Triodos Bank: Innovative approach for charitable causes

(Published in The Financial Times of 20 April 2004).

When one thinks of the fundraising efforts of community projects and environmental initiatives, the image that appears is one of sponsored walks, charity concerts or applications to grant-making bodies – not the launching of a public share issue. But that is what Cafédirect, the UK’s largest fair trade hot drinks company, planning to do in order to raise £5m.

"In the greater scheme of things it’s a small share option, but in this sector it’s a lot of money," says Charles Middleton, managing director of Triodos Bank, the bank with which Cafédirect is raising the share issue.Triodos, an independent bank founded in the Netherlands in 1980, finances only projects or groups that have social, environmental or cultural goals, such as organic farming, renewable energy, social housing and fair trade. Through its branches in Belgium, the Netherlands and the UK – and this year a new branch in Spain – the bank offers engages in everything from operating savings and lending accounts to bond issues and the sort of share issues it is launching for Cafédirect.It recently conducted two successful share issues for the Ethical Property Company, which provides fair rents, and Mr Middleton believes that these kinds of financing initiatives – that have won it a Queen’s Award for Sustainable Business – will increase as charities and community organisations see the potential in such arrangements."There’s an increasing understanding of the broader financing opportunities, and that’s why we’re trying to move the more sophisticated organisations from normal debt financing through to more equity type financing – and even to venture capital financing," he says.Mr Middleton sees a move by charitable causes away from raising money purely through grants and donations towards embracing a wider approach to financing. "You have to seek grant financing on a yearly basis, and grants don’t go on forever,” he says. "So people are realising that borrowing can make you more sustainable, and that the discipline around having to finance borrowing is healthy for an organisation in terms of its longer-term prospects."Organisations seeking financing are considered both on what their project is trying to achieve and on their creditworthiness. While it is approached frequently by organisations looking for funds, the bank also actively seeks out projects with which it would like to be associated.Triodos, which places a strong emphasis on transparency, publishes a list of the organisations to which it lends money every year, allowing ethically motivated depositors to see what their cash is supporting.Such depositors are growing in number, according to Mr Middleton. "And there’s no question that the tax incentives are a very powerful way of bringing people in," he adds."Certainly we see ourselves operating in a growing market and that’s not a bad place to be."

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