Teachers Mutual takes responsible-investment certification to a new level

Teachers Mutual Bank (Teachers Mutual) has taken its commitment to responsible investment a step beyond its peers, by having Responsible Investment Association Australasia (RIAA) certify its retail deposits, mortgages and wholesale funding. According to Teachers Mutual, the move could generate more than A$3.5 billion (US$2.5 billion) of socially responsible investments for the bank by 2021.

The certification adds to Teachers Mutual’s ethically certified wholesale debt-issuance programme, which RIAA certified in June 2015 and which was added to in 2018. The A$1 billion programme excludes investment in fossil fuels, alcohol, armaments, correctional facilities, gambling and other harmful activities.

Bank Australia also has all its retail lending and deposit products certified by RIAA, while Community Sector Banking and Bendigo Bank have individual products certified. Teachers Mutual, though, is the first to have both its retail lending and wholesale debt issuance certified.

The certification ensures that all Teachers Mutual’s products align with its commitment to responsible and ethical practices, with legal documentation to clearly articulate this. A filter is also applied to the bank’s lending, to ensure that it is practicing high standards.

Steve James, Sydney-based chief executive officer at Teachers Mutual, explains: “Central features of this certification are specific social-responsibility exclusion criteria and that the bank operates under distinctive socially responsible strategies, standards and practices which apply to all its products – primarily mortgages and deposits.”

A Teachers Mutual press release also reveals that the bank estimates the certification will cover a cumulative A$1.3 billion of retail mortgages and deposits in 2019, with that figure rising to A$2.7 billion in 2021. This, combined with its wholesale debt programme, means the certification brings a responsible-investment opportunity of more than A$3.5 billion to the bank.

Broadening engagement

Teachers Mutual’s move characterises the evolving theme of growing demand for and engagement with responsible investments, says Simon O’Connor, Melbourne-based chief executive officer at RIAA. This theme has been evident in the engagement Teachers Mutual has received since initially having its wholesale debt-issuance programme certified.

“We are starting to see that this is a valuable point of difference in a relatively homogenised market place. These certifications are attractive to investors and they help issuers stand out,” says O’Connor.

At a time when more and more consumers are wanting to ensure their banking and investments are managed ethically, James says that the certification demonstrates Teachers Mutual’s efforts in this respect.

“It is about setting a standard that is socially responsible,” he says. "These RIAA standards won’t be optional for our members. They will be locked in for any new retail deposit or mortgage that goes through the bank."

While the bank’s broader certification does not increase its ethically certified wholesale debt programme, James believes it may augment the number of investors that can purchase Teachers Mutual term debt as it will satisfy more ethical investment mandates.

RIAA has typically been a certifier of investment products, such as managed funds and superannuation fund options, but O’Connor says interest from banks in having certification across its product suite is growing.

“There is a rapidly growing diversity of debt and banking instruments coming forth to service the responsible-investment appetite, and it is important that these are certified to ensure the high standards that have become a part of the institutional investment market are deployed across the industry,” he tells KangaNews.