Vancouver can reinvent the global economy: Vancity

Many in the Vancouver finance community are confident they can revolutionize a global financial system that in the past few years resulted in a crippling economic meltdown. And according to Tamara Vrooman, CEO of Vancity, they have the performance figures to prove it. 

Vancouver non-profit Board of Change hosted a conversation on the profitability of Corporate Social Responsibility (CSR) with the CEO of Vancity, Canada's largest credit union, Tamara Vrooman, at UBC Robson Square Thursday.

Vrooman argued against the conventional wisdom that corporate responsibility – going to great lengths to ensure a business operates in “clean capital” to serve the interests of everyone from its stakeholders to local communities to the environment – comes at a cost to corporations.

“Good companies are successful and sustainable,” Vrooman said, “The two are not mutually exclusive.”

David and Goliath

The Global Alliance For Banking on Values – of which Vancity is a partner – recently released a report comparing the performance of top international financial institutions at the height of the recession with the performance of CSR banks.

Between 2007 and 2010, 17 CSR banks reportedly outperformed 29 top international institutions. The leading banks net income growth shrunk by nearly seven percent, and the CSR banks' expanded by 64.37 percent. In a recession.

“Our success has been simple: We've understood that corporate responsibility isn't risky. It's not something we should shy away from,” Vrooman said.

Vancity, with a balance sheet approaching CDN$17 billion and almost 500,000 members is an example of what Vrooman calls “crowdsourced finance.”

Bankers tell the credit union how they want their money invested in corporations and non-profit groups.

Photo of Saul Brown and Tamara Vrooman by Massoud Hayoun 

“The more we focus resources on what the community needs to be sustainable, just and economically viable – the more we think of those things together, the better we do financially... Financial institutions are subsidiaries of the economy. Economies are subsidiaries of the environment.”

The secret to Vancity's success, according to Vrooman, is tempering a commitment to social responsibility with the kind of business savvy that has worked well for the leading global financial institutions.

“I am a banker – a community-based one,” Vrooman said.

“As a banker, I like to do business with people who deal in quality products that will do well. We do give them better rates [on loans] and faster approvals.”

Vrooman announced that Vancity was invited, along with big corporate names like Telus and Hewlett Packard last week by Canadian CSR advocate Corporate Knights to join a group to join a new group called the Council for Clean Capitalism, designed to establish an intellectual and practical infrastructure for corporate responsibility as a business model. 

Vrooman explained that while there are many students in Canada interested in sustainability, business schools need more professors and researchers to foster a culture of economic change that could, in coming years have a global impact.

CSR and “sustainablility in financial institutions are still in their early stages. So early it's almost invisible,” Vrooman joked, explaining that the economic revolution is coming, but still a ways off.

Financial viability

Many in the audience at the talk Thursday are convinced that CSR corporations are the only sustainable financial institutions.

“A business model which relies in part on providing retail credit through consumer loans and credit cards ends up financing increasing consumption when as a society we need to find ways to consume less - and this is a sustainbility challenge of many current banking business models,” said sustainability strategist Coro Strandberg.

Credit Unions: A Canadian speciality

Credit unions, popular for their emphasis on promoting corporate responsibility are something of a proudly Canadian institution.

More than 650,000 Americans moved their money from traditional banks into credit unions in the US in October 2011, according to the US Credit Union National Association, largely driven by an Occupy movement-backed “Bank Transfer Day,” meant to promote a culture of corporate responsibility.

But the leading credit unions in the United States still service federal employees and other niche communities. CSR banking has yet to become part of the mainstream culture there.

Credit Unions have long been part of the financial infrastructure in Canada, which relative to its neighbors to the South, came out of the recession unscathed, without the sweeping losses and foreclosures of US individual and businesses.

“It's a part of Canadian culture – social consciousness,” said strategist Keith Jardine.

Social consciousness: A cost-benefit?

But some worry that culture comes at a cost.

Small businessman Saul Brown, who owns Vancouver's Saul Good Gift Co., “radiating happiness since 2006” banks at Vancity, but worries that individual bankers pay larger interest rates – essentially funding the credit union's push for corporate responsibility.

“When comparing your metrics verses other banks, you might be getting better results, because you get better [profit] margins on loans,” Brown said.

Vrooman responded: “We have the problem that our members assume that we're more expensive. The data we have shows that we're not.”

Vancity's interest rates are locked to that of the big five banks such that “when two take interest rates down, we move down our interest rates with them.”

An absence of shareholders is the secret to Vancity's ability to not impose costs for corporate responsibility on its members.

“Because we don't have a shareholder, every time we are doing business with you, Saul, there's no shareholder to demand the biggest portion of the transaction.” 

Top photo by Jennifer Strang.