Jeroen Rijpkema (Triodos): ‘To Secure The Long-Term Mission Takes Courage’

Anxiety among depositary receipt holders
Mr. Rijpkema talks about it as if he has never done anything else. Yet he only succeeded Peter Blom eight months ago. Mr. Blom had been involved in Triodos Bank since its founding and was its statutory director and CEO for more than 30 years. Mr. Rijpkema had worked at ABN AMRO for over three decades, most recently as CEO of the International Private Banking division. He was also involved in Transaction Monitoring Netherlands, a joint venture between a number of banks to combat money laundering and terrorist financing. Mr. Rijpkema encountered difficulties after his switch to impact banking, though. Anxiety arose among some of the over 43,000 Triodos depositary receipt holders (shareholders without voting rights). Previously, shares could be traded through Triodos Bank at a price based on Triodos Bank's net asset value. During the coronavirus pandemic, however, supply became so much greater than demand that Triodos was forced to halt trading twice. The last time was in January 2021. Recently, the bank announced it was working toward a listing on a multilateral trading facility: A platform where certificates could be traded at a price based on supply and demand. However, this could involve a significant loss in value. A small proportion, roughly 700 of the 43,000 depositary receipt holders, are therefore pressing for a takeover by ASN Bank, for example, which is part of de Volksbank. It is one of the biggest challenges Mr. Rijpkema faces in the run-up to Triodos' 50^th anniversary in 2030. Together with Xavier Baeten, Professor of Reward Management & Sustainability at Vlerick Business School, he explores the path to half a century of sustainable banking.

Like Triodos, the major banks are increasingly focusing on sustainability. What is you view on that?
‘We are perfectly happy that the financial industry is embracing the need for a sustainable stance. I welcome all efforts by other financial institutions and, if needed, we’re glad to be able to help and inspire them. Triodos may also have helped initiate the turnaround. For example, we played a leading role in securing the financial sector's commitment to the Dutch climate agreement. As part of the agreement, the sector undertakes to make an active contribution to managing and recording CO₂ emissions and the energy transition. We also contributed to agreements concerning protecting biodiversity. Furthermore, the financial sector is working together on debt assistance. In addition, a lot is being invested in the joint fight against money laundering: That is another way in which we contribute toward protecting society. I see money laundering as an underestimated social problem. It is always accompanied by suffering: Human exploitation or trade in endangered species. Ultimately, it also leads to undermining of society or new criminal activities.’

To what extent will Triodos stand out within a sustainable financial sector in the near future?
‘We do not see ourselves as a niche bank, but as a mission-driven bank. First and foremost, we look at whether we can create impact by consciously using money to bring about social change. Only then do we look at risk and return. In traditional banking, it is the other way around. If a project comes up that does not align with our objectives, then we do not get involved it – even if the risk-return ratio is very attractive. Our clients consciously choose Triodos for our intrinsic motivation for sustainable banking. They know that 41 years after we were founded, we still hold to this sustainable approach and we do not deviate from it for commercial reasons or out of opportunism.’

Is that enough to remain competitive in the future?
‘I think so. Our limited size makes us agile. We have a clean balance sheet, with no stranded assets. We have no large investments or outstanding loans in industries or activities that may be valued differently in the future due to climate measures or that cannot fulfill their earning capacity. In this sense, all our activities are future-proof. The value of this is difficult to express now, but it will become increasingly important. At the same time, we need to continually develop. We do this by focusing on three strategic themes: Energy and climate, nature, food and biodiversity, and social inclusion. The coronavirus pandemic has exacerbated social inequality. The Netherlands is one of the richest countries in the world, but not everyone shares in that prosperity. We also face a serious challenge in terms of housing: Large groups of Dutch people do not have equal access to housing. We want to contribute to change in all three of these areas: Finance change. However, we also want to change the financial sector itself: Change finance. We want to bring about systemic change. We want to be a front-runner in this change – a guide that challenges the sector to keep shifting the boundaries.’

How are you shaping this ambition to be a front-runner?
‘We are aiming to achieve net zero CO₂ emissions in all our activities – in both the loan portfolio and our asset management – not by 2050, but as early as 2035. So we include the CO₂ emissions of our borrowers and the listed companies in which we invest in our overall calculation. We also discuss with them how they can reduce their CO₂ emissions. We want to compensate the emissions that inevitably remain by investing in green spaces and capturing CO₂ from the atmosphere.
The easiest thing would be to only finance clean projects from now on. However, you have to give the business community and society the opportunity to make the necessary transition to sustainable energy. We consider it our task to help with that. We are granting more and more mortgage loans in order to enable people to make their homes greener, for example. We do not automatically exclude any company that is yet to reach net zero emissions. We do, however, have a strict exclusion policy for certain sectors and company types. We consciously avoid investing in fossil fuels, for example. In addition to ecological sustainability, we are guided by ethical and mission-driven considerations in the exclusion policy.’

In their ESG policy, companies often focus on the ‘e’ for environment and less on the ‘s’ for social. How do you try to achieve positive change in a social sense?
‘We believe there should be a place for every individual in society. That is why we focus on a humane environment by financing causes such as care institutions and public housing. Another of our keystones is to support the cultural sector. Art and culture are a connecting element in our society and give people a voice: A means of expression to voice and share their emotions and experiences. We believe it is important that a cultural sector still exists in the countries where we operate after the coronavirus crisis. That is why we are delighted that we have been able to arrange a €200 million credit facility with the European Union in order to finance cultural projects. Another example is supporting small entrepreneurs in developing countries through micro-financing.’

What role can digitization play in making the world more broadly sustainable? ‘’Digitization gives people access to knowledge and networks and therefore lowers the threshold for participation in society, regardless of location, circumstances or origin. In addition, digitization can play an important role in creating transparency. We have developed an app through which we can give our clients access to each other and show them sustainable entrepreneurs in their neighborhoods. By making purchases in those local stores or doing business with them, clients can help to create social impact in their own area.
We also help people donate their money to charities in order to accelerate social change. At the same time, keeping apace with digital developments is a challenge for our budget as a medium-sized bank, so we have to be selective.’

Triodos has turned social challenges into a business model. Can a bank make enough money by doing that? Triodos' return on investment is lower than that of other banks, while its costs are significantly higher.
‘The revenue model is under pressure for the entire financial sector, including Triodos. This is partly explained by the low interest margin and the high costs of investing in digitization, complying with regulations and combating money laundering. At the same time, we want to use our money to create positive social impact.
So far, we have always felt supported in this by our depositary receipt holders, who were primarily focused on social return and were therefore satisfied with a lower financial return. We are now moving toward a different way of trading our certificates. We also want to make our financial return more appealing, with a return on equity of between 4% and 6%. Compared with the rest of the financial sector, that is still modest, by the way. We therefore need to adjust the balance between financial return and social return for depositary receipt holders. I am convinced that we will manage to get the job done.’

Another important stakeholder is the government. What do you expect from the new cabinet?
‘We would like to see the government take a leading role. In order to enable the transition in the areas of energy, biodiversity and social inclusion, a level playing field needs to be created. Certainly in the area of climate transition, it is important that the government draws up clear legislation and makes efforts to mobilize public support for it. Pricing, standardization and any public support – in that order – should be key.’

At Triodos, the highest paid employee earns only 5.5 times the median salary. How sustainable is that modest remuneration policy in a tight labor market?
‘Triodos is occasionally called a movement, rather than a bank. People come to work for us because they are intrinsically motivated: They want to work for an organization that creates social impact. They are satisfied with a fair salary and also receive a moral reward. I have made that conscious decision myself, too.
Nevertheless, we sometimes give people an extra token of appreciation: A voucher for personal development or relaxation and, in exceptional cases, a financial reward of up to €10,000. However, there is no contractual link between performance and individual reward. That is exactly where things went wrong in the financial sector in previous years. With us, people are also free to organize their own work schedules and work from home for 50% of the time. They also have the flexibility to take training courses. So we look for attractive employment practices in both financial and non-financial aspects.’

What kind of leadership does Triodos need at this stage, and why did you feel called to the job?
‘Triodos is in a phase of transition in terms of leadership, organizational structure and capital structure. It is my task to guide that transition, and that task mainly involves creating a connection between the past and the future. I have set my sights on Triodos' 50^th anniversary in 2030. What do we need to do in order to keep the bank healthy and relevant? That calls for a certain level of boldness.
During a transition, you have to dare to take and implement your decisions, as with the capital issue. That’s challenging, and I realize it might be very painful as well. But we have to have the joint courage to do the right thing in order to secure the mission for the long term. It is my job to do that in a unifying way, and I also see it as a form of servant leadership. I am now in my early 60s, so I will not be here for 40 years like my predecessor was. I was initially appointed for two years because the Supervisory Board at the time thought the transition could be completed in that time. However, after just three months they asked me if I would like to extend my term to four years. I said yes, of course – with passion and full conviction. I am not here for myself – I am here for Triodos. It is a beautiful institution and one that I would like to help move into its next phase of its existence.’

This interview was published in Management Scope 02 2022.