Background

The drought in financial services

While there was strain on the credibility of financiers before the global financial crisis precipitated by the Wall Street collapse of 2008, the ensuing crisis and subsequent disclosures of corruption and bad practices have evaporated trust in banking and investment structures. Consumers, as well as politicians, are angry at the lack of clarity in banking operations, as well as at the high costs, in more ways than one, of the financial services products that they choose.

Financing sustainable initiatives is not a new idea internationally, and some banks for example have already stepped into the breach. The 10 best-known sustainable banks already have assets of around US$ 30 billion, according to The Upside of the Downturn: How Sustainable Banking Can Deliver a Better Future by Peter Blom. Triodos Bank, a European sustainable bank with whom Water has held discussions, has built assets under management of US$ 5 billion over several years, growing by 25% per year and delivering consistent profits. Triodos has 10,000 businesses and projects in its loan book and 200,000 deposit customers. We seek to emulate this sort of achievement.

Globally, 10 of the best-known sustainable banks make up the Global Alliance for Banking on Values (GABV), an association of like-minded institutions which does not include the more mainstream institutions such as the co-operative banks. These commercial, growing financial institutions focus on financing environmental projects, social entrepreneurship and community businesses that, in a country like South Africa, and on a continent like Africa, are sorely needed (there are no GABV members in Africa).

South Africa is one of the most financially unequal societies in the world and the time is ripe for investors to understand and feel comfortable with exactly where their money is put to work. There is a variety of funding available particularly for sustainable projects; Eskom and the African Development Bank (AfDB), for example, have signed loan agreements to the value of US$ 365 million that will enable the first large-scale implementation of renewable wind and solar generation in South Africa’s history. And the State-owned Industrial Development Corporation (IDC) has officially unveiled a R 500 million fund which seeks to promote energy efficiency and renewable projects primarily within energy-intensive industrial sectors in South Africa.

What's more, there is over R 2 trillion in bank savings and deposit accounts in the formal banking sector, representing over 34.5 million accounts (2009), and this is anticipated to grow by 22% by 2012 (according to PriceWaterhouseCoopers). Some of this capital has the potential to fund and support sustainable projects.