A profile of Triodos Bank

This article by Andrew Bibby, in a slightly different form, was first published in the Observer, 2004

The specialist bank well known for its pioneering work in developing ethical investments in Britain is currently finding itself forced to defend its reputation in a High Court action brought by a former business customer. [update below]

Triodos Bank has built up a track record for its role as banker for a range of social and community-based ventures and for its work in developing the idea of ‘ethical' share issues. It is responsible for the technical and fulfilment aspects of the current Café Direct issue, launched by the fair trade company in February 2004 and already half way to its £5m target. Café Direct shares will be tradeable on the Ethex (Ethical Exchange), another innovative recent Triodos initiative.

Triodos describes itself as a bank which lends only to organisations that ‘create social, environmental and cultural value', and its latest newsletter reinforces its progressive credentials with, among other things, a discussion of sustainable farming, a critique of current world trade rules and publicity for a community-controlled village shop. It is unfortunate for the bank, therefore, that it has a dissatisfied customer prepared to confront it in the High Court. The civil case pitting property developer Ashley Dobbs against the bank, which has been stewing for several years, finally began at the High Court on March 16 this year (2004).

The case concerns the Crickhowell ‘televillage', an innovative development of 39 homes in this south Wales town which was designed to attract teleworking pioneers. Ashley Dobbs, now in his forties, began property developing in his early 20s before, among other things, following up interests as an underwater photographer and documentary film-maker. He was an early telework enthusiast and helped found what is now the Telework Association.

Dobbs' dispute with Triodos hinges on the bank's decision to withdraw support for the Crickhowell venture, pushing his company Acorn Televillages into receivership in 2000. He claims that, despite some problems with contractors, the development was fundamentally profitable and that the Acorn assets subsequently sold off by the receivers for £2.1m have since been shown to have been worth much more. He also alleges that Triodos actively worked in the period before receivership to undermine his position. He is representing himself in the High Court in the £18m case, which also has Acorn's two administrative receivers as defendants.

Dobbs says he chose Triodos as banker because he identified with its environmental principles. His views have changed. For Triodos, he says, “I would place an ‘u' and an ‘n' before the word ethical.”

Triodos is strongly contesting his case. “We don't accept the claims he's making. We're confident we have a good case and that the Court will recognise this,” says Charles Middleton, Triodos UK's managing director. The bank says that it will make a full statement at the end of the case.

The Ashley Dobbs case relates to decisions taken by an earlier management team at the bank. However, the current attention will inevitably focus attention on Triodos's background. The bank's British office is in a fine old building overlooking Clifton Downs in Bristol but Triodos has its head office in the Netherlands and is regulated by the Dutch central bank. Triodos also operates in Belgium and Spain.

Triodos's roots (like the UK bank Mercury Provident which it took over in 1995) are in the anthroposophy movement. The term refers to the ideas of the Austrian spiritualist thinker Rudolf Steiner who died in 1925 and whose interests included education, ‘biodynamic' agriculture, eurythmy (movement as art) and therapeutic medicine. Triodos Bank's statutes committed it to anthroposophical principles until 1999 when this formal link was dropped, and in recent years the bank under its current head Peter Blom has embarked on a policy of reaching out beyond Steiner adherents and of broadening its appeal. Nevertheless Triodos's origins are reflected in the fact that most of the Dutch directors come from within anthroposophy, and Triodos continues to be the banker for many Steiner-inspired projects.

The bank describes itself as a ‘transparent bank' and spells out in detail all the UK ventures in which the bank has given overdrafts or loans in a sixteen-page brochure ‘Inspiring Change'. However Triodos has to overcome something of a problem of transparency in its own structure. Behind the single Triodos brand is a parallel legal structure in the Netherlands: Triodos Bank NV is legally separate from Triodos Holding NV, which operates as an international fund manager, provides microcredit in developing countries, and runs a significant venture capital operation in the Netherlands. The two companies are ultimately both controlled by Foundations, with strong roots in anthroposophy and with overlapping membership. The Bank's Foundation issues dividend-earning but non-voting ‘depository receipts' which are held partly by private investors but also by a number of Dutch commercial companies.

Charles Middleton's appointment as head of Triodos in Britain in 2003 followed a managerial hiatus. Glen Saunders, UK managing director at the time of the Crickhowell affair, has since left the bank and his successor Mark Hayes (a well-respected figure who previously set up Shared Interest, the ethical savings co-operative) stayed only a few months before parting company after a disagreement, unspecified but not believed linked to the Ashley Dobbs case.

Hayes's departure was more likely to have been linked to his discomfort with another legacy issue from the early days of Triodos's operation in Britain, the treatment of former Mercury Provident investors. About 560 people had taken advantage of two early ‘ethical' share issues to invest a total of about £1.3m in the British bank. At the time of the 1995 takeover they were given replacement stock in a new subsidiary Triodos Stockholding plc, with an initial pledge that the stock value would be tied to the parent bank's own share value. Unfortunately this arrangement failed to allow adequately for UK/Dutch exchange rate movements, so that by 2001 Triodos Stockholding found itself technically insolvent. As a consequence, ex-Mercury Provident shareholders were asked to agree to a variation in the terms of their stock, reducing the value of their investment by 16%-20%. It meant that £50 originally invested in Mercury Provident became converted in 2003 into Triodos stock worth about £42.

Charles Middleton, who has brought in several new senior managers for the UK bank, will no doubt be wanting to look to the future rather than dwelling on past problems. He comes from a banking background, having joined the bank from Barclays where he held senior management positions for the bank in Africa, the Caribbean and India. He speaks with obvious passion of the potential for developing the bank's distinctive values in Britain, where it currently has about 23,000 account holders and about 550 borrowers. Triodos's next event is an annual meeting for investors, borrowers and friends next month [Apr 2004], when a range of invited speakers will be exploring ‘how values-driven businesses and organisations can reach wider audiences without compromising their principles'. In this respect, Triodos's efforts to reconcile its role as a profit-generating commercial business with its desire to encourage an ethical approach to money certainly makes it a fascinating case study in its own right.

UPDATE APRIL 2004

The recent High Court case between Triodos, the Bristol-based ethically minded bank, and Crickhowell televillage developer Ashley Dobbs has ended with the judge finding in the bank's favour.

Triodos, who acted as banker for the innovative Crickhowell development, had been criticised by Mr Dobbs after his company, Acorn Televillages, had been forced into receivership. But the High Court judgment exonerates Triodos's actions and those of its senior management at the time. In his judgment, Mr Justice Lewison describes Mr Dobbs as a ‘man of vision' who nevertheless lacked the necessary financial management skills for the project. Triodos, he says, had acted with ‘sympathy and forbearance' towards Acorn.

The Judge did find Triodos technically liable for a breach of its responsibilities towards remedying snags on the estate, although he suggested that this merited only nominal damages of £2. Ashley Dobbs, who has the right to further legal action in this respect, describes the judgment as “disappointing” and says that he is considering his next steps.

Update, Dec 2009. At the court of appeal in 2005, the appeal judges clarified the law in relation to bank guarantees (such as Ashley Dobbs had offered Triodos), in situations where loan agreements were subsequently subject to amendment or revision.

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