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Economy

Charity Bank: a social purpose alternative to the high street

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Over a decade ago at 11 Downing Street, Gordon Brown – then chancellor of the exchequer in Tony Blair’s Labour government – cut the ribbon on a bank that had just secured approval from the regulators.

This article originally appeared in The Guide to Sustainable Banking 2013. 

In Brown’s own words, though, this was “more than just another bank”. It had, he said, “an emphasis on financing, not just fundraising; investing, not just giving; fostering a new spirit of self-sufficiency in the voluntary sector and changing the way people see their own communities.”

At the time, Bank of England governor Sir Edward George said, “I can’t over-emphasise the importance for all of us in both economic and social terms of bringing those on the outside into the mainstream.”

The bank in question was Charity Bank. Whereas Brown has elevated to and descended from the frontline of British politics in the 11 years since, Charity Bank has transcended from a small start-up to an increasingly popular option for socially-conscious individuals looking to exit the stranglehold of the mainstream banks.

Lending solely to charities and social enterprises using money from investors and depositors, it is now one of the leading alternative options away from the high street. Its 2012 report says that two-thirds (66%) of the projects it has funded would have been untenable without its financial backing. Meanwhile, 95% of borrowers claim that Charity Bank’s loan had made a “major or significant” contribution to the fulfilling of their core mission.

In March 2013, the bank underwent a fairly fundamental change. Having launched as a registered charity and an authorised bank in 2002, the organisation announced its intention to cease to be a charity. New banking regulations had begun to make it difficult for Charity Bank to operate simultaneously as a regulated bank and a charity. The move to change its status, it said, would enable the bank to raise capital from a wider community of social investors, helping to boost its lending to the charitable and social sectors.

Not one depositor withdrew money from Charity Bank on the ground of our change in status”, says Patrick Crawford, the bank’s chief executive.

A few raised questions, to which we responded, but we’re not aware that significant concerns were expressed to the Charity Commission either. We felt that by setting out the rationale and background, and by providing reassurance that our mission and our approach to the mission would not be changed, our supporters could feel confident that we would stay the same safe, social purpose bank that they had invested in or deposited money with.”

Having spent 26 years at Deutsche Bank, and also working in fund management for Africa with a number of European aid agencies and as a civil servant, Crawford replaced former chief executive Malcolm Hayday in November 2012.

The decision to drop Charity Bank’s charitable status was made prior to his arrival.

What borrowers will see is an ability to make bigger loans and to make more of them”, he told Blue & Green Tomorrow in March, adding that the bank’s emphasis will remain on making relatively small loans.

They will be the beneficiaries of what will be a rather larger bank with more firepower to lend to the sector. We will remain a mission-driven and impact-focused bank and our ability to grow means that we will achieve financial sustainability. We haven’t achieved this yet because of our relatively small size, but it is in the interests of the sector.”

Crawford’s three-year vision for the organisation includes helping the bank to grow and raise new capital to support this growth – something helped by its new status. And research conducted in 2013 suggests the need for a bank like Charity Bank is as strong as ever, with 69% of charities saying they had been unsuccessful in getting loans from one of the big banks.

All the evidence that we have is that there are continuing market failures in the provision of debt to smaller charities and smaller social enterprises and that the original vision that led to the creation of the bank in 2002 holds good”, says Crawford.

The board is clear that in order to respond to that demand, we should grow and ensure that we’re an enduring institution that can be available to respond to the needs of the sector, that is within the sector, understands the sector and is committed to enabling the sector to achieve the impacts that our borrowers wish to make.

The mission is quite simply to do more of the same on a bigger scale, so that more beneficiaries can benefit from the activities of our borrowers and help them to achieve their purposes on a stronger and better basis.”

But with growth comes greater responsibility. Charity Bank currently runs open days – this year held in London and Manchester, with plans to expand that reach as its customer base expands – which allow borrowers, savers and investors to congregate and talk about what their money is doing, and it also puts on Different Journeys events where savers can visit charities have received one of its loans.

For Crawford, this is an aspect of his bank that he wants to retain: “It’s quite important for us to retain that sense of personal contact. Savers can see and talk to the bank’s management, they can share a table with a borrower and bank staff, and they can feel part of a community with a shared interest. We think there is close alignment between the savers, the bank, its board and staff, and its borrowers and that this is a distinctive feature of the bank.”

Keeping this personal touch – the ability for customers to meet the people looking after and investing their money – is crucial if Charity Bank wants to remain a haven for socially-conscious individuals. Particularly at a time when one of the major failings of the mainstream banks – according to numerous independent surveys – is the impersonal treatment they hand out to customers.

There is a lot of appetite from consumers for a more diverse finance sector”, Crawford concludes.

The government is keen to promote the challengers to the large banks and therefore, there is support for new forms of delivering financial products to SMEs or to the social investment sector be it through crowdfunding platforms or through alternative forms of social purpose banks.

There is also ample evidence that the ethical consumer market is growing in this country, and banks such as Charity Bank that combine a financial return with a social return are responding to this growing movement, which has been reflected by consumer attitudes in lots of other walks of life.”

Further reading:

Has your bank been naughty or nice in 2013?

Different Journeys: Charity Bank shows savers the good their money is doing

Small is beautiful: why alternative banks need to step up to the mark

Charity Bank drops charity status and sets sight on sustainable growth

The Guide to Sustainable Banking 2013

Economy

Report: Green, Ethical and Socially Responsible Finance

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“The level of influence that ethical considerations have over consumer selection of financial services products and services is minimal, however, this is beginning to change. Younger consumers are more willing to pay extra for products provided by socially responsible companies.” Jessica Morley, Mintel’s Financial Services Analyst.

Consumer awareness of the impact consumerism has on society and the planet is increasing. In addition, the link between doing good and feeling good has never been clearer. Just 19% of people claim to not participate in any socially responsible activities.

As a result, the level of attention that people pay to the green and ethical claims made by products and providers is also increasing, meaning that such considerations play a greater role in the purchasing decision making process.

However, this is less true in the context of financial services, where people are much more concerned about the performance of a product rather than green and ethical factors. This is not to say, however, that they are not interested in the behaviour of financial service providers or in gaining more information about how firms behave responsibly.

This report focuses on why these consumer attitudes towards financial services providers exist and how they are changing. This includes examination of the wider economy and the current structure of the financial services sector.

Mintel’s exclusive consumer research looks at consumer participation in socially responsible activities, trust in the behaviour of financial services companies and attitudes towards green, ethical and socially responsible financial services products and providers. The report also considers consumer attitudes towards the social responsibilities of financial services firms and the green, ethical and socially responsible nature of new entrants.

There are some elements missing from this report, such as conducting socially responsible finance with OTC trading. We will cover these other topics in more detail in the future. You can research about Ameritrade if you want to know more ..

By this report today: call: 0203 416 4502 | email: iainooson[at]mintel.com

Report contents:

OVERVIEW
What you need to know
Report definition
EXECUTIVE SUMMARY
The market
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
The consumer
For financial products, performance is more important than principle
Competition from technology companies
Financial services firms perceived to be some of the least socially responsible
Repaying the social debt
Consumer trust is built on evidence
What we think
ISSUES AND INSIGHTS
Creating a more inclusive economy
The facts
The implications
Payments innovation helps fundraising go digital
The facts
The implications
The social debt of the financial crisis
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
PUTTING FINANCIAL SERVICES IN AN ETHICAL CONTEXT
An ethical economy
An ethical financial sector
Ethical financial services providers
GREEN, ETHICAL AND SOCIALLY RESPONSIBLE ISSUES IN FINANCIAL SERVICES
The role of investing
Divestment
The change potential of pensions
The role of trust
Greater transparency informs decisions
Learning from past mistakes
The role of innovation
Payments innovation: Improving financial inclusion
Competition from new entrants
The power of new money
The role of the consumer
Consumers empowered to make a change
Aligning products with self
THE CONSUMER – WHAT YOU NEED TO KNOW
For financial products, performance is more important than ethics
Financial services firms perceived to be some of the least socially responsible
Competition from technology companies
Repaying the social debt
Consumer trust is built on evidence
Overall trust levels are high
THE ETHICAL CONSUMER – SOCIALLY RESPONSIBLE ACTIVITIES
Payments innovation can boost charitable donations
Consumer engagement in socially responsible activities is high
Healthier finances make it easier to go green
SOCIALLY RESPONSIBLE COMPANIES
37% unable to identify socially responsible companies
Building societies seen to be more responsible than banks….
….whilst short-term loan companies are at the bottom of the pile
CONSUMER TRUST IN THE BEHAVIOUR OF FINANCIAL SERVICES COMPANIES
Overall trust levels are high
Tax avoidance remains a major concern
The divestment movement
Nationwide significantly more trusted
Trust levels remain high
CONSUMER ATTITUDES TOWARDS GREEN AND ETHICAL FINANCIAL PRODUCTS
For financial products, performance is more important than principle
Socially conscious consumers are more concerned
CONSUMER ATTITUDES TOWARDS TRANSPARENCY
Strategy reports provide little insight for consumers
Lack of clarity regarding corporate culture causes concern
Consumers want more information
THE ROLE OF FINANCIAL SERVICES FIRMS IN SOCIETY
The social debt of the financial crisis
THE SOCIAL RESPONSIBILITIES OF FINANCIAL SERVICES FIRMS
For consumers, financial services firms play larger economic role
Promoting financial responsibility
CHALLENGER COMPANIES AND SOCIAL RESPONSIBILITY
Consumer trust is built on evidence
The alternative opportunity
The target customer

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Economy

A Good Look At How Homes Will Become More Energy Efficient Soon

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energy efficient homes

Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.

There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.

1. The Rise Of Smart Windows

When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.

If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.

2. A Better Way To Cool Roofs

If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.

Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.

3. Low-E Windows Taking Over

It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.

They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.

4. Magnets Will Cool Fridges

Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.

The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.

5. Improving Our Current LEDs

Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.

That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.

Maybe Homes Will Look Different Too

Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.

ShutterStock – Stock photo ID: 613912244

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