioneer new business models with an explicit the importance of Triodos Bank being a thought leader. goal to regenerate society and the planet. It aims to As a frontrunner in the banking sector, the bank can support initiatives that can fulfil a catalytic role as stimulate change in others. This is true both for the potential game-changers. The goal of every donation activities we finance in specific sectors and for the and catalytic investment is to increase consciousness debate about how the banking system can better serve and provide new perspectives on current questions in society and meet the challenges we face. Our role in the areas where, for different reasons, traditional bank and development of the commitment in Germany of several investment products cannot provide an answer. financial institutions to the Paris climate agreement is an example of this in practice. One such initiative is Aardpeer, which aims to support a transition in the farming and food industry by As a frontrunner, Triodos Bank aims to be a catalyst promoting nature-friendly farming in The Netherlands for change in the banking sector, beyond its immediate through acquiring farmland and securing it for future activities of financing sustainable sectors. Changing generations so that it can be used by regenerative the financial system so that it is better able to serve farmers for a fair price. TRMC also financed Paper people while taking care of the environment we depend on the Rocks in 2020 to support transition in the on is fundamental to our mission, hence its inclusion paper industry by stimulating the production of tree- as a material topic. To do this, we need to not just be free paper. experts in banking, but also specialists in financing specific sustainable sectors. That's why we include TRMC manages four initiatives in one centre (Triodos sector-specific knowledge, as well as being an expert in Foundation, Triodos Sustainable Finance Foundation, sustainable finance, within the boundary of this topic. Triodos Renewable Energy for Development Fund and Triodos Ventures). This creates a larger funding base In 2020, we built on vision papers on the strategic and increases the focus of and synergies between the themes of food and agriculture, and energy and different teams of co-workers involved. climate (both published in 2019). We published a vision paper on managing the post-pandemic recovery Integrating mission and strategy that also addressed the important perspective of Since inception, Triodos Bank has integrated mission social inclusion. This argued that the coronavirus crisis and strategy. Unlike many other banks, we have always had revealed substantial shortcomings in the current focused on risk, return and impact. That means this is a economic and social system and called for a reset of material topic, the boundaries of which encompass its the global economy. Triodos Bank set out a concrete entire activity. policy, business and finance agenda that could protect the world from future pandemics having similarly This integration of mission and strategy influences dire economic consequences. Our proposals included everything: from our governance structure – which intensifying efforts to combat the climate emergency safeguards the mission of the bank – to our and other eco-crises, and working on a more socially exclusive focus on sustainable investments. Two of inclusive society. Triodos Bank’s three key strategic objectives, being a frontrunner in responsible finance and unlocking At a European level, we are involved in discussions our purpose, reference our mission explicitly. The third about a sustainable finance action plan, specifically strategic objective, to be one bank that’s redesigned, related to taxonomy, and the Non-Financial Reporting 25


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    Directive. We contributed to the development of a to, values-based banks, who engage closely with the global standard to account for the carbon footprint people they finance and the sectors they work in. of loans and investments via the Partnership Carbon Accounting Financials (PCAF), and are working on an As a bank with a stakeholder rather than shareholder accounting methodology for measuring the impact of focus, our impact on this topic applies to different types the financial sector with the Partnership Biodiversity of personal client. As part of this approach, we focus Accounting Financials. We signed the Finance for on improving the customer experience. Deepening our Biodiversity Pledge, committing ourselves to make a relationships has been a key strategic objective and positive impact on biodiversity. is an integral part of Triodos Bank’s model. Indicators of our engagement on the topic include Net Promoter Our work on this topic is led by Triodos Bank’s Chief Scores, a mechanism to determine how positively, or Economist and a small team at Head Office as well otherwise, our clients regard their relationships with as by senior management in Triodos Bank’s country Triodos Bank. In addition, a grievance mechanism is in and Triodos Investment Management operations. Most place for clients of all types. of the resources applied to this work are in the form of people’s time, typically via speaking opportunities, Social inclusion collaboration on working groups and in partnerships. Sustainability is not only about environmental issues, but also about social inclusion – and social inequality, Products with a purpose which is increasingly dividing society. Triodos Bank This topic refers to all our products because they all aims to support a society that protects and promotes contribute to the development of sustainable sectors. quality of life for all with human dignity at its core. Products with a purpose are an important part of our strategic effort to ‘unlock our purpose’. They increase We support those that contribute to a thriving, our relevance to clients and society. The products we mutually supportive community and society, within the offer serve to prompt or stimulate actions from our boundaries of this planet. The social and environmental clients. For example, private mortgages are available in transitions we face are inextricably connected and this Triodos Bank Netherlands, Spain and Belgium, which makes social inclusion a key strategic theme. Triodos incentivise clients to improve energy efficiency by Bank is stepping up efforts to put social inclusion into offering a discount on their mortgage rate as the practice for our clients, stakeholders and within the environmental performance of their home improves. organisation (see also Social (22% of total portfolio) (see page 51)). The latter is highlighted in more detail Products are developed and managed at a business below in ‘Responsible employer (see page 28)’ and in unit level by specialists in relevant fields. Platforms at the Co-worker report (see page 66). Group level also provide a space to agree significant new products, share best practice and evaluate their The Covid-19 pandemic has also shown that social performance across business units. This ensures that inclusion and sustainability go hand in hand. We cannot we can respond to local demand with appropriate, and must not see these two parts as being separate. mission-linked products and services. Everyone is affected by the pandemic, but the extent to which people are affected varies widely for individuals Client relationships all around the world. Our vision paper 'Reset the economy', published in 2020, stressed the importance Client relationships are a material topic, not least of a green and just recovery as a way to reduce the because strong relationships limit the chances of imbalance in society. loans and investments going wrong and make working through challenges with clients easier when problems do occur. This is especially true of, and important 26


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    Resilient financial institution When it comes to privacy and data protection, Triodos Bank believes: Being a resilient financial institution is important for - That data is an abstraction, reduction of reality and all banks and an explicit principle of values-based an interpretation of behaviour. The world cannot banking. It forms the bedrock upon which values- be captured in abstractions. People should not be based banks can deliver positive impact. An effective reduced to the data collected about them. And since approach to risk management is a key element data refers to the past it is not always a reliable ensuring the long-term resilience of Triodos Bank. The predictor of the future. boundaries of this topic include our institution and - That every individual has the right to be different our clients. in different situations, in other roles or at different times. The importance of being a resilient financial - That each individual should maintain power and institution assumed more prominence in 2020, control over their own life, including personal because of the negative impact on clients of the data. This calls for freedom of choice, fairness coronavirus pandemic. and transparency on data collection, processing and usage. Trading in Triodos Bank Depository Receipts was - That data is valuable; therefore, Triodos Bank has an temporarily closed in 2020 in response to the obligation to keep the data it holds accurate, secure heightened uncertainty in the economy as a whole, and confidential. including the financial sector, caused by the pandemic. We have since intensified engagement with Depository In addition to the issues we highlight here, we Receipt holders on this topic through webinars also publish an extensive data protection policy: and personal conversations in both 200 and 2021. ‘Respecting privacy and protecting personal data’ is Addressing the strategic challenge presented by the available at www.triodos.com/download-centre. suspension is an urgent focus in 2021. Fair remuneration Financial resilience is a topic highlighted in many places throughout the annual report. This includes the Despite continued public debate about remuneration, Impact and financial results (see page 36), Risk and this topic does not have the highest priority compliance (see page 75), and Financials (see page for our stakeholders and the bank. This may 97) sections. reflect satisfaction with the prevailing approach to remuneration at Triodos Bank and suggests that Protecting client data our policy is well understood. Remuneration within Triodos Bank is based on the principle that the bank’s Privacy of client data is important to both Triodos results are the joint accomplishment of all co-workers. Bank’s stakeholders and the organisation itself. Triodos Remuneration within Triodos Bank is neutral for all co- Bank believes money can help change the world and workers, without regard to gender, ethnic background, that data can have an impact as well. Data can be age, sexual orientation or distance from the labour used to better understand both the world and people. market. Triodos Bank does not offer bonuses and has This understanding can prevent waste, reduce costs a relatively low differential between its median and and create benefits for society. Data helps Triodos highest salary. For more details of our remuneration Bank become a better bank by improving our service policy and our performance as a responsible employer, offerings and operations. It helps us discover or predict please see ‘Remuneration Report 2020 (see page 90)’ risks and fraud, and enhance the reliability of our in this annual report. services. Triodos Bank knows the (personal) data it processes can be sensitive and can impact the privacy of clients and employees. As such, we are committed to respecting privacy and ensuring data protection. 27


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    Responsible employer Engaging with communities is a material topic, whose boundaries are defined by Triodos Bank’s positive As a responsible employer, Triodos Bank focuses lending criteria. These criteria and our broader on creating a welcoming, inclusive environment. We business model ensure that a very high percentage of believe each individual is important. Everyone should our operations involve engagement with communities. feel welcome, appreciated, safe and respected in We also ensure that potential borrowers and investees our organisation. are subject to a social and environmental assessment. As a bank that does not have a branch network The developments of last year have shown us even in most countries where we operate, many of the more the importance of our personal health and well- communities we serve are not local to the business. being and that of our friends, family and colleagues. For this reason, we do not conduct significant local Triodos Bank takes the health and safety of co-workers community development programmes. seriously. We have paid considerable attention over the past year to supporting co-workers in this area, Triodos Bank discloses the results of its own social, as can also be read in theCo-worker report (see environmental and cultural assessments in its annual page 66). In some countries, following local practice, report and other reports. This work is supported by a we have Health and Safety committees focusing on stakeholder engagement plan that’s underpinned by a these topics. detailed description of our stakeholder groups, as set out in ‘Materiality analysis (see page 20)’. Adiverse co-worker community contributes positively to Triodos Bank’s effectiveness and vitality. We must Triodos Bank has a grievance process that makes it therefore be aware of our own (unconscious) prejudices accountable to third parties. and how they are expressed in our culture and behaviour. This topic was brought to the fore in 2020 – Learning organisation both within Triodos Bank and among stakeholders – by the Black Lives Matter movement. Being a learning organisation is a strategic priority for Triodos Bank. Collective learning brings positive Triodos Bank’s role as a responsible employer is energy, drives innovation, enhances our efficiency and governed by a Director of Human Resources at our capacity to develop and change. Learning and Head Office and specialists in its business units development is relevant for all co-workers, regardless who have primary responsibility and resources to of their role or seniority. ensure the organisation delivers as a responsible employer, including the vitality and development Our stakeholders consistently urge us to be a of co-workers and a culture which supports our frontrunner in finance. We will continuously develop ambitions and mission. Their efforts are underpinned to ensure we fulfil this objective and truly live our by policies, including on remuneration, and grievance mission. As covered in the Co-worker report (see page mechanisms. Goals and targets are defined at Group 66), in line with adapting to virtual ways of working, level in the annual report’s Co-worker report (see page the challenges of 2020 have accelerated our shift to 66) and in local plans in the business units. learning in a more blended way. Engaging with communities Each Group Director is responsible for developing craftsmanship within their responsible functions. The By directly engaging in business relationships with Group Director Human Resources is responsible for entrepreneurs, personal customers and Depository developing and managing Group-wide learning and Receipt holders, Triodos Bank mobilises deposits and development approach, including our Triodos Academy, investments and uses them to finance values-driven talent and leadership development. This topic is entrepreneurs. This is delivering on our mission to be a catalyst for cultural, social and environmental change. 28


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    covered in more depth in the Co-worker report (see page 66). Sustainable suppliers Working with sustainable suppliers is an important material topic for Triodos Bank. These relationships allow us to extend our positive impact. We consider our role to be about creating awareness on impact improvement among suppliers. For this to succeed, we also need to build internal awareness on the interconnectedness of procurement and sustainability when selecting and maintaining relationships with our suppliers. This will be an area of focus in 2021. We seek to maintain good relationships with our suppliers and business partners. We strive to build connections between suppliers to help them share best practice and gain insights into making a positive impact. In 2020, our impression was that the majority of our contracts were not adversely affected by COVID-19. We further discuss this topic and the impact it has in the Environmental report (see page 71) of this annual report. 29


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    1.2 Strategic objectives In this section, we reflect in detail on our strategic objectives for 2020. Our conclusions, along with some key issues raised in our materiality analysis, determine our strategic objectives for 2021. Our strategic objectives and plans are informed by Within these three strategic themes, we identified nine our mission and by input from both internal and key objectives for 2020, which built on the progress external stakeholders. The overall direction of our made in 2019. The table that follows sets out Triodos 2019-2021 strategic plan remains valid, although – Bank’s key strategic objectives for 2020 and reviews in line with the sector as a whole - there is increased progress made against each of them through related pressure on our business model. We will continue to initiatives. The progress-at-a-glance column gives a work on the improvement of our long-term, structural summary assessment of 2020 for each objective, based performance in line with our strategic plan, building on on professional judgement and the opinions of co- the substantial measures we took in 2020. workers with an overview of these topics. Strategic themes 2019-2021 Despite the difficult circumstances during the COVID-19 pandemic, we have met most strategic goals and progress for 2020. At the same time, the external pressure The strategic objectives mentioned here are derived on our business model has increased. As a result from our 2019-2021 strategic plan. Overall, our of this we recognise that although we are on track, intention is to transform and make progress at three additional steps will be necessary going forward. levels – internally, within the organisation; through Strategic objectives for 2021 can be read in Strategic our relationships and interactions with our clients objectives for 2021 (see page 35). and stakeholders; and externally, by extending our influence beyond the organisation. These areas are addressed sequentially in our three strategic themes. Strategic themes 2019-2021 1. One bank Redesigned, responsive and robust. We have been improving our operating model by acting as one (bank). We are introducing unified, digitally supported processes to enhance the customer experience and improve our responsiveness to customer needs. This is leading to a step-change in efficiency and control in our organisation. 2. Unlocking Enabling customer engagement; activating our communities. We are empowering our purpose customers and communities to achieve impact through their actions. One way we are doing this is by becoming a reference platform for sustainable finance, offering carefully selected products from other providers as well as our own purpose-linked products and impact investment solutions. 3. Frontrunner in Leading by example; innovating finance for impact. We aim to take a leadership role in the responsible finance transition of the financial system by taking a frontrunner position. 30


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    Progress on strategic theme: One bank Our key objectives for 2020 How we did Progress at a glance 1. Business model enhancement: safeguarding our long-term sustainable business model. Profitable Lending growth determined by balancing the maximisation of our lending growth mission with the need to meet the minimum profitability hurdle. Rates and fees Measures have been taken in all banking entities to bring rates and fees more in line with economic reality. Sales of Assets under management (AuM) and inflow growth were on track, but Triodos Investment COVID-19 seriously hampered revaluations and volume development. Management (T- IM) funds We also postponed asset management mandates for institutionals and new product launches. Despite COVID-19 related impact, the actual profit exceeded budget due to related cost-control measures and lower fee erosion, which is relevant for sales. Management Our project to improve the quality and depth of management information information is on track as planned, but not yet finished. Business model Deep dives completed in Triodos Bank Germany (TBDE) and deep dive Belgium (TBBE). Deep dive commenced in Spain (TBES) and The Netherlands (TBNL); United Kingdom (TBUK) deep dive planned for Q1 2021 2. Operational optimisation: improving operational processes and the cultural foundations for optimisation. Operational process Domains surpassed their KPI target of EUR 10 million in benefits, in a setting in which COVID-19 government measures changed customer interaction overnight, moving access, on-boarding, lending and servicing fully online. LEAN We continued to build a culture of improvement by providing training to continuous process co-workers and improving KPI steering for business units and functional departments, among other measures. Digitalise We completed the conceptual design of the digital operating model (DOM), and started execution, including moving towards the mobile app as the main communication channel for retail customers. Data management We finalised the implementation of data governance and of processes related to data quality reporting. Our data quality reporting tool, dashboard and processes are now available and in operation 31


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    Our key objectives for 2020 How we did Progress at a glance 3. Risk management optimisation: safeguarding our licence to operate and managing inherent banking business risks to stay within our modest risk appetite. Strengthen Integrity (AML/CDD): a Group-wide shared vision and action plan have compliance been defined and approved to last until 2023. In terms of reporting, portfolio risk visibility and transaction monitoring have improved. In control via ICS Internal sign-off in May 2020 of the bank’s in-control statement (ICS) for 2019 with underlying control cycles and sign-offs for bank business units (BBUs) and Group functions. 4. Financial management optimisation: managing our balance sheet and profitability effectively and efficiently. IR risk and liquidity We took measures to manage the bank’s overall liquidity more actively, including a successful application for TLTRO. Capital strategy We continue to explore additional Tier-2 capital instruments; the actual MREL requirement has not yet been communicated to us. Cost containment We revisited our cost base, with EUR 5 million in cost-containment measures and by working out structural optimisation cases Met Mostly met Partially met Not met 32


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    Progress on strategic theme: Unlocking our purpose Our key objectives for 2020 How we did Progress at a glance 5. Reference sustainable finance platform: connecting with people and communities and supporting their desire to make a difference by dealing consciously with their money. Relationship tools Aggregator functionality (for retail customers’ impact) and the Impact Prism (impact of lending) are largely on track. Third-party products - TBES investment fund offering ready to launch in H1 2021: a product – investments suite of equity, mixed and bond funds, with Triodos Investment Management, Mirova and GLS as providers - TBES pension plan: two additional risk profiles available with third- party providers Mirova, GLS and Etica Sgr - TBDE added GLS as a provider 6. Unlocking our purpose via products: focusing on purpose-driven propositions that actualise our impact themes; developing strategies of transition per impact theme and building business lending and impact investment propositions onto them. Impact theme Food and agriculture paper published in June 2020. A draft of the social inclusion paper is under review. Impact Sales expansion in DACH and Nordics, expansion in Spain and France investment solutions postponed to 2021. On the product side, the mixed funds were successfully launched, a United Kingdom bond fund went live on 1 November 2020. Purpose products New product development has not advanced as much as we would have liked, as a result of changed priorities due to COVID-19. 7. Resilient and vibrant co-worker community: embedding consistent practices in local offices that conform to the Group Strategic Plan 2019-2021; fostering a leadership culture at all levels that enhances change effectiveness. Monitor governance This continues to be embedded with special attention for Group project on Directors and management teams, while taking account of the impact international of COVID-19. alignment Strengthen The COVID-19 crisis has stress-tested our change effectiveness. We change effectiveness proved our ability to maintain operations and adapt rapidly to new working conditions. An online learning platform has been introduced; its current focus is on legally required training. Met Mostly met Partially met Not met 33


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    Progress on strategic theme: Frontrunner in responsible finance Our key objectives for 2020 How we did Progress at a glance 8. Participate in global debate: influencing the public’s perception of the role of money by leveraging our networks and partnerships and participating in public debate on topics that relate to our mission; not just financing change, but changing finance. Leverage Our active involvement with the Club of Rome and support for its new sustainable networks Finance Impact Hub extend coverage for our stance on sustainable finance. For our frontrunner activities, see Changing finance (see page 63) Influencing ‘Reset the Economy’, our vision paper on the global pandemic, and our public debate response to the European Commission’s Renewed Sustainable Finance Strategy proposals were both widely cited, inviting opportunities for advocacy. Crowdfunding The United Kingdom crowdfunding platform continues to develop. It is building its investor base and optimising its platform. Promoting Given COVID-19 developments in 2020, relatively few initiatives have local initiatives come to fruition. 9. Triodos Regenerative Money Centre (TRMC): leveraging impact through TRMC, positioned alongside Triodos Bank and Triodos Investment Management. Leverage impact TRMC has published its manifesto and executed its first transformative via TRMC investments according to the key performance indicators defined in 2019. In addition, its strategy for Gift Money was finalised and the focus areas for Regenerative Money defined. Met Mostly met Partially met Not met 34


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    Strategic objectives for 2021 Unlocking our purpose: enabling customer engagement; activating our communities The strategic objectives for 2021 aim to ensure we meet the three-year objectives in the final year of our We are bringing purpose into our customer 2019-2021 strategic plan. We have identified 13 key propositions by connecting them more explicitly objectives, which are summarised below within our to impact. In doing so, we empower customers and three strategic themes. We intend to progress and communities to take action to realise that impact. transform within each of these themes by realising these objectives. We intend to become the reference platform for sustainable finance, offering carefully selected One bank: redesigned, responsive and robust products from other providers as well as our own purpose-linked products and impact We are improving our operating model by acting investment solutions. as one (bank), enhancing the customer experience and responsiveness to customer needs via unified, We have specified three objectives for 2021: digitally supported processes, leading to a step- 1. Create a prototype of a sustainable finance platform change in efficiency and control. design, including its value case and realisation roadmap and start executing on it. Within this theme, managing the potentially extensive 2. Use our vision of how societal change will occur effects of COVID-19 on our business model is the per impact theme (energy and climate, food and current priority. There are consequences for revenues, agriculture, social inclusion) to create scalable provisions, cost considerations and capital. We also business propositions, primarily for the bank and need to maintain focus on the longer-term business Triodos Investment Management. model as the underlying drivers of low interest rates and 3. Invest in measuring, managing and unlocking high regulatory costs have not changed. For 2021, eight impact information. key objectives have been formulated: 1. Maintain strong focus on profitable lending growth Frontrunner in responsible finance: leading by and stringent monitoring of the lending portfolio. example; innovating finance for impact 2. Enlarge our assets under management and related fee income by growing Triodos IM in a We aim to take a leadership role in the transition profitable way and rolling out the bank investment of the financial system, moving from niche player distribution strategy. to frontrunner. 3. Pursue balanced growth in mortgages, carefully considering impact, risk and return. We have identified the following two key objectives 4. Mitigate excessive inflow of funds. under this theme: 5. Invest in functionality to: 1. Execute our Change Finance Strategy 2020-2022 - digitalise the banking operating model; 2. Position the Triodos Regenerative Money Centre to - safeguard our licence to operate; increase and leverage our impact - improve customer experience; - and reduce costs. 6. Improve effectiveness and contain costs from centralisation and efficiency measures. 7. Refine the Group’s capital strategy based on recent economic developments, with DRs at its core. 8. Continue to improve our customer integrity monitoring processes. 35


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    1.3 Impact and financial results This section describes the main results achieved in 2020, at Group level as well as detailed per Triodos Bank division, its products and services, their broader impact and the prospects for the coming years. Because Triodos Bank integrates its values-based mission and strategy, these results combine both financial and non-financial performance. They provide insight into how our mission and strategic objectives performed in 2020. First, we present consolidated financial results. This is then broken down into results by division, including an overview of our loan and investment portfolio. Loans and investments are then linked to their impact, which includes positive impact and any negative impact from additional emissions generated by financed activities. 1.3.1 Consolidated financial results In 2020, the economic outlook worsened as a result of the COVID-19 pandemic. The forward-looking macro-economic parameters adjusted accordingly. IFRS This resulted in higher ECL provisions, which reduced From 2020, our financial reporting standard bank profitability. The build-up of the ECL provision has changed from Dutch Generally Accepted in 2020 was mainly related to the influence of these Accounting Principles (GAAP) to International forward-looking macro-economic parameters on our Financial Reporting Standards (IFRS). Triodos stage 1 and stage 2 ECL provisions. Additions, in Bank's continued growth and increasing 2020, to stage 1 and stage 2 provisions, i.e. expected internationalisation, as well as wanting to align losses, make up 57% of our total addition to the ECL ourselves with reporting developments in the provision, with just 43% relating to stage 3, incurred, banking sector, were the key factors driving losses. The risk profile of our portfolio also implies this decision. that any improvement in the forward-looking macro- economic parameters, perhaps because of better- than-expected post-COVID-19 economic conditions, IFRS-9 and the Expected Credit Loss Model might result in a reduction in Triodos Bank's overall ECL With the introduction of IFRS at the beginning of provision. Further details can be found in the following this financial year, Triodos Bank had to apply initial paragraphs on our financial results. and subsequent measurement rules in line with the underlying IFRS framework. Consequently, Triodos Consolidated financial results Bank replaced the credit provisioning model under At the start of 2020, Triodos Bank anticipated a year of Dutch GAAP with the expected credit loss (ECL) model stable development, building on the results of 2019. By in line with IFRS-9 for all loans and debt securities. The the end of February it was apparent that this year would ECL model calculates credit risk costs by anticipating be different. potential credit losses in future periods for performing loans (stages 1 and 2) and loans in default (stage 3). On 11 March 2020, the World Health Organization The underlying calculation parameters in the model declared that the coronavirus outbreak was a global and the overall ECL provision are closely monitored pandemic. The disruption to lives, livelihoods and our and updated on a monthly basis. The calculation business has been unprecedented. As the scale of for ECL stages 1 and 2 for potential future credit the global crisis became clear, economic outlooks losses (not yet incurred) are particularly sensitive worsened and financial markets became very volatile. to forward-looking macro-economic parameters, like Triodos Bank had to take some exceptional decisions: gross domestic product, unemployment rate, house - On 18 March 2020, the Executive Board voted prices, etc., for the countries in which Triodos Bank to suspend trading in Triodos Bank Depository is active. 36


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    Receipts (DRs). Trading resumed on 13 October 2020 with a new prospectus and restrictions in place, Impact drives our ‘impact, risk, return’ model limiting the number of DRs investors can sell in In essence, Triodos Bank aims to maximise one transaction. sustainability. It embraces the need to be profitable - Despite the mitigating measures we took, the but only as a means to a sustainable end. Profit patterns of buying and selling of Depository Receipts can be seen as a yardstick. It shows an organisation did not return to the balance we were expecting. The is working efficiently but says nothing about the ongoing uncertainty around the corona crisis and its content and the impact of what it is doing. longer-term economic effects have not disappeared; on the contrary, further lockdown measures and Triodos Bank uses a three-tier approach to making other restrictions were seen globally in the last lending and investment decisions, which starts two months of 2020. The trading pattern we were with evaluating the content of an activity and experiencing put into question whether the balance focuses on its sustainable impact. The first thing in trade in Depository Receipts will be restored in to consider is ‘How does this contribute to positive the current economic context. It also poses the social, environmental and cultural change?’; Next, question of what measures we can take to achieve we ask ‘Is it viable?' And finally, 'Is the idea rooted balanced trading, as we must now assume that in society – is it supported by those around the previous trading patterns will likely not recover in entrepreneur?' If the professional judgement is the foreseeable future. DR trading was therefore correct, financial and social profit should follow suspended on Tuesday 5 January 2021. almost automatically. - On 1 April 2020, the Executive Board decided to withdraw the dividend proposal which was Income published in the Annual Report 2019. This was a direct response to the recommendation made by In 2020, Triodos Bank’s income grew by 4% to the European Central Bank and De Nederlandsche EUR 305 million (2019: EUR 292 million). Triodos Bank on 27 March to all banks not to pay out Investment Management contributed EUR 45 million to dividends so as to prioritise supporting the real this figure (2019: EUR 51 million). The growth of Triodos economy by lending to customers during the Bank’s income was mainly driven by the growth in the COVID-19 pandemic. loan portfolio. This was achieved in a low interest rate environment and despite the economic effect of the We focused first on the implications for customers first, second and third waves of COVID-19. In 2020, net of the global pandemic, especially our borrowing commission income amounted to 35% (2019: 36%) of customers. We have been in close contact with most total income, in line with expectations. Further, Triodos of our business customers to assess and address their Bank participated in the TLTRO tender III.5 of the ECB short-term needs. We have contributed to initiatives for EUR 750 million. In 2020, this resulted in additional with other banks, governments and regulators to income of EUR 1.9 million. advance measures to assist business, particularly in the SME sector. Triodos Bank has been doing its Balance sheet utmost to reinforce our customers' economic resilience Triodos Bank’s balance sheet total grew by 15% to during the crisis by facilitating repayment holidays EUR 13.9 billion (2019: 12.1 billion) caused by a and payment deferrals across countries. We have significant growth of funds entrusted and lending helped other companies and organisations to remain during the year in all banking entities. This compares active with government-guaranteed loans and other with expected growth of between 5% and 10%. Triodos special agreements. Bank’s funds under management grew by 12% to EUR 6.4 billion (2019: 5.7 billion). In light of these developments, the consolidated financial results are summarised below. 37


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    Continuing growth in loans, deposits and equity, In 2020, our ratio of operating expenses against although hampered by the three waves of COVID-19 income remained stable at 80% (2019: 80%). This is and despite low interest rates and returns, shows that an exceptional achievement in a year in which our Triodos Bank’s commitment to values-based banking income ambitions could not be fully realised, with the remains relevant for people and businesses who coronavirus crisis dampening the pace of our loan choose to make a more conscious choice about their volume development. We managed to compensate bank and the sustainable contribution their money for unavoidable cost increases with cost-containment makes to the economy. measures and efficiency gains. Consequently, we were able to achieve a stable cost/income ratio in 2020. Customers Improving our efficiency continues to be a key focus The total number of Triodos Bank customers increased area for the bank. Given the challenges faced in by 1% to 728,000 during the year (2019: 721,000). this context we are pleased to have achieved a Surplus liquidity led to a reduced marketing spend reasonable return on equity during the year, despite in 2020; our main focus was on assisting borrowing the consequences of COVID-19. customers through the COVID-19 crisis and on data quality. These priorities likely reduced the rate of ECL provision and impairments methodology customer growth during the year. The current economic environment has, as a result Operational expenses of the COVID-19 pandemic, affected the credit risk of financial instruments. These changes in credit risk In 2020, our operational cost base increased by resulted in changes in expected credit losses (ECL). 5% to EUR 245.4 million (2019: EUR 234.4 million). We have applied the ECL model in line with IFRS-9 Technology and efficiency improvements further based on underlying forward-looking macro-economic optimised our cost base, but these cost reductions were parameters. We have updated these parameters to more than offset by external factors over which Triodos factor in the consequences of COVID-19. This affected Bank has little direct influence. Increased regulatory GDP growth and unemployment rates, which are key requirements, the deposit guarantee scheme (DGS), sensitivities for the stage 1 and 2 provisions in the and managing know your customer/customer due ECL model. diligence (KYC/CDD) and anti-money laundering (AML) processes all imposed additional costs during the Several judgements and estimations are made in year. Furthermore, the new way of working, which order to calculate ECL. The accounting policies and is a combination of working from home and working ECL model are consistent with the 2019 pro forma from the office, triggered an impairment of the office IFRS consolidated financial statements. Nevertheless, building in Zeist. This resulted in a non-recurring cost of the COVID-19 pandemic has had an impact on the EUR 5 million. judgements and estimations used in the ECL model. Triodos Bank has incorporated the current economic Regulatory expenses increased by EUR 2.2 million to environment in its forward-looking macro-economic EUR 16.6 million at the end of the year 2020. This was scenarios. This is done by using external market mainly driven by higher DGS costs as a result of the information and adding internal, specific information. significant growth of our funds entrusted. Compliance GDP growth is a key driver of credit risk. The section costs also increased, with additional co-workers being Critical judgements and estimates (see page 112) assigned to CDD and AML improvements and related in the annual accounts section presents the future IT investments. outlooks implied by the different scenarios defined by Triodos Bank. Operating profit before tax decreased in 2020 to EUR 35.5 million (2019: EUR 54.1 million). 38


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    Triodos Bank uses the three-stage model to classify EUR 24.2 million from EUR 3.7 million in 2019. The the ECL for financial instruments. Stage 1 includes impairments represent 0.27% of the average loan book the financial instruments that have maintained similar (2019: 0.05%). This relatively high impairment ratio credit risk status since origination. The ECL for this is primarily caused by increased stage 1 and stage category is determined by looking forward 12 months. 2 provisions as a result of the downward revision in Stage 2 includes financial instruments where there macro-economic parameters caused by the COVID-19 has been a significant increase in credit risk since pandemic. The resulting increase in ECL impairments origination. Stage 2 ECL is assessed by looking over has had a significant influence on year-on-year profit the entire lifetimes of the financial instruments. The levels. Furthermore, the new way of working, which ECLs for stages 1 and 2 are determined by a model is a combination of working from home and working that includes various metrics, some are client-specific from the office, triggered an impairment of the office others are based on macro-economic scenarios. building in Zeist. This resulted in a non-recurring cost of EUR 5 million. Stage 3 includes financial instruments which are in default. The ECL for this stage is also determined Profit and return on equity over the entire lifetime but calculated individually Despite the impact of COVID-19 on our loan book, considering default-specific scenarios. income and impairments, Triodos Bank was able to achieve a net profit of EUR 27.2 million, down by In the macro-economic scenarios, Triodos Bank has 30% (2019: EUR 39.0 million), primarily caused by taken into account that some sectors are expected to be the EUR 24.2m (2019: EUR 3.7 million) impairments more affected by the COVID-19 pandemic than others. for the financial instruments in 2020 driven by the Consequently, Triodos Bank has placed some sectors worsened macro-economic parameters that drive the fully into stage 2 in the course of 2020. ECL calculation model. These parameters worsened as a result of the COVID-19 pandemic and the economic In 2020, the provision for ECL was materially impacted consequences related to that crisis. This resulted in a by the effects of COVID-19. The ECL provision was positive return on equity of 2.3% in 2020 (2019: 3.4%). recalculated in line with the subsequent measurement rules under IFRS-9 by considering forward-looking Triodos Bank considers a return on equity of 3-5% as a macro-economic parameters, such as GDP growth realistic medium-term objective for the type of banking and unemployment numbers in Europe. The balance activity that Triodos Bank engages in. This has not been sheet provision for expected credit losses increased modified in light of the recent development. by EUR 18.7 million in 2020 to EUR 53.3 million. Fifty-seven percent of this provision increase was Triodos Bank will continue to work on improving its related to ECL stages 1 and 2, anticipating potential profitability while maintaining a solid equity base, credit losses in future periods rather than actual, capital ratio and a substantial liquidity surplus. The incurred losses. The calibration of this provision is bank recognises that this risk-averse strategy imposes carried out continuously, considering the changed constraints on its return on equity. forward-looking macro-economic parameters, as well as changes to support measures taken by governments Earnings per share, calculated using the average and regulators and the creditworthiness of our clients number of outstanding shares during the financial in our loan portfolio. year, were EUR 1.91 (2019: EUR 2.80), a 32% decrease. Triodos Bank proposes a dividend of EUR 0.65 Impairments per share, subject to policy recommendations and In the profit and loss account, the increased ECL guidelines of the ECB and/or DNB. The remaining profit provision is reflected in higher impairments for the will be attributed to the retained earnings of the bank, financial instruments. These increased sharply to 39


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    which is part of the net asset value of the bank, the basis Triodos Bank aims for a common equity tier-1 ratio of at for the value of the Depository Receipts. least 15.5% in the current regulatory context. Depository Receipts Dividend The number of individual Depository Receipt holders The Executive Board decided on 1 April 2020 to decreased overall in 2020. The number of Depository withdraw the dividend proposal which was published Receipt holders decreased from 44.401 to 43,614, in the Annual Report 2019. Initially, the proposal was despite a closed DR market for a significant period to distribute 50% of the profit for 2019 as a dividend. of time during 2020. Given the uncertainty of the wider impact of COVID-19 on society and the economy at large, the regulatory The price of the Depository Receipts for Triodos Bank authorities (ECB and DNB) strongly advised banks to shares (the issue price) is based on a financial model provide a clear signal to the public that they would make that derives the calculated net asset value (NAV) of maximum efforts to ensure the continuity of lending Triodos Bank divided by the number of Depository and to retain prior year profits until the extent of the Receipts (NAV per DR). As of 1 January 2020, the NAV of crisis was known. Triodos Bank, which is embedded in Triodos Bank is calculated in accordance with IFRS. the Dutch and European financial sector, felt it could not ignore such a request. We remain committed to our The Issue Price under Dutch GAAP, corrected for the dividend policy, which under normal conditions aims to estimated IFRS impact, was set on 3 July 2019 at distribute to depository receipt holders a fair share of EUR 82, in line with the new prospectus. This was the profits realised. EUR 1.00 lower than when trading was suspended on 4 June 2019. At the end of 2019, the net asset value For 2020, Triodos Bank proposes a dividend of EUR 0.65 for each Depository Receipt was EUR 83, based on the per share (2019: EUR 0.00), equivalent to a maximum NAV including the estimated IFRS impact. In our pro of 15% pay-out ratio (the percentage of total profit forma IFRS consolidated Financial Statements 2019, distributed as dividends) for the 2019 to 2020 two-year as published on 3 July 2020, the net asset value on period, in compliance with the latest DNB guidelines 31 December 2018 has been adjusted from EUR 84 to following the instruction of the ECB. EUR 82 in line with the new IFRS accounting principles. In due course, as the economy recovers from the Equity COVID-19 pandemic, Triodos Bank expects the ECB to end its restrictive regulations on dividend payments. Triodos Bank increased its equity by 1%, or We plan then to return to our long-term policy of EUR 7 million, from EUR 1.201 million to maintaining a 70% pay-out ratio. EUR 1.208 million. This increase includes net new capital by DR growth and retained net profit. The growth in equity, in combination with the implementation of capital requirements regulation measures and the strong capital base of Triodos Bank, ensured sufficient capital to meet the capital requirements set by the regulator. At the end of 2020 the total capital ratio was 18.8% (2019: 17.9%) and the common equity tier-1 ratio was 18.7% (2019: 17.9%). In December 2020, Triodos Bank issued tier-2 capital in the amount of EUR 6.4 million. 40


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    1.3.2 Triodos Bank divisions and results Triodos Bank in The Netherlands, United Kingdom and Belgium contributed to the Group’s profitability Triodos Bank’s activity is split between three in line with positive expectations. Triodos Bank Spain core divisions: Triodos Bank Retail and Business unfortunately suffered the most significant impact of Banking; Triodos Investment Management; and Triodos loan impairments based on the negative change to Regenerative Money Centre (see Triodos Bank Group the macro-economic parameters due to the COVID-19 structure, page X). pandemic. In addition, Spain’s loan production lagged in combination with a modest funds entrusted growth. The following section provides an overview of each In Germany, Triodos Bank progressed further in 2020, division in 2020, including a short description of despite the COVID-19 effects, and is close to making a their work, how they performed during the year and positive contribution to the Group’s overall profitability. prospects for the future. The last part zooms in on our In the United Kingdom, the smooth transition to loans and investments in our main sectors. In short: become a subsidiary executed in 2019 continued during - Retail and Business Banking, including Private the year 2020. Triodos Investment Management made Banking, was responsible for 76% of Triodos Bank’s a significant contribution to the Group. Finally, the net profit in 2020 (2019: 70%). closing down of the French activities has further - Triodos Investment Management makes up 24% progressed. This process has resulted in a partial (2019: 30%) of Triodos Bank’s overall net profit. release of EUR 1.3 million of the provision that was - Triodos Regenerative Money Centre became more created in 2019 (EUR 3.4 million). established during 2020 after its start in mid-2019. It sets out to manage non-consolidated entities that lend, invest or donate money with an impact-first perspective and a main goal to make pioneering, transformative initiatives possible. Products and services are offered to investors and savers enabling Triodos Bank to finance new and existing companies that contribute to the improvement of the environment or create social or cultural added value. Retail and Business Banking: European network Triodos Bank provides values-based financial services that reach hundreds of thousands of business and personal customers across Europe, growing sustainable banking’s impact and scale. While Triodos Bank’s values bind customers and co- workers, there are important differences between countries. Regulations, tax incentives and government approaches to sustainability are sometimes markedly different. Local culture, within and between countries, also affects how Triodos Bank approaches its work. Retail activities developed further in 2020 as people and sustainable enterprises continued to choose to partner with Triodos Bank. 41


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    portfolio by EUR 762 million (or 39%). The increase in Assets committed to the triple bottom line (TBL) business loans was 3% (2019: 6%). and real economy The low interest rate environment encourages Triodos Bank is a values-based bank. We lend customers to refinance at lower rates and to pay back and invest in the real economy because that their credit facilities earlier than planned. Both these is where we can have a positive impact on trends continued in 2020 and had a downward effect people’s lives and safeguard the environment. We on interest margins. The Expected Credit Loss (ECL) apply the Global Alliance for Banking on Values on loans and advances to customers increased by (GABV) scorecard using indicators like ‘assets EUR 18.7 million in 2020 to EUR 53.3 million, influenced committed to TBL’ and ‘assets committed to real by the COVID-19 pandemic which has significant economy’ to monitor and qualify impact. For more negative effect on the macro-economic parameters information and the complete GABV scorecard see used to calculate the Expected Credit Loss (ECL). section Understanding impact (see page 58)and Appendix IV– Global Alliance for Banking on Values Competition between banks in the lending market was scorecard – quantitative evidence of our impact strong in 2020. Mainstream banks are increasingly (see page 369). embracing sustainability as a business opportunity and competing aggressively to take advantage of Real economy assets in a values-based bank available lending opportunities. should be relatively high. In 2020, this was 75% (2019: 76%). Triodos Bank targets a ratio of loans The Loans and funds’ investments by sector (see page (in the real economy) to deposits of 75% to 85% to 46)section describes the relative volume of our loans make sure it always has enough money available and investments in the main sectors where Triodos (i.e. liquidity) to support its clients in case of Bank is involved. disruptions in the market. The total loan portfolio, as a percentage of the total amount of funds Funds entrusted entrusted, was 78% in 2020 (2019: 77%). More people want to use their money consciously to Triodos Bank has 74% (2019: 75%) of its total deliver positive change by depositing and investing with assets committed to triple bottom line. This Triodos Bank. This reflects a wider trend in society figure provides the best indication of a bank’s and increasing interest in sustainability in general, commitment to sustainability. Triple bottom line and sustainable finance in particular. Funds entrusted, assets refer to assets not only focused on including savings, enable Triodos Bank to finance economic benefits, but also on positive social and companies and organisations that benefit people, the environmental benefits. environment and culture. The Impact by sector (see page 49) and Climate Triodos Bank’s banking entities offer a variety of impact of our loans and funds' investments (see sustainable financial products and services as part page 53) sections describe this impact in the main of its key strategic objective of offering services that (sub-)sectors Triodos Bank finances. allow customers to participate in the transition to sustainable finance. Total lending The Group derived detailed retail and business Despite the challenges to grow in all sectors caused customer research during 2020 using Net Promoter by COVID-19, the overall growth of the loan portfolio Score (NPS) methodology. This technique is widely amounted to EUR 948 million (or 12%) in 2020. used across the business sector to measure This includes the growth of the residential mortgage customer satisfaction. 42


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    Triodos Bank’s overall NPS on all indicators for the in sustainable themes such as inclusive finance, retail group is 25 (2019: 28). This is much better food and agriculture, energy and climate, or in listed than the average for large banks. Triodos Bank’s companies that materially contribute to the transition principles as a sustainable bank are the main reason toward a sustainable society. The investment funds to recommend the bank. The equivalent figure for publish separate annual reports and most have their business clients is 1 (2019: 12). The decline in the own annual general meetings. NPS score for business clients is primarily due to the perception of costs associated with banking with Developments in 2020 Triodos Bank. The detailed results are now being used The COVID-19 pandemic has had a huge impact on as a key performance indicator to allow Triodos Bank the global economy and society, affecting lives and continuously to measure its customers’ views and livelihoods almost everywhere. The range of mitigating gather better insights. measures, from full lockdown to no lockdown, resulted in disruptions to commodity markets, global trade, Together, this resulted in continuing growth in all the supply chains and tourism, ultimately leading to countries where Triodos Bank operates due in part to economic downturn. a growing profile, more efficient and customer-friendly account opening processes, and a receptive market At the start of the pandemic, Triodos IM took steps keen to use their money more consciously. to ensure the well-being and safety of its co-workers and maintain operational resilience, swiftly followed Prospects for Retail and Business Banking by measures to preserve the financial health of the Triodos Bank expects to grow its bank balance organisation. COVID-19 also affected its investments, sheet more modestly, maintaining a stable loan-to- both positively and negatively. On the positive side, deposit ratio. It aims to grow its fee income with the Triodos Investment funds were less sensitive to particular emphasis on growing Triodos Investment the downward appreciation of those sectors impacted Management activities. most by the pandemic, such as the oil and aviation industry, as they are excluded from investments due to The bank will focus on the impact, profitability Triodos’ investment beliefs. As a result, especially at and diversification of its loan portfolio. In that the beginning of the crisis, the funds showed a relative context, we will put extra effort into identifying loans outperformance compared to the benchmark. On the to frontrunners in their fields; the entrepreneurs other side, some investments were negatively impacted developing the sustainable industries of the future. as the economic downturn increased counterparty risk Persistent low interest rates and increasing regulatory and uncertainties about recovery dominated financial costs continue to pose a serious challenge. And yet, markets, which put pressure on equity and bond prices. there are significant opportunities for Triodos Bank as To mitigate the increased risk and volatility, Triodos a frontrunner in responsible finance. With a controlled IM intensified the monitoring of all its investments growth strategy, we aim to generate maximum impact throughout the year. and stable profit levels. As a result of the mitigating measures and continued Triodos Investment Management confidence among its investor base, Triodos IM was able to realise an overall growth in assets under Investments take place through investment funds management by 10% (2019: 18%) to EUR 5.4 billion. or investment institutions which are managed by The net inflow of funds was 8%. The investment Triodos Investment Management (Triodos IM), a 100% funds overall gained 3% of their value following stock subsidiary of Triodos Bank. exchange movements in 2020. Triodos IM is responsible for 16 funds, for both individual and professional investors. The funds invest 43


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    In challenging conditions, Triodos IM continued to Organic Growth Fund became Triodos Food Transition focus on strategy execution, and specifically on Europe Fund. These name changes more effectively and implementing its strategic goal of becoming the asset accurately convey their impact investment approach manager of choice for investors seeking solutions for and align the funds more closely with the accelerating building impact investment portfolios. transition in energy and food. In addition, Triodos IM expanded its activities in existing Prospects for Triodos Investment Management and new markets. It has increased its exposure and 2021 will likely continue to be centred around the sales capacity in the Nordics. It also launched the challenges resulting from the COVID-19 pandemic. Triodos Sterling Bond Impact Fund, bolstering the pact Although a vaccination programme may ultimately lead investment portfolio in the United Kingdom market. to a rebound in economic activities, we expect that the global challenges for our society and economy resulting The process to end the activities of Triodos from the pandemic will continue to dominate in 2021. Vastgoedfonds N.V. was completed in January 2020 COVID-19 has so far proved a major setback for the through a final payment to shareholders. Following this global sustainability agenda as articulated in the UN final step in the liquidation process, the registration Sustainable Development Goals (SDGs) and private with the Trade Register of the Chamber of Commerce investors are needed more than ever to help to realise was terminated and the fund was removed from those goals. the register of collective investment schemes of the Autoriteit Financiële Markten. Within this context, Triodos IM will continue to build on more than 25 years’ experience of bringing together At the end of 2020, Triodos IM renamed two of its values, vision, and financial returns in investment. It funds. Triodos Renewables Europe Fund was renamed is helping to meet the European demand for values- Triodos Energy Transition Europe Fund and Triodos based investment solutions that are critical for the EUR 5.4 billion In 2020, Triodos Investment Management’s total assets under management increased to EUR 5.4 billion, a 10% increase (2019: 18% increase). 44


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    transition to a more sustainable society. Through its and invests in change-makers from the perspective of funds, Triodos IM aims to extend its impact in the key impact first. areas related to its mission and the SDGs. TRMC is a relatively new division within Triodos Triodos IM’s strategic focus in 2021 will continue Bank. Therefore 2020 has been a year of strategic to be on retail investors through distributors, development, defining optimal ways to put gift money high-net-worth Individuals, family offices and and catalytic money to work to regenerate society and (semi-) institutional investors. Impact mandates the planet in close collaboration with Triodos Bank and that accommodate institutional investors seeking Triodos Investment management. investment opportunities with positive impact will have a strong focus in 2021. In addition, Triodos IM’s The main goal for 2021 is to bring the strategic international distribution strategy will be broadened direction into practice and to optimise cooperation by adding more European markets to its network, with Triodos Bank and Triodos Investment Management including France and Spain. in order to jointly accelerate our activities on our transition themes. Triodos Investment Management will continue to pursue development and growth, both through expansion and development of existing funds and by creating new impact investment products. Triodos Regenerative Money Centre Triodos Regenerative Money Centre (TRMC) has functioned as a distinct business unit within Triodos Bank since 2019, managing both donations and catalytic investments. These assets under management are not consolidated in the balance sheet of Triodos Bank but are included in our total funds under management. In 2020, the assets related to catalytic investments were EUR 57 million. The assets under management related to donations were EUR 9 million. In 2020 EUR 2.2 million was donated to 156 initiatives. The TRMC’s primary objective is to manage entities that lend, invest or donate money that have, as its main goal, making pioneering, transformative initiatives possible. Financing transformational change requires both gift money (or donations) and the development of more blended (and/or higher risk) finance products. As part of the Centre, Stichting Triodos Foundation raises gift money from its clients and donates it to initiatives aligned with Triodos Bank’s core transition themes. Catalytic investments are provided through three funds of which Triodos Sustainable Finance Foundation is the largest entity. This entity lends to 45


  • Page 46

    Loans and funds’ investments by sector Total outstanding loans and funds’ investments by sector 2020 4% 17% 3% 30% 56% 21% 12% 8% 22% 22% 21% 32% 29% 23% Loans Funds investments Total Environment Residential sustainable mortgages Social Municipalities and other Culture Impact equity & bond funds The improved quality and growing size of the loan is then evaluated, and a decision made about whether and investment portfolio are important indicators it is a responsible banking option. The criteria or of the contribution Triodos Bank makes towards a guidelines Triodos Bank uses to analyse companies more sustainable economy. All the sectors it works can be viewed at www.triodos.com and www.triodos- in qualify as sustainable and the companies and im.com for investment management. projects it finances contribute to delivering Triodos Bank’s mission. Triodos Bank’s focus remains on the existing sectors in which it has already developed considerable expertise To make sure that Triodos Bank only finances and where it considers more growth, diversification and sustainable enterprise and enterprises transitioning innovation is possible. to sustainable approaches, potential borrowers are first assessed on the added value they create in these areas. The commercial feasibility of a prospective loan 46


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    Environment 29% (2019: 31%) Impact, risk and return The subsector ‘Energy and Climate’ consists of Traditionally, banks have focused on risk and renewable energy projects such as wind and return, primarily to avoid negative outcomes, and solar power, hydro-electric, heat and cold storage, to enable investors to understand the performance and energy-saving projects. It also includes of the institution. But when an institution sees its environmental technology projects, for instance main goal as maximising returns to shareholders, through recycling companies. risk and return are often viewed in a short- term context. This neglects the company’s wider Within the subsector ‘Sustainable Property’ we finance relationship with – and effect on – society and the new buildings and renovation projects to reach environment. Triodos Bank uses three parameters high sustainability standards. It also includes nature- – impact, risk and return – to understand its conservation projects. overall development and place in the world. This promotes a long-term perspective. The focus on The subsector ‘Sustainable Food and Agriculture’ also delivering sustainable social, environmental and includes organic agriculture and projects in Europe and cultural impact as well as risk and return implies emerging markets, across the entire agricultural chain a positive, holistic outlook and a horizon that is – from farms, processors, wholesale companies and inherently longer term. sustainable trade to natural-food shops. Impact: We want to deliver sustainable impact. Social 22% (2019: 23%) When we talk about ‘impact’, we are concerned This sector contains loans and funds' investments to with what our actions, in particular financing a scale of businesses and (non-profit) organisations and investing, mean to people in concrete terms. with clear social objectives, such as social housing, Impact means delivering positive outcomes, not community and social-inclusion projects. It also covers only at a transactional level but also at a social and the health and elderly care sector and the inclusive ecological system level. finance and fair-trade businesses sector. Risk: Because our starting point is to deliver greater Culture 8% (2019: 9%) impact over the long term, it is essential that we are financially resilient. We therefore focus This sector covers loans and funds' investments to on maintaining a consistently high-quality loan organisations working in education, retreat centres, portfolio. Triodos Bank’s modest risk appetite is an religious groups, recreation, cultural centres and important building block for this resilience. organisations, and artists. Return: We have been able to deliver stable, fair Residential sustainable mortgages 21% (2019: 17%) returns over a sustained period. For us, financial The retail sector of the loan book is primarily comprised performance is important because being a resilient of residential sustainable mortgages, including a small financial institution is essential for the delivery of amount of other private loans and overdrafts on lasting, sustainable change. current accounts. 47


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    Municipalities 3% (2019: 4%) Under municipalities we include sustainable loans and funds' investments to local authorities without a specific sector classification and some limited short- term loans to municipalities. These investment-type loans in the public sector are included in the loan portfolio in accordance with regulations related to financial reporting. Impact Equities and Bonds 17% (2019: 16%) The Impact Equities and Bond funds that are managed by Triodos Investment Management focus on direct investments into listed equities and bonds of companies, institutions and projects that drive the transition to a sustainable society. Each investment in our Impact Equities and Bonds strategy has been hand-selected for its contribution to our sustainable transition themes, while applying our strict minimum standards. 48


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    1.3.3 Impact by sector EU Sustainable Finance Disclosure Regulation (SFDR) from 10 March 2021 onwards. More on this topic can be Our vision on measuring impact reflects a focus on found in Understanding impact (see page 58)’. delivering our mission. We aim to find qualitative evidence of impact and back it up with numbers when it’s relevant. Our more qualitative impact can be Sustainable Development Goals and Triodos Bank found in the case studies online (www.annual-report- triodos.com). This section summarises the positive The United Nations launched the 17 Sustainable impact in numbers our loans and investments generate Development Goals (SDG) in 2015. The SDGs are within our three main impact sectors (environmental, a universal set of targets and indicators designed social and cultural impact). to help countries end poverty, protect the planet and ensure prosperity for all. They have quickly Impact information is mostly collected through become an established framework with relevance the interaction of our relationship and investment for businesses, government and civil society. They managers and their clients and projects. For 2020, resonate strongly with Triodos Bank and our this interaction was, for affected sectors, primarily identity as a values-based bank. We have been about assessing clients’ immediate needs as a result working on this agenda since our founding in 1980. of the COVID-19 pandemic. Gathering impact data was therefore challenging for our clients and relationship Triodos Bank is asked to describe its approach to managers. The pandemic resulted in significant the SDGs by various stakeholders. This is the fifth changes in some impact indicators, mainly in the year that Triodos Bank will include the SDGs in its cultural sector and to a more limited extent in the social reporting. We do this in three distinct ways: sector. Nevertheless, Triodos Bank maintains a positive 1. By linking relevant content throughout the outlook on the impact our finance makes possible. report to specific SDGs with an SDG icon. 2. Via the mapping exercise that follows Triodos Bank’s approach to measuring and managing inAppendix III – UN Sustainable Development impact is described in 'Understanding impact (see page Goals (see page 343), including updates where 58). Our main guidelines for impact by sector are: we have made specific progress. • Our calculations only measure projects with a direct 3. By identifying and reporting against several relationship to our finance or investment activities. specific targets, which underpin each of • For the impact indicators we use the contribution the SDGs. approach. This means that we include 100% of the impact when we co-finance a project unless this And while we continue to plot our own path on a represents the results unfairly. journey to a sustainable, low-carbon and inclusive • The impact data included in the Executive Board future, we welcome a framework that enables us to report is in scope of the review procedures communicate better with our fellow travellers. The performed by the independent external auditor. SDGs do just that. They provide powerful language Subjecting our impact performance to the audit to communicate integrated sustainability goals process (limited assurance) is a logical step for an that are more urgent now than ever. integrated business with sustainability at the core of its financial activity. Environment, including mortgages (50% of total portfolio) For more detailed information on the measurements per sector, see www.triodos.com/impact-themes. Renewable energy A fundamental transition is needed to decarbonise our The data that Triodos Bank collects for the Impact by economy. By lending and investing in solar, wind and Sector section will be essential for the adaptation of the 49


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    hydro energy, Triodos Bank stimulates this transition. The organically managed land on the farms which We finance and co-finance projects that increase the Triodos Bank and Triodos Investment Management use of renewable resources and projects that reduce financed in 2020 could produce the equivalent of the demand for energy and promote energy efficiency. 33 million meals in 2020, enough food to provide a sustainable diet for approximately 30,000 people By the end of 2020, Triodos Bank and its climate and (2019: 28,000). Together they financed approximately energy investment funds were financing 561 projects 32,000 hectares of organic farmland across Europe. (2019: 504) in the energy sector. This included: This equates to farmland the size of a football pitch for - 484 sustainable power-generating projects related every 14 customers, each one producing enough for 610 to wind (201), solar (252), hydro (30), or a combination meals per year. of wind and hydro (1) - 42 sustainable power projects in a We also financed 30,000 hectares of nature construction phase and conservation land (2019: 31,000 hectares), - 35 energy-efficiency projects including 23 heat and representing around 400m2 of nature and conservation cold storage projects, 1 greenhouse gas-neutral land per customer. This land is important for biomass project and a diverse range of energy- the sequestration or absorption of CO2 from efficiency initiatives. the atmosphere. Through our share in these renewable energy projects, In 2020, over 35,000 smallholder farmers (2019: about 0.9 million tonnes of CO2 equivalent emissions 98,000) in eight emerging market countries worldwide were avoided (2019: 0.9 million tonnes). were paid directly and fairly upon delivery of their harvests as a result of the trade finance that Triodos The total capacity of the power-generating projects was Investment Management funds provide to farmers’ 5,100MW (2019: 3,900 MW), producing the equivalent cooperatives and agribusiness. The lower number of of the electricity needs of 4.8 million households smallholder farmers in 2020 is related to one company worldwide or 0.7 million based on an attribution that did not receive trade finance during 2020. approach (2019: 0.7 million). The farmers’ harvests brought 10 different fair- Despite a 30% higher total capacity our share in the trade and organic products to international markets, avoided emissions and the number of households including cocoa, coffee, rice and quinoa. In 2020, did not increase. This is due to a change in the the funds' clients had 56,000 hectares of certified emission factors (from International Energy Agency organic farmland under cultivation (2019: 64,000). to International Financial Institutions Framework), an An additional 8,000 (2019: 6,000) hectares was in update of the number of households conversion factor conversion – a significant indicator of future growth (World Energy Council) and changes in finance and as it takes time before conventional farmland is ready to attribution percentages per project. be certified organic. Sustainable property and private sustainable Organic farming and nature development mortgages Our relationship with the soil and the Earth requires a systemic perspective. A world view that views As well as offering green mortgages that incentivise agricultural land as the starting point for a limitless households to reduce their carbon footprint, Triodos process of extraction is unsustainable. Instead, Bank and Triodos Investment Management finance agriculture needs to be seen within the context of a new building developments and renovation projects natural system. This system includes nutrients, water, for properties to reach high sustainability standards. biodiversity, animal welfare and social conditions. In 2020, Triodos Bank and Triodos Investment Management financed directly via retail banking and via sustainable property approximately 17,600 homes 50

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