Sustainable banks continue to significantly outperformed their “too big to fail” competitors in such key measures as return on investment, proportion of equity loaned out and strength of capital, according to an update of the Global Alliance for Banking on Values’ (GABV) groundbreaking March 2012 study.
The new report, released last month, confirms and bolster the first study’s conclusions with expanded data spanning from 2003 to 2012. The report, Real Banking for the Real Economy: Comparing Sustainable Bank Performance with the Largest Banks in the World, provides further statistical evidence that sustainable banks like New Resource (a GABV member) often surpass Global Systemically Important Financial Institutions (GSIFIs) in positively affecting vital areas of the real economy.
For example, the report found that sustainable banks maintained stronger capital positions than mainstream banks (7.2 percent compared with 5.5 percent), making them less vulnerable to economic upheaval. Yet sustainable banks also delivered almost the same ROI as bigger banks over the study cycle (0.56 percent versus 0.57 percent)—with the added bonus of less volatility and higher returns in the wake of the global economic meltdown (0.53 percent compared with 0.37 percent). Sustainable banks’ social impact was even more impressive: their 75.9 percent loan-to-asset ratio (compared with the big banks’ 40.1 percent) meant they put nearly twice as much of their money to work in communities.
Presenting the report’s findings at the annual GABV meeting in Washington, D.C., Chairman Peter Blom emphasized that transitioning to a sustainable global banking system is not only crucial to long-term economic stability, but also practical because sustainable banks have already proved themselves in the marketplace.
“The results matter because we need a stronger banking system to support a more resilient, modern economy,” Blom told the crowd at Georgetown University. “If we take the mounting evidence seriously, we have an unprecedented opportunity to build a more diverse, transparent and sustainable banking system in the interests of us all.”