SUSTAINABLE ACTION: LENDING BUSINESS
The bank was founded in 1966 as Darlehenskasse im Bistum Essen eGmbH. One of the main tasks of the company, as specified by its founding fathers, has become increasingly important over the years: providing church organisations with credit and advice on financial matters. The bank's corporate credit customers all undertake social activities, focusing on healthcare and social services, and are usually based in Germany. In recent years, we have expanded to include numerous microfinance institutions in developing and transforming countries, offering them refinancing loans. As part of our sustainability strategy, in addition to the social components of fighting poverty and encouraging development, these transactions also bring in profits for the bank. We are also seeing a growing demand for financing products that focus on renewable energies, energy efficiency and other environmental issues.
Multilateral development banks such as the European Bank for Reconstruction and Development (EBRD) in London and the Inter American Development Bank (IDB) in Washington are now keen to work with BANK IM BISTUM ESSEN. Of our retail lending portfolio, 98 per cent consists of property financing, focusing heavily on the owner-occupied sector. In the interests of both customers and the bank, our advice focuses on ensuring sustainable loan servicing capacity. Programmes that support eco-friendly construction – e.g. the odernisation of houses to make them more energy-efficient – are always considered as a matter of course. We do not actively offer consumer credit, which is the cause of many people's debt problems, nor do we advertise such credit. The criticism of banks in Germany that demand excessively high interest for overdraft facilities on employees' salary accounts does not apply to BIB, as our overdraft interest is always far below the market average. Our prices for lending are fair. We calculate our terms with all due consideration of processing, risk and equity capital costs, as well as entitlement to profits that are intended to secure the long-term existence of the bank rather than serve as profit maximising tools. Although this entitlement to profits is relatively low, processing costs are kept down as they are handled very efficiently, and risk costs are also excellent thanks to the above-average credit ratings of our customers. The price of the loans we offer is the interest rate. We do not charge processing fees or any other (hidden) fees. However, when it comes to providing loans for development financing abroad, we sometimes have no choice but to charge processing fees because the due diligence costs are so high. Nevertheless, this does not impair our competitiveness, because our return expectations are more modest than those of our competitors.
SUSTAINABLE TREASURY MANAGEMENT
Because customers have a great deal of trust in a church cooperative bank, BIB has a sizeable net liability position and therefore needs to invest heavily in the financial and capital markets. In order to avoid counteracting the bank's sustainable retail lending business by making unethical investments in the financial markets with its own funds, BIB has long since added ethical criteria to the three classic investment pillars of profit, security and availability. This principle is anchored in our 'Guidelines for ethical, sustainable investments by BANK IM BISTUM ESSEN', which include negative and positive criteria for socio-ecological justifiability and incorporate the best-inclass approach.
We believe that a sustainable company analysis is a better way of identifying various risks such as reputational risks, consumer boycotts and the legal consequences of unethical corporate behaviour. However, we also acknowledge that such analyses exceed our in-house capabilities. For this reason, the bank works with imug, an independent research institute in Hanover. Shares and bonds undergo a multi tier selection procedure to assess their sustainability. The list of criteria used is regularly reviewed by our own sustainability committee. The bank's aim is to harmonise all its investments with financial and socio-ecological criteria, whether those investments are loans to customers or financial and capital market investments. We know that capital market investments are a tricky topic from the point of view of sustainability. For one thing, information about listed companies is rarely complete when it comes to social and environmental responsibilities. Furthermore, there are often major differences in opinions about moral questions in society, as well as amongst the members and customers of the bank.
This means that we find ourselves, along with our customers, advisers and interested initiatives, in an ongoing search for ethical, sustainable investments in line with socio-ecological considerations, knowing full well that there neither is nor will be a perfect, incontestable solution. Based on these criteria and our bank's own standards, a comprehensive analysis was completed on 31 December 2012, which concluded that a low percentage – 4.48 per cent – of our own investments were in 'unacceptable' institutions. We are working to improve this figure further, but it should be noted that changing volumes in our investment portfolio alone can cause fluctuations.
The bank was founded in 1966 as Darlehenskasse im Bistum Essen eGmbH. One of the main tasks of the company, as specified by its founding fathers, has become increasingly important over the years: providing church organisations with credit and advice on financial matters. The bank's corporate credit customers all undertake social activities, focusing on healthcare and social services, and are usually based in Germany. In recent years, we have expanded to include numerous microfinance institutions in developing and transforming countries, offering them refinancing loans. As part of our sustainability strategy, in addition to the social components of fighting poverty and encouraging development, these transactions also bring in profits for the bank. We are also seeing a growing demand for financing products that focus on renewable energies, energy efficiency and other environmental issues.
Multilateral development banks such as the European Bank for Reconstruction and Development (EBRD) in London and the Inter American Development Bank (IDB) in Washington are now keen to work with BANK IM BISTUM ESSEN. Of our retail lending portfolio, 98 per cent consists of property financing, focusing heavily on the owner-occupied sector. In the interests of both customers and the bank, our advice focuses on ensuring sustainable loan servicing capacity. Programmes that support eco-friendly construction – e.g. the odernisation of houses to make them more energy-efficient – are always considered as a matter of course. We do not actively offer consumer credit, which is the cause of many people's debt problems, nor do we advertise such credit. The criticism of banks in Germany that demand excessively high interest for overdraft facilities on employees' salary accounts does not apply to BIB, as our overdraft interest is always far below the market average. Our prices for lending are fair. We calculate our terms with all due consideration of processing, risk and equity capital costs, as well as entitlement to profits that are intended to secure the long-term existence of the bank rather than serve as profit maximising tools. Although this entitlement to profits is relatively low, processing costs are kept down as they are handled very efficiently, and risk costs are also excellent thanks to the above-average credit ratings of our customers. The price of the loans we offer is the interest rate. We do not charge processing fees or any other (hidden) fees. However, when it comes to providing loans for development financing abroad, we sometimes have no choice but to charge processing fees because the due diligence costs are so high. Nevertheless, this does not impair our competitiveness, because our return expectations are more modest than those of our competitors.
SUSTAINABLE TREASURY MANAGEMENT
Because customers have a great deal of trust in a church cooperative bank, BIB has a sizeable net liability position and therefore needs to invest heavily in the financial and capital markets. In order to avoid counteracting the bank's sustainable retail lending business by making unethical investments in the financial markets with its own funds, BIB has long since added ethical criteria to the three classic investment pillars of profit, security and availability. This principle is anchored in our 'Guidelines for ethical, sustainable investments by BANK IM BISTUM ESSEN', which include negative and positive criteria for socio-ecological justifiability and incorporate the best-inclass approach.
We believe that a sustainable company analysis is a better way of identifying various risks such as reputational risks, consumer boycotts and the legal consequences of unethical corporate behaviour. However, we also acknowledge that such analyses exceed our in-house capabilities. For this reason, the bank works with imug, an independent research institute in Hanover. Shares and bonds undergo a multi tier selection procedure to assess their sustainability. The list of criteria used is regularly reviewed by our own sustainability committee. The bank's aim is to harmonise all its investments with financial and socio-ecological criteria, whether those investments are loans to customers or financial and capital market investments. We know that capital market investments are a tricky topic from the point of view of sustainability. For one thing, information about listed companies is rarely complete when it comes to social and environmental responsibilities. Furthermore, there are often major differences in opinions about moral questions in society, as well as amongst the members and customers of the bank.
This means that we find ourselves, along with our customers, advisers and interested initiatives, in an ongoing search for ethical, sustainable investments in line with socio-ecological considerations, knowing full well that there neither is nor will be a perfect, incontestable solution. Based on these criteria and our bank's own standards, a comprehensive analysis was completed on 31 December 2012, which concluded that a low percentage – 4.48 per cent – of our own investments were in 'unacceptable' institutions. We are working to improve this figure further, but it should be noted that changing volumes in our investment portfolio alone can cause fluctuations.