Better ways of banking (Jonathon Porritt)

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Better ways of banking

In all the finger-pointing about the moral turpitude and defective judgement of the mainstream banks, we've heard mighty little about the banks that aren’t being bailed out or (as with Barclays) are desperately seeking new capital from China or the Middle East. So let's just celebrate for a moment the inspiring success of the Co-op Bank (and indeed the whole Co-op Group). To be sure, the credit crunch is also having an impact on them, but nothing like in the same business-threatening way as for the big banks.

At the very least, the relative resilience of this business model should prompt both Treasury and the sector's regulators to think again about alternative ownership and governance structures in the financial services sector. Astonishingly, the default response from government ministers at the moment is simply to patch things up as fast as possible and re-regulate if necessary – although I think it’s fair to say that if Adair Turner – the new boss of the FSA – gets his way, then we might see a rather heavier hand than the light touch that has been preferred up until now.

But if ever there was a time to re-think the governance structures of the industry as a whole, and to promote the self-evident benefits of mutuals (the Nationwide must surely be feeling just a little bit pleased with themselves at the moment!), co-operatives and smaller ethical banks like Triodos, this has to be it.

So it's a great time for the Co-op as the leading advocate of this kind of ethical approach to come out fighting. Although I had heard that the Bank had a TV ad in preparation, it was just brilliant to see it out there last week, playing into people's deep anger at the cataclysm that the erstwhile "Masters of the Universe" have inflicted on the world, and into their understandable concern about their own financial situations.

For completely different reasons, I was equally delighted to see the Co-op's latest adverts in the papers telling people about their forest offset scheme – an area of replanted rainforest the size of 324 football pitches. Right from the start, the Co-op has always argued that offsetting is a critically important part of any integrated carbon management strategy – do the efficiency bit, flat out, then do the renewables bit, flat out, and then do the offset bit flat out as well.

Whatever you may think about forest-based offsets, it's really important to hear more of that kind of voice. Whether or not they've thought it through, the direct consequence of some of the NGOs drip-dripping their corrosive cynicism over any and every mention of offsets is that most people are either deeply confused or deeply suspicious of offset schemes in the private sector – even the best of them. This is so damaging. It’s impossible to promote best practice (as in "Gold Standard", properly verified and audited offsets) by trashing the very idea of offsets in principle.

The Co-op's message to the NGOs is a simple one: wise up, guys. If you're more concerned about maintaining your purist image than you are about getting some really good stuff going on the ground (that does, in however small a way, contribute to a lower-carbon world), then you’re doing nobody any favours.

That's the kind of eye-poking stuff you can get away with when you're the UK's most trusted bank!

Posted by Jonathon Porritt on October 31, 2008 3:42 PM | Permalink

Comments (8)

Hi Jonathon,
The Greens in the Scottish Parliament, for whom I work, have been making pretty similar arguments about the Cooperative Bank, about credit unions, and about the still-mutuals. Here's a bit of Patrick Harvie on the subject.
http://www.theyworkforyou.com/sp/?gid=2008-10-30.11892.2

Incidentally, please do come up and see us in Holyrood. Given the finely poised numbers in the Scottish Parliament, it's the closest any UK Greens have yet been to sharing power, and well worth a visit.

James

Posted by James Mackenzie | October 31, 2008 10:14 PM

Of course Jonathan, you're right to recognise the 'success' of the Co-op and ethical banking. The example of ethical banking is a model for the future, that is, the idea of melding two seemingly contradictory things, banking and ethical behaviour. It's the recognition that in order to do things better (in this case, more green or ethical) then you have to take a pragmatic approach to find workable solutions. In this case, you have to except that we need banking and wealth generation (and yes bankers, heaven forbid!) but it can be done ethically, banking for people and not just for the profit motive; in the end it's better to have ethical banking, rather than unethical banking.

You rightly point out the offset detractors. As you say, do the efficiency, do the renewables, AND do the offset; in fact, do anything and everything that will arrest the destruction of the environment and the depletion of resources. The crisis in the world has got to the stage where you cannot be an idealist or a purist -- we must ditch the idealism and do everything we can to save the situation. As you say, we need more "really good stuff going on" and we need it now.

Posted by 4fooey | November 1, 2008 12:25 AM

There is much to applaud about the ethics and responsibilities of the Co-op and Triodos quoted in your Blog. Globalisation has meant that sources of finance and equity has involved money arriving from countries whereby the lending culture and definitions of 'interest' and 'profit' are different. If we are talking about business models and governance structures should we not be adopting more Eastern philosophical approaches to lending and altering the Banking culture to a more empathic relationship, e.g along the lines of Sharia Finance which emphasises sharing in yields and breaking the western banking model of acheiving profit on differential interest management.

I think the whole concept of usury requires a re think and maybe it's time we re opened that debate as well.
The Coop in particular have a micro finance initiative in Bosnia, I would be interested to know whether any Muslim customers are comfortable with this product. With the emergence of Eastern Economies, I can see a real struggle to see which Banking way is Better. The cynic in me thinks that as Middle Eastern money is based on oil exports , mainly to the West and China and India are reliant on Iron and steel imports from the West, then the Western model will prevail, irrespective of the ethics involved in extraction of raw material.The age of the 'mutuals' and a bias towards partnership in the lending contract should be more prevalent than it is, my fear is that Western Capitalism may not advance to this state, despite the best efforts of the Banks you quote.

Posted by Len Jones | November 1, 2008 6:07 PM

The point about offsetting is very thought provoking. The reason why hard-core activists are so against any form of offsetting is that it is used by many businesses for completely the wrong reasons. For instance, a car manufacturer offsetting the first 5,000 miles is clearly not intending to reduce emissions but to increase them, make money and impress customers by their "green" credentials. The NGO's fear that condoning any offsets will be the thin end of the wedge, but that does not mean to say offsets are always a bad thing.

If people or businesses already reducing emissions have the money but not the ability to make further cuts, and this money can enable bigger reductions elsewhere, clearly there is a gain to offsetting. In a successful carbon reduction strategy offsetting will be the lesser method, just a means of transferring cuts around. The problem is that business likes passing round the offsets, but somebody somewhere has to cut emissions by more than the offset or else it is a tragic waste of good intentions.

Posted by Justin | November 5, 2008 2:09 PM

Justin, you're right to point out "somebody somewhere has to cut emissions", but surely offset works as part of the complete package of measures to fight climate change.

Jonathan said "do the efficiency bit, flat out, then do the renewables bit, flat out, and then do the offset bit flat out as well," which puts energy efficiency and savings at the top, then finding alternative energy sources, then offset, in that order.

The efficiency and savings strategy is not pushed enough -- individuals can make a huge dent in their individual use of energy and resources. 10% reduction in energy use would be 'easy' for most people, 20% reduction would be very achievable; something like 40-50% reduction of energy use would be difficult for most people and businesses, but not impossible. Next comes alternatives and/or renewables -- I'm confident in the next few years alternative energies will be found -- most urgent is an alternative, non-cargon fuel for cars and other road transport. But we need offset as well. All these surely have their part to play.

Posted by 4fooey | November 7, 2008 5:36 PM

Offsetting is ok provided it is third priority not first or second priority...though the quality and nature of the offsetting needs to be right too. For instance tree planting as part of an offsetting scheme is highly problematic in many circumstances, with potentially very large inaccuracies in assessing carbon sequestered.

Posted by Glenn Vowles | November 7, 2008 10:28 PM

Will all the pragmatists in the house please make themselves known? Sorry, you'll have to speak louder, can't hear you over the susurration emanating from the NIMBYs.

Sorry again, shouldn't be so facetious...

Moral and ethical choices? Who do we rely on to point us in the right direction: politicians, the private sector? This is our individual choice and our individual responsibility. Majority rules, so guess it'll be business as usual then!

Posted by Ironspider | November 19, 2008 2:07 PM

Nothing about Local Exchange Trading Systems, from the patron of Fair Shares, a charity which has completely given up on advertising it's existence to the Gloucester community, except to anyone who happens to spy the 'free' mini bus a select bunch of people have dibs on?

Go their City Works office and ask the staff how many of them get paid in Time Hours?

Yes, bit of a rant, but FS is a pale shadow of the Gloucester LETS scheme that preceded it, and *they* didn't get a tenth of the financial assistance from the government/council...

Posted by Joe K | February 2, 2009 10:38 AM

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