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Final presentation - Strategic Management

Four-Continent Social Consulting Group B.V. USA – Japan – France - Brazil/Colombia

Simi GambhirSimi Gambhir

Katsuya NakamuraKatsuya Nakamura

Thierry ZeddaThierry Zedda

Renata Peregrino de BritoRenata Peregrino de Brito

Antonio PatronAntonio Patron

Technology

StrategyImplementation

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Final presentation - Strategic Management

Where will we draw the line?

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Final presentation - Strategic Management

SUSTAINABLE SUSTAINABLE BANKINGBANKING

Triodos BankTriodos Bank

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Overview

• Banking Industry OverviewBanking Industry Overview

• What is Triodos Bank?What is Triodos Bank?

• Financial AnalysisFinancial Analysis

• Strategic IntentStrategic Intent

• RecommendationsRecommendations

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Banking Banking OverviewOverview

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Overview

How do banks function?

InternationalMarkets

FinancialMarkets

Households Companies

Impo

rts

Taxes

Savings

ExportsInvestm

ents

Investments

Consumptions

Production

Government

The Changing Environment of Banks. M.H.A. Jeucken, J. J. Bouma. GMI Theme Issue: Sustainable Banking, 1999.

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Sources of Income for a BankSources of Income for a Bank

Interest Earning Provision Earning

• Work on its own behalf and risk.

•Interest income received on loans minus the interest expense for borrowed funds

• Works on behalf of and at the risk of its clients.

• Securitization and investment banking

Banking Industry

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4 Main Functions of a Bank4 Main Functions of a Bank

Transform money by scale

Transform money by duration

Banking Industry

Creditors have short-term surpluses, while debtors have long-term needs

Money surpluses of one person are not the same as shortages of another

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4 Main Functions of a Bank4 Main Functions of a Bank

Banking Industry

Transform money by location

Bank brings money from a creditor in Rio to a debtor in Rotterdam.

Risk Assessment Value the risks of various investments

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What is Triodos What is Triodos Bank?Bank?

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Overview

Triodos (tree-odos): from the Greek “tri hodos”

meaning “three way approach”Social

FinancialEthical

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“The Triodos Bank aims to be a pioneering force in the world of sustainable banking … to contribute to a more decent, dignified and kinder society and a world that respects people, the environment and culture.”

Mission

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Objectives

Provides funds for entities that add value to society, culture or the

environment

InformationInformation

ProfitProfit

FundsFunds

Makes funding and investment decisions transparent to customers

Funds are economically sound and positively impact the bottom line

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Key Dates in History

1971 Triodos Foundation established

1980 Triodos Bank fully licensed in The Netherlands

1990 First ¨Green fund¨ offered and listed on the Amsterdam Stock Exchange (AEX)

1993 Belgian branch opened

1995 UK branch opened

1997 Triodos Green Fund on AEX

1998 Solar Investment Fund introduced

2004 Spanish branch to be opened

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Products and Services

Personal Savings

• Fairtrade Saver • Medical Foundation • Amnesty Saver • Organic Saver • Earth Saver • Just Housing • Dana Partnership

Shares and FundsShares and Funds

• Cafédirect Share issue• Ethical Property

Company• Golden Lane Housing

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Financial AnalysisFinancial Analysis

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Bank

Borrowers Depositors

Triodos

Depositors Borrowers

Transparency

FinancialReturn

Maximization

Customer Characteristics

VisionFinancial 　 & 　 Social

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€ 233,814€ 280,907

€ 328,965€ 386,587

€ 466,975

€ 0

€ 200,000

€ 400,000

€ 600,000

€ 800,000

€ 1,000,000

1999 2000 2001 2002 2003

Deposits Loans

Key Figures

20% in average

(000s)

Rapid growth

€ 407,810

€ 667,181

€ 838,013

€ 534,770

€ 729,108

€ 0

€ 200,000

€ 400,000

€ 600,000

€ 800,000

€ 1,000,000

1999 2000 2001 2002 2003

(000s)

20% in average

Data source: Triodos Annual Report

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Data source: Triodos Annual Report

52.5%49.3%

53.0%57.3%

55.7%

€ 0

€ 200,000

€ 400,000

€ 600,000

€ 800,000

€ 1,000,000

€ 1,200,000

1999 2000 2001 2002 2003

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Loan

Deposit

3years

Key Figures

Saving-lending mismatch due to rapid growth and time lag

Ratio of Loans to Deposits

% of Deposits

(ABN AMRO:90%)

(000s)

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0.54%

0.70%

0.45%0.51% 0.48%

0.00%

0.50%

1.00%

1.50%

2.00%

1999 2000 2001 2002 2003

0.54%

0.70%

0.45%0.51% 0.48%

0.87% 0.88%0.93%

0.61% 0.67%

0.00%

0.50%

1.00%

1.50%

2.00%

1999 2000 2001 2002 2003

ABN AMRO Bank

Key Figures

Pre-tax profits % of total assets

0.54%

0.70%

0.45%0.51% 0.48%

0.82% 0.87%0.87% 0.88%

0.84% 0.77%

1.20%

0.67%0.61%

0.93%

0.00%

0.50%

1.00%

1.50%

2.00%

1999 2000 2001 2002 2003

Triodos potential (90% util of deposit)

Social projects can be profitable

Not only Financial,but Social

Return

Data source: Triodos Annual Report

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Strategic IntentStrategic Intent

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Sustainability & Strategy

In the Banking Industry:• Slow change• Reduces Risk for Lending• But also bring new opportunities

The Sustainaility concept in Business:• Long term strategy in a profit maximization world• Being conscious of limited resources

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Sustainable banking

Offensive banking

Preventive banking

Defensive banking

Sustainability Typologies

Four different attitudes commercial and investment banks have towards sustainability.

• Sustainability as a core strategy

• Look for highest sustainable rate of return

• Applicable to niche players

The Changing Environment of Banks. M.H.A. Jeucken, J. J. Bouma. GMI Theme Issue: Sustainable Banking, 1999.

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Models of Sustainability

Business Leaders

Employees

Business PolicyBusiness Practise

Bank

Public AdministrationRegulations

NGO´s

Investors

Sustainability as new banking strategy

Sustainability as value driver

O. Weber, R. Reiland and B. Weber, “Sustainability benchmarking of european banks and Financial Service organizations” 2002. ETH.

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“…seeks to restore a sense of relationship between depositor and borrower which […] tends to be broken in normal banking practice.” (C.J. Cowton, 2002)

Affinity Finance

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• Investments go beyond the usual risk and return analysis

• Specify more precisely the uses of

funds

• Low annual expenses (overhead)

• Fee charges • Diversification:

Insurance products

•First mover advantage •Few business sectors

ValueValueValueValue

CostCostCostCost SpeedSpeed

Costumers

Competitor

Company

Value, Cost and Speed

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Strategy Implementation

External:External:• The bank only invests in

social and environmental harmless business, projects and sectors.

• Annual Report• The Meerwaarde Fund

Internal:Internal: • ISO 14001 certification for environmental management • Gender equality regarding salaries

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Strengths Weaknesses

Opportunities Threats

•Stakeholder approach•Transparency•Unified proposal

•Niche orientation•Innovative products

•Increasing demand•Alliances with other institutions

•Financial Return•Fiscal “green scheme”•Acquisition threats

SWOT analysis

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RecommendationsRecommendations

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Recommendations

Alliances & Partnerships

Problem

Recommendation:•Valuable partner to other financial institution•Exchange: sustainability expertise & brand recognition •Access to new customers and markets.

OpportunityOpportunity

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Recommendations

Sustainable GrowthHow to keep the same transparency level?

Problem

•Recommendation:•“Keep small”•Change the current level of information

OpportunityProblem

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Recommendations

Ratio of savings to lending.

Are sustainable initiatives limited?

Problem

Recommendation:• Administrative speed to evaluate and reach new market• Risk taking attitude - less mature projects

OpportunityProblem

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Recommendations

Customer Service

Problem

Recommendation:•Inclusion of payment services: debit & credit cards, and internet banking•Incorporate the banking facilities

OpportunityProblem

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Recommendations

European Focus

Problem

Recommendation:• Local resistant to foreign bank• Do not ignore US market.

OpportunityOpportunity

Us MarketUS$ 2.16trn

European Market€ $ 336bi

18.7%

Problem

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Conclusion

So…what can you do to support sustainability?

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THANK YOUTHANK YOU