The chief executive of the New Resource Bank explains why values-led banking can lead to growth, profitability and social good
Vince Siciliano, chief executive at the New Resource Bank, says personal and business banking is all about “joining up the dots”.
“Do you know where your money spends the night?” It’s not a typical question for a banker. But then Vince Siciliano is not your typical banker. His next gambit is equally unconventional: imagine your dollar bill is a magic carpet and you could travel on it around the world to see where your dollars are invested. “Would you be proud?”
For Siciliano, chief executive of the “planet-smart” New Resource Bank, personal and business banking is all about “joining up the dots”. As a former Bank of America employee, he knows very well that customers’ cash “is not down in a vault; it’s out there doing something.”
The governing focus of San Francisco-based New Resource Bank is to ensure that this “something” leaves the world a better place, not a basket case. As such, it channels its lending and other banking services in four specific areas: clean tech, “green” products, eco real estate and any other businesses run on clear sustainability principles. The bank counts “a couple of hundred” non-profits on its books as well.
So what’s its angle? Or what’s its “niche”, as bankers like to say? It’s a legitimate question – and one that a semi-skeptical Siciliano was himself asking when he went for interview five years ago. A self-confessed “accidental banker” (he studied biology at Stanford and has a Masters degree in environmental planning), he claims never to have heard of “values-based banking” before, despite a long career in finance.
“Many banks are organised just for sale. They say they are going to be a community bank that’s got various good values,” he notes. But then a bigger bank comes along, snaps them up and those values evaporate. Siciliano insists New Resource Bank is different. His motivation and that of his 40 or so colleagues is clear: they hope to build nothing less than a “more conscious capitalism”.
That starts with debunking the belief “that the invisible hand will optimise all good”, he says. It also relies on eschewing the notion that “values-based” business (be it business or any other kind of enterprise) equates to philanthropy. “No margins, no mission” runs one of his oft-used adages.
Profitability has to be a long-term game, however. Siciliano has little time for exacting quarterly earning targets. Instead, New Resource Bank looks for companies that are “good bets” for the future. In practice, that means firms with solid financials and strong sustainability credentials combined.
“When you take a long-term perspective and you manage yourself not just for financial but community and environmental returns, that becomes a very resilient business and a profitable business over the long-term,” says Siciliano.
The bank’s long-term strategy makes for a slow burner, yet, with $220m in investment capital, its problem loan ratio is “extremely low” and its cost of funds are “very modest”. Yes, the bank took a nosedive during the 2008 financial crisis, but profitability “is beginning to increase” again, Siciliano states.
Without the support of its financiers, however, New Resource Bank couldn’t hope to do what it does. Not all the bank’s early investors fully grasped the implications of the bank’s “mission and message”. So when profits slid, some “rethinking” ensued for some. As a result, the bank’s investors are now “pretty clear” what it stands for. Among that grouping is a number of influential ethical investors, including Portland-based Portfolio 21, Triodos Bank of The Netherlands and Al Gore’s Generation Investment Management.
Part of New Resource Bank’s clarity of mission means turning down loans that are too small or too risky. Unlike mainstream banks, however, it always explains its rationale. “We would say, ‘Look, this is how we see your business,'” Siciliano says. “‘These are your strengths and weaknesses. Here’s someone else you can talk to, or this is what it would take for us.'”
This article was originally posted on May 2014 The Guardian