Annual Review 2020 - Building a greener society - Ecology Building Society
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Annual Review 2020 Building a greener society
Welcome to your Annual Review 2020
This booklet summarises the progress we have made over the previous year.
You can find a glossary of some of the financial terms used in this booklet on page 19.
,
What s inside your Annual Review?
03 C
hair’s statement Directors’ remuneration report
11
04 Chief Executive’s review 14 Measuring what matters
06 Business review 18 Member stories
09 Summary financial statement 19 Glossary
10 Independent auditor’s statement
About Ecology in 2020 We’re the first
building society to
report on the
carbon
2,000
(including £1,000
impact
of our lending
matched funding)
raised by the Ecology We’re
team for Mind and
the Canal and eligible members voted
powered
River Trust 1,339 in our 2020 AGM. More by over
226.0m
(16.15%) than half of voting
members voted online 10,000
members
total assets
555 37
employees based in
our eco-build offices in
We provided raised for
230
lending for 230 Silsden, West Yorkshire
Trees for Cities
sustainable
as a result of We have a policy that no basic salary
properties and
projects AGM voting will exceed a maximum of 8 times
the lowest full grade available
Cover images, rows from top to bottom, left to right: A new home at Bunker Housing Co-op, Brighton, built with Ecology funding; Ecology‑backed ‘House at Wildcat
Corner’ – an energy efficient self-build in Scotland; gardener, Pippa, planting the living walls of Ecology’s new meeting room; Ecology-backed ‘House at Wildcat Corner’;
Bunker Housing Co-op founder, Martyn Holmes; affordable homes at Broadhempston CLT, Devon, refinanced by Ecology; affordable homes being constructed by Mull
and Iona Community Trust; residents outside their Ecology-backed Passivhaus-standard home in Closeburn, Dumfries and Galloway (credit: Tom Manley); Angle House,
award winning (best SIP) low-energy self-build home financed by Ecology (credit: Agnese Sanvito).
02 Ecology Building Society | Annual Review 2020
,
Chair s statement
Tackling the climate and Finance Institute to develop innovative
ecological emergency remains financial solutions. During the year we
the defining challenge of the also joined the Bankers for NetZero
Initiative which has been set up to find
decade and it has never been
positive solutions for advancing progress
more relevant and important to net zero, supporting our international
for Ecology to provide a efforts working with the Global Alliance
progressive force for positive for Banking on Values and the UNEP
environmental change. Your Finance Institute.
Society is well placed to be at our 40 years we have remained true to I’m proud that we are the first building
the heart of efforts to deliver a our ecological mission, demonstrating society in the UK to report the carbon
truly sustainable and inclusive how finance can benefit people and emissions arising from our lending. We
green recovery, determining planet, and I am immensely proud of continue to champion the sustainable
the kind of planet we live on for our achievements leading the way on built environment and welcomed the UK
providing finance for energy efficient
generations to come. Government placing greener buildings at
building projects and community the heart of the economic recovery, as
While we are not immune from the housing solutions. well as contributing to discussions on key
effects of the pandemic and found initiatives requiring lenders to disclose
As we look forward to the future,
ourselves navigating the uncharted details of the energy performance of their
the successful issue of the Core
waters of the lockdown and a closed mortgage books. The outcome of these
Capital Deferred Shares (CCDS) marks
housing market for part of the year, I am discussions is important in the run‑up to
the beginning of an exciting and
pleased to report that we maintained our COP26.
transformational era in the Society’s
support for sustainable building projects.
history. The additional capital will Whilst this year has brought
This has resulted in a strong and resilient
enable us to invest in innovation, unprecedented challenges to us all, this
financial performance underpinned by
accelerating our lending and amplifying remains an exciting time for the Society as
a solid set of environmental lending
our voice so that we can play an even we accelerate our role in the sustainable
throughout the year.
more significant role in the climate and recovery. The Board will continue to
I was especially proud of the agile and ecological challenge that impacts us all. scrutinise and provide critical challenge to
rapid transition to home working for the Executive whilst upholding Ecology’s
I am thrilled that we were shortlisted
the majority of the Ecology team as ecological mission and focusing on
for a prestigious Ashden Award for our
well as their continued commitment to members’ needs.
commitment to sustainable buildings
maintaining services to members.
and that our support for energy efficient On a personal note, it is with great
A highlight of our calendar, our AGM is self-build and renovation was also sadness that we lost our CEO’s wife, Hazel,
an opportunity for members to meet the recognised by Build-It magazine. after a long illness. Many of our members
Ecology team and hear how we’re building will have met Hazel over the past 36 years
Later this year the delayed UK-hosted
a sustainable future. However, due to the as she has attended many of our events
COP26 is due to set out the key
social distancing requirements, the 2020 and been an inspirational supporter of
steps required to deliver on the Paris
event was a very different, scaled-down both Ecology and Paul; she will be missed
Agreement and ensure the world’s
meeting. I would like to thank all our by us all.
nations can meet the net-zero ambition
members who took the opportunity to
required. Our members expect us to be Finally, I would like to sincerely thank
vote and submit questions to the Board.
a leading agitator, pressurising policy the Board and the Ecology team for their
The ongoing Covid-19 uncertainty and makers and other lenders to tackle continued commitment and hard work
restrictions means that it will not be the climate and ecological emergency, throughout these uncertain times.
possible for members to attend the 2021 especially as we approach COP26.
AGM in person. We anticipate members
Retrofitting 28 million homes in the
will be able to view a live stream and
UK is critical to achieve the target of
submit questions during the meeting.
net zero by 2050. We joined the call Steve Round
During 2021 we will also be celebrating for a National Retrofit Strategy and Chair
our 40-year anniversary. Throughout participated in the work of the Green 5 March 2021
Building a greener society 03
,
Chief Executive s review
Throughout our 40-year activities with the Sustainable Development
history we have seen a growing Goals and the Paris Agreement. Our first
awareness of the existential report under the UNEP FI framework
illustrates the progress we are making.
ecological crisis. Today, we are
more determined than ever We believe all financial institutions have
to achieve positive impact a responsibility to report and reduce
through our environment- the ‘financed emissions’ arising from
conscious lending programme their lending. This year we have reported
the carbon emissions arising from the
and to agitate for change in the The critical importance of the collective residential properties in our mortgage
financial system to serve the role of the financial sector to avert book. We have used the new Partnership
needs of people and planet. climate breakdown and ecological for Carbon Accounting Financials (PCAF)
collapse was emphasised by former Bank Reporting Standard and joined the PCAF
This has undoubtedly been an
of England Governor, Mark Carney, at UK group, where we are collaborating with
extraordinary year, with deep and lasting
the launch of the new private finance partner banks to improve the accuracy of
impacts on society. The pandemic has
strategy for COP26 where he, along with carbon accounting methods and will report
caused a devastating global public health
David Attenborough, called on us all on this at COP26.
crisis, with wide-reaching social, cultural,
economic, and political consequences. to ‘ensure that every financial decision
takes climate change into account’, and In 2021 we mark the Society’s 40-year
Our thoughts are with the many people anniversary, which provides a moment to
who have been personally affected by to set targets and plans to reach net-zero
emissions. Targets are essential, but it is reflect on what has been achieved during
the Covid-19 pandemic, particularly that time. There have been so many
those members who have lost loved critical that these translate into urgent
large-scale action. The next decade must successes over the years: we broke the
ones. We’ve all had to make substantial traditional rules of mortgage pricing with
changes to our daily lives, and our focus see global emissions cut in half if we are
to stay within the realms of ‘safe’ global our C-Change discounts, which incentivise
has been on supporting our colleagues borrowers to improve the environmental
whilst continuing to serve our members. temperatures.
performance of their home; our eco‑build
Like many lenders, we provided an As the UK looks forward to hosting office in Silsden, West Yorkshire, was
opportunity for borrowers to defer COP26 in Glasgow later this year, clear recognised as one of the 10 most
mortgage payments and we saw many and consistent climate leadership is vital. sustainable ‘bank’ headquarters in Europe;
members take up this facility. I sincerely The UK Government’s Ten Point Plan in as founding members of the Passivhaus
thank the Ecology team for quickly November, set out high‑level ambitions Trust we helped drive the uptake of the
adapting to new approaches of working for a green recovery, creating green jobs Passivhaus low-energy standard in the UK;
from home and within the office. and supporting new technologies, which we were told by a leading commentator
The far-reaching shocks experienced will help our energy supply, transport that our lending was instrumental in
in 2020 highlight the importance and heavy industries to decarbonise. The kick‑starting the demand for green building
of preparedness and cooperation in Government’s plans to support greener projects in the UK; we were recognised
response to global threats. And, as we homes need to go much further if our for our climate leadership in the Finance
bore witness to record wildfires and housing stock is to be on track to meet for the Future awards; and Kevin McCloud
polar ice loss, we were also reminded of net-zero targets. As a priority, we need a even indicated that he wouldn’t have had a
how crucial green space and nature are national retrofit programme to bring all television programme without Ecology!
to our wellbeing, reinforcing the need existing properties up to modern standards,
for urgent action to safeguard the future simultaneously creating green jobs. Financial overview
health of our planet. Ecology was the first building society to The Society has demonstrated its
As we emerge from the disruption sign the United Nations Environment resilience during these challenging times,
of the pandemic, central banks and Programme Finance Initiative (UNEP FI) achieving an increase in mortgage assets
governments must fully target their ‘Principles for Responsible Banking’. By in 2020 of 9.43% to £158.69m against the
emergency finance measures to support signing the Principles, we hold ourselves backdrop of a wider economic slowdown
the transition to a green and fair to account whilst also creating pressure and the effective closure of the property
economy and society. for others to sign and align their banking market during the first lockdown.
04 Ecology Building Society | Annual Review 2020
In response to the pandemic, the Lending highlights This investment is expected to contribute
Bank of England’s base rate fell to an to lower profits in 2021. However, it
unprecedented low level of 0.10%. The During the year we supported 230 will help create the platform for a solid
Society was faced with difficult interest sustainable properties and projects with future for the Society, enabling us to
rate decisions to ensure that the inflows £39.3m of new lending. Among these, we meet the needs of our current and future
of savers’ deposits were maintained at have supported five new community-led members while doing more to achieve
levels which continue to support the housing projects in London, South Wales, our ecological mission.
demand for our lending whilst managing Lancashire, Leeds and Devon, creating
liquidity at a sustainable level. energy efficient and affordable homes We are committed to delivering
for local families. enhanced services to our members, with
Despite this, the inflow of funds has online savings applications a key priority
remained strong as rates continued for 2021.
to reduce across the market, and new Our colleagues
members, who are attracted to our Throughout our 40-year history, we
We are pleased to report that we have
values, have joined. We ended the year have always supported innovation
with an increase in savings balances of not furloughed any of our colleagues
in sustainable building methods and
13.55% to £210.3m. The low interest rate as a result of Covid-19, nor made any
materials. Construction is going through
environment is anticipated to continue redundancies or pay cuts.
a period of rapid evolution, embracing
for some time to come, which will be We are very fortunate to have a strong digital technologies and off-site
unwelcome news for our savers, and we body of colleagues who are committed manufacture termed Modern Methods of
need to remain cognisant of balancing to the Society’s social and environmental Construction. In 2021 we will expand our
the needs of savers whilst pursuing our range of mortgages to cover properties
goals, and to providing a friendly,
mission through lending activity and constructed using Modern Methods,
responsive service to our members. During
ensuring our financial stability. which can reduce waste, construction
the year we appointed Sarah Kemp to
In September, the Society secured a our Executive Team in the newly created time and emissions. We start the year
£3m investment through the issue of role of Head of Risk and Compliance. This with a record pipeline of sustainable
Core Capital Deferred Shares (CCDS). new role reflects the Society’s continued lending prospects, supported by strong
This marked the beginning of a new investment in our capabilities to ensure we inflow of funds and membership growth
era in our history, underpinning our are well placed to respond to the changing generated by the increasing awareness
growth prospects and strengthening needs of our members and the regulatory of climate and ecological issues. We can
our commitment to ethical saving and environment. Alison Vipond joined us look forward to 2021 with confidence.
ecological lending whilst we continue to
as our Sustainability Lead, helping us to I would like to thank all members for
invest in innovation.
measure and manage our environmental your support throughout the year. It is
The strong inflow of funds alongside the and social impacts. Alison’s appointment through your membership that we can
CCDS investment contributed to liquidity will ensure we set and deliver ambitious create change, either through saving
levels ending the year at 30.82% of share targets, in line with our mission. with us so your personal capital can
and deposit liabilities. For comparison, create positive impact or borrowing
excluding CCDS, liquidity would be Despite lockdowns, our Social and
Charity Committee continued their from us to fund an ecological and social
29.45% (2019: 26.67%).
fundraising efforts, enabling donations project. We are always grateful for your
Increased levels of savers’ funds led to of £1,000 each to Mind Bradford and The feedback as we act on your behalf, and
a 14.13% growth in assets to £226.0m, Canal and River Trust. value your continuing support to build a
taking us over £200m for the first time. greener society.
I am also pleased to report that, whilst Future developments
impacted by the low interest rate
environment and higher impairment Macroeconomic uncertainty will
provisions, profits were above undoubtedly continue for some time
Paul Ellis
expectation at £0.524m, reflecting our to come. However, the Society remains
Chief Executive
focus on resilience and underpinned by financially strong, resilient, and well
5 March 2021
a solid set of environmental lending. The placed to accelerate our programme of
profit further adds to our capital base, investment, strengthening our digital
supporting the growth of our loan book. and operational capabilities.
Building a greener society 05
Business review
Our purpose
As stated in the Memorandum adopted The Memorandum also states that, in The Chief Executive’s Review on
in 1998, the Society’s principal purpose carrying out its business, the Society will pages 4 to 5 provides an overview of
is making loans which are secured on promote ecological policies designed the Society’s performance during 2020
residential property and are funded to protect or enhance the environment which should be read in conjunction
substantially by its members. in accordance with the principles of with this report.
sustainable development.
The advances shall be made in those The Board uses a number of Key
cases which, in the opinion of the Board, In relation to its lending activities, the Performance Indicators (KPIs) to
are most likely to promote, encourage or Society requires any borrower applying measure the performance and position
support: for a loan to demonstrate that the of the Society on a regular basis. This
purposes for which it is required are section provides more detail on these
n the saving of non-renewable energy
consistent with the ecological policies KPIs and the table below provides the
or other scarce resources
approved by the Board of Directors. This actual position as at the end of the
n the growth of a sustainable housing approach to lending is fully in keeping current and preceding two years.
stock with the original objectives laid down
by the Society when it was established
n t he development of building practices,
in 1981.
ways of living or uses of land which
have a low ecological impact.
Key Performance Indicators
2020 2019 2018
Total assets £226.0m £198.0m £177.9m
Mortgage asset growth 9.43% 14.61% 10.59%
Mortgage lending £39.3m £43.5m £38.4m
Savings balances £210.3m £185.3m £166.0m
Liquid assets as a % of shares and borrowings 30.82% 26.67% 28.82%
Management expenses as a % of mean total assets 1.57% 1.69% 1.54%
Net profit £0.524m £1.073m £1.022m
Profit after taxation as a % of mean total assets 0.25% 0.57% 0.57%
Core Tier 1 capital £14.997m £11.677m £10.578m
AGM – voting turnout 16.15% 19.78% 15.62%
As outlined above the Society has achieved a resilient performance despite the ongoing backdrop of uncertainty during the year due
to the Covid-19 pandemic, Brexit negotiations and potential contraction of UK growth.
06 Ecology Building Society | Annual Review 2020
Asset growth
During 2020 the Society’s total assets to help combat climate change, has The Society’s Risk, Audit, Compliance
increased by £28.0m to £226.0m (2019: increased steadily to 40% (2019: 39%). and Ethics Committee assesses the
£198.0m), 14.13% (2019: 11.35%), primarily A reduction to the interest rate is impact of forbearance and monitors
driven by the strong increase in savings applied following confirmation of the whether there is a possibility of loss, in
balances alongside the £3m CCDS energy rating achieved. which case an impairment provision is
issuance that are required to support made in accordance with the Society’s
The Society continues to ensure that
future lending. policies. A total of 5 (2019: 4) individual
mortgage growth is delivered in a
impairment provisions were required in
The Society views asset growth as a sign controlled and measured way. Our
those cases where the Society’s model
of our success in meeting the needs of personalised approach to underwriting
indicated a potential shortfall compared
our savers and supporting our borrowers enables each case to be individually
to the outstanding balance resulting in an
to build, renovate or buy sustainable assessed to ensure we maintain a
increase in the individual provision to £361k
properties. high‑quality loan book.
(2019: £384k). Of these, provisions continue
Total Assets (£m) Overall arrears levels remain low despite to be held for two cases which are not in
the difficulties some members have arrears but where the Society is working
230
220 experienced since the onset of the with our borrowers to navigate difficult
210 226.0
200 pandemic. As at 31 December 2020, there operating conditions.
198.0
190
were no cases in possession, or 12 months
180
As outlined in accounting policy 1.5 the
173.1 178.7 177.9 or more in arrears (2019: nil).
170
160
150
Society also maintains a provision for
£ millions
140
130
As a direct result of the pandemic the collective impairment, which assesses loan
120
110
number of payment deferral requests cases for potential loss. In determining the
100
through the Government’s temporary level of impairment provision, the Society
90
80 payment holiday scheme increased has considered the statistical modelling of
70
60 significantly during the year. However, the historical trends alongside a deterioration
in economic conditions during the
50
2016 2017 2018 2019 2020 substantial majority have subsequently
returned to full contractual repayments. current financial period in relation to the
Mortgages As at 31 December 2020, there were 33
ongoing impact of the pandemic. The total
collective provision has increased to £268k
Against the backdrop of a wider economic cases (2019: 15) under forbearance with (2019: £183k).
slowdown and the effective closure of the total balances of £5.988m (2019: £2.451m)
property market during the first lockdown and arrears totalling £7.6k (2019: £0).
the Society has continued to build the
Savings and liquidity
The Society continues to exercise
pipeline of new mortgages generating Savings balances consist of shares, and
forbearance measures to assist borrowers
solid growth in gross lending of £39.3m amounts owed to other customers.
who are experiencing financial difficulty,
(2019: £43.5m). Redemption activity has The Society aims to attract a level of
agreeing to interest-only payments
remained stable with overall growth in savings balances that supports demand
on a temporary basis. In each case an
mortgage assets which represents gross for mortgage lending, prudent levels of
individual assessment is made to ensure
lending less redemptions, repayments, liquidity and provides a fair return to
that it is in the best interests of the
and effective interest rate adjustments of members relative to its peers. In February
borrower and the Society. It is expected
9.43% (2019: 14.61%). 2020, the Society closed the 90-Day Notice
that the borrowers will resume normal
account to all but existing members. Total
The interest rates offered by the payments once they are able to.
savings balances held at the end of the
Society enable it to provide support for
Mortgage Assets (£m) year are £210.3m (2019: £185.3m) an increase
more projects which deliver a positive
of 13.55%.
environmental and social benefit and 160
provide good value for borrowers seeking
150
158.7 In September 2020, the Society secured
145.0
140
to build or renovate sustainable and 130 £3m of investment through the issuance of
energy efficient properties. The Society 120
126.5 Core Capital Deferred Shares to accelerate
£ millions
launched an updated renovation and
110
118.0 114.4 our future growth prospects.
100
retrofit product in November 2020. 90
80
The strong inflow of funds alongside the
The proportion of loans benefiting from 70 CCDS investment contributed to liquidity
one of our C-Change mortgages, which 60
ending the year at 30.82% of share and
50
reward work undertaken on the property 2016 2017 2018 2019 2020 deposit liabilities. On a like-for-like
Building a greener society 07
comparison (excluding CCDS) liquidity Net Profit (£m) requirements and to cover those risks that
was 29.45% (2019: 26.67%). 1.2
the Board has identified under Pillar 2. The
Board approves the ICAAP on an annual
We aim to manage the amount of
1.073
1.0
1.022
basis, and it is reviewed by the Society’s
funding that is not lent out to ensure
0.920 0.915 regulator in setting the Total Capital
£ millions
0.8
that the majority of savers’ funds are
Requirement (TCR).
creating value in the real economy. 0.6
We see our role as providing a savings 0.4 0.524 Further details of the Society’s approach
service for those who wish to invest to risk management, including the Pillar
0.2
in pursuit of social and environmental 2A percentage and value, required by the
goals, preferring where possible to 0.0 Capital Requirements Directive can be
2016 2017 2018 2019 2020
source our funds for lending direct from found in the Pillar 3 disclosures available
individuals and community groups Considering the cumulative 0.65% fall in on the Society’s website: ecology.co.uk.
supportive of our mission, rather than the Bank of England base rate to 0.10%, The Society must maintain sufficient
taking in wholesale money from other which reduced net interest income during capital to cover its risk weighted assets,
financial institutions. the year, and the overall unprecedented which is measured by the Core Tier 1
social and economic environment that solvency ratio. This is determined by the
Management expenses beset the UK during the year, the Board is standardised approach to credit risk set
satisfied with the level of profitability. out in the CRD. As at 31 December 2020
The increase in the Society’s cost base
the risk‑weighted Core Tier 1 ratio was
was lower than expected at 4.40% to During 2020 the Society increased
18.09% (2019: 15.54%).
£3.32m (2019: £3.18m) due to the timing its capital resources by £3m with the
of recruitment activity and the deferral issuance of Core Capital Deferred The leverage ratio expresses Tier 1 capital
of some expenditure because of the Shares (CCDS). This is a perpetual as a percentage of total assets plus
pandemic. This resulted in a favourable capital instrument with a discretionary mortgage impairments and a proportion
impact on the Costs to Mean Assets Ratio distribution. Each CCDS investor holds of mortgage pipeline commitments.
which reduced to 1.57% from 1.69% in 2019. a single vote, preserving the Society’s The leverage ratio increased by 0.68%
mutual status. to 6.23% (2019: 5.55%) as a result of
The Society plans to accelerate its the increase in capital resources during
investment in digital strategy, operational The issuance of CCDS during the year
the year. Capital amounts and ratios
capacity, and capability in 2021 which further enhanced the Society’s capital
remained comfortably above regulatory
will enable us to deliver on our objectives strength which now totals £15.11m requirements throughout the year.
from a solid operational base. (2019: £11.69m).
Wherever possible, we use the most As at 31 December 2020, the ratio of gross Member relations
sustainable and ethical option when capital as a percentage of total share and
purchasing goods and services, in some deposit liabilities was 7.18% (2019: 6.29%) Voting turnout at our 2020 AGM was
cases resulting in us paying more than and free capital was 6.65% (2019: 5.68%). 16.15%, with our AGM being a scaled-
the less sustainable option. The increase in the ratio is primarily driven back affair due to the restrictions of
by the CCDS issuance. the Covid‑19 pandemic. Despite the
Profit and capital challenges of the pandemic restrictions,
The Board complies with the Capital voting turnout was significantly higher
The Society seeks to make sufficient Requirements Directive (CRD) which than the sector average of 7.2%.
profits in order to invest and grow this requires the Society to assess the
business for the benefit of its current and adequacy of its capital through an
future members. Internal Capital Adequacy Assessment
Voting Turnout
Process (ICAAP). Scenario analysis and
Net profit for the year amounting to
stress testing is performed on key 20.00%
£0.524m (2019: £1.073m) was added to 19.78%
business risks to assist the Board in
general reserves. In accordance with
Votes cast %
assessing whether the Society could 15.92% 16.17% 15.62% 16.15%
15.00%
accounting policy 1.5 the Society has
survive a severe economic downturn and
assessed whether there is objective 10.00%
other severe business shocks.
evidence that investments not carried
at fair value through profit or loss Through the ICAAP, the Board is satisfied 5.00%
are impaired and has recognised an that the Society holds sufficient capital to
0.00%
impairment provision of £180k (2019: £45k). meet the CRD’s Pillar 1 minimum capital 2016 2017 2018 2019 2020
08 Ecology Building Society | Annual Review 2020
Summary financial statement
This financial statement is a summary of information in the audited Annual Accounts, the Directors’ Report and Annual Business
Statement, all of which will be available at ecology.co.uk or free of charge to members and depositors on request from the head
office after 31 March 2021.
Summary Directors’ Report
The Business review for 2020 is discussed on pages 6 to 8.
Summary Financial Statement for the year ended 31 December 2020
Results for the year 2020 2019
£000 £000
Net interest income 4,323 4,466
Other income and charges (74) (15)
Administration expenses (3,320) (3,177)
Impairment losses on loans and advances (98) 82
Impairment losses on investments (180) (45)
Provision for liabilities (3) –
Profit before taxation 648 1,311
Tax expense (124) (238)
Total comprehensive income for the year 524 1,073
Financial position at end of year 2020 2019
Assets
Liquid assets 64,830 49,535
Mortgages 158,689 145,014
Fixed and other assets 2,510 3,489
Total assets 226,029 198,038
Liabilities
Shares 200,335 175,321
Amounts to other credit institutions – 503
Borrowings 10,013 9,931
Other liabilities 576 593
Subordinated liabilities – –
Reserves 15,105 11,690
Total liabilities 226,029 198,038
Summary of key financial ratios 2020 2019
% %
Gross capital as a percentage of shares and borrowings 7.18 6.29
Liquid assets as a percentage of shares and borrowings 30.82 26.67
Profit for the year as a percentage of mean total assets 0.25 0.57
Management expenses as a percentage of mean total assets 1.57 1.69
Gross capital represents the general reserves and subordinated liabilities as shown in the statement of financial position.
Liquid assets are taken from the items so named in the statement of financial position.
The profit after taxation is the profit for the year as shown in the statement of comprehensive income.
Management expenses are the administrative expenses plus depreciation and amortisation for the year as shown in the statement
of comprehensive income.
Mean total assets are the average of the 2020 and 2019 total assets.
Approved by the Board of Directors on 5 March 2021 and signed on its behalf by S. Round, Chair; P.C. Ellis, Director and
Chief Executive; A.L. Chambers, Finance Director.
Building a greener society 09
,
Independent auditor s statement to the members
and depositors of Ecology Building Society
Opinion n Checking that the format and Auditor’s responsibilities
content of the summary financial
We have examined the summary Our responsibility is to report to you
statement is consistent with the
financial statement of Ecology Building our opinion on the consistency of the
requirements of section 76 of the
Society (‘the Society’) for the year ended summary financial statement within
Building Societies Act 1986 and
31 December 2020 which comprises the Summary Financial Statement
regulations made under it; and
the Results for the year, the Financial with the full annual accounts, Annual
Position at end of the year, together n Considering whether, in our opinion, Business Statement and Directors’
with the summary Directors’ Report and information has been omitted which Report and its conformity with the
Annual Business Statement. although not required to be included relevant requirements of section 76
under the relevant requirements of of the Building Societies Act 1986 and
On the basis of the work performed,
section 76 of the Building Societies Act regulations made under it.
as described below, in our opinion
1986 and regulations made under it, is
the summary financial statement
is consistent with the full annual
nevertheless necessary to include to The purpose of our work
ensure consistency with the full annual
accounts, the Annual Business and to whom we owe our
accounts, the Annual Business Statement
Statement and Directors’ Report of
and Directors’ Report of the Society for responsibilities
the Society for the year ended 31
the year ended 31 December 2020. This auditor’s statement is made solely
December 2020 and conforms with the
applicable requirements of section 76 We also read the other information to the Society’s members, as a body, and
of the Building Societies Act 1986 and contained in the Summary Financial to the Society’s depositors, as a body,
regulations made under it. Statement and consider the implications in accordance with section 76 of the
for our statement if we become aware of Building Societies Act 1986. Our work has
been undertaken so that we might state
Basis for opinion any apparent misstatements or material
to the Society’s members and depositors
inconsistencies with the summary
Our examination of the summary financial statement. those matters we are required to state
financial statement consisted primarily of: to them in such a statement and for
Our report on the Society’s full annual no other purpose. To the fullest extent
n Agreeing the amounts and accounts is unqualified and describes permitted by law, we do not accept or
disclosures included in the summary the basis of our opinions on those assume responsibility to anyone other
financial statement to the corresponding annual accounts, the Annual Business than the Society and the Society’s
items within the full annual accounts, Statement and Directors’ Report. members as a body and the Society’s
Annual Business Statement and
depositors as a body, for our work, for
Directors’ Report of the Society for the
year ended 31 December 2020, including
Directors’ responsibilities this statement, or for the opinions we
have formed.
consideration of whether, in our opinion, The Directors are responsible for
the information in the summary financial preparing the summary financial
statement has been summarised in a statement within the Summary Financial
manner which is not consistent with Statement, in accordance with applicable
the full annual accounts, the Annual United Kingdom law. Daniel Taylor (Senior Statutory Auditor)
Business Statement and Directors’ Report For and on behalf of BDO LLP,
of the Society for that year; Statutory Auditor
London
United Kingdom
5 March 2021
10 Ecology Building Society | Annual Review 2020,
Directors remuneration report
Introduction held two meetings during 2020 at which and other benefits. The Chair appraises
all members of the Committee were Executive Directors annually.
The purpose of this report is to inform
in attendance. The Committee reviews
members of the Society about the policy All fees earned by Executive Directors
supporting evidence, including external
for the remuneration of Executive and serving on external boards are paid to the
professional advice if appropriate, on
Non‑Executive Directors. It provides Society.
comparative remuneration packages.
details of the elements of Directors’
remuneration and explains the process In line with good governance Basic salary
for setting them. expectations no Director is involved in
setting their own salary. The Society’s policy is for all employees
The Society adheres to the FCA (including Executive Directors) to be
Remuneration Code which sets out the The terms of reference for the remunerated in relation to their expertise,
standards that building societies have Remuneration Committee are available experience, overall contribution and
to meet when setting pay and bonus on the Society’s website at ecology.co.uk the general market place. The Society is
“
awards for their staff. The Code requires committed to paying the Living Wage and
disclosure of the fixed and variable has received accreditation for this from
remuneration of senior management, the Living Wage Foundation.
risk takers, staff engaged in control The Society is The Society falls outside of the mandatory
functions and any employee receiving
total remuneration that takes them in to committed to paying requirements to disclose the ratio of
the same remuneration bracket as senior the Living Wage the CEO’s pay to the average pay of all
management and risk takers whose
professional activities have a material
impact on the Society’s risk profile. These
disclosures are published annually in the
Society’s Pillar 3 Statement.
and has received
accreditation for this
from the Living Wage
Foundation.
“ employees. However, the Society has a
long‑established fair pay policy which
limits the ratio between the highest
and the lowest basic salary. Following
consultation with the Society’s Ethics
Panel this was set at a multiple of eight
times the lowest full grade with effect
Role and composition of the
from January 2017.
Remuneration Committee
The Committee’s responsibility is to Remuneration policy Ratio of highest basic
determine the salaries and contractual
arrangements of the Chair of the Board, Non-Executive Directors salary to lowest full
the Executive Directors and executive
management. It is also responsible
Non‑Executive Directors receive a fee grade available
for their services that reflects the time
for making recommendations to the commitment for their duties. There are as at 31 December 2020
Board on the level of remuneration no performance related pay schemes for
for Non‑Executive Directors, based on Non‑Executive Directors, and they do not
information provided by the Executive
Directors. In addition, it reviews general
qualify for pensions or other benefits. 2020 2019
salary levels. Non‑Executive Directors do not have
6.58 6.14
service contracts but serve under letters
The Committee is comprised of of appointment. The contribution of each
three Non‑Executive Directors. At the Non‑Executive Director is appraised by
invitation of the Chair of the Committee, the Chair annually. Performance related pay
the Chair, Chief Executive, the Finance
Director, and the HR Manager attend This is an annual scheme that provides
meetings as required. The Chief Executive
Executive Directors non‑pensionable rewards directly linked
as well as the Finance Director take no Remuneration of the Executive Directors to the achievement of key performance
part in the discussion concerning their comprises: basic salary, contributions to objectives aimed at personal and
individual remuneration. The Committee the Society’s personal pension scheme professional development.
Building a greener society 11The overall objective is to improve Society performance whilst maintaining the financial strength of the Society for the long-term benefit of its members. Effective from 1 April 2019 Executive Directors no longer participate in this scheme. Pensions The Society makes contributions equivalent to 8% of basic salary for each member of staff, including Executive Directors, to the Society’s group personal pension plan after an initial service period of three months. In 2018 the Society introduced a salary sacrifice option permitting staff to increase personal pension contributions by taking a reduction of up to 12% of basic salary. A death in service scheme is operated which pays a lump sum of four times basic salary. These arrangements apply equally to all qualifying staff, with no enhanced arrangements for Executive Directors or senior management. The Society meets the requirement of the July 2018 Corporate Governance Code in that the pension contribution rates for the Executive Directors are aligned to those available to all colleagues. Benefits Prior to 2012 Executive Directors could participate in the Society’s staff mortgage scheme subject to a maximum of £33,000. The scheme was closed to new applications in February 2012. The Chief Executive is also provided with a hybrid company car. Contractual terms None of the Society’s Non‑Executive Directors have service contracts. Paul Ellis, Chief Executive, has a service contract entered into on 30 July 2018. The service contract with Amanda Chambers was entered into on 4 November 2019. All Angle House, an Ecology-backed low-energy home built contracts are terminable by either party on a brownfield site in London (credit: Agnese Sanvito) giving six months’ notice. 12 Ecology Building Society | Annual Review 2020
Non-Executive Directors’ remuneration
2020 2019
£000 £000
Andrew Gold1 27.3 27
Kerry Mashford 14.2 –
Tim Morgan 18.2 18
Chris Newman 15.8 16
Louise Pryor 14.2 –
Steve Round 22.5 22
Vincent Smith 15.4 14
Alison Vipond 3.5 14
Totals 131.1 111
1
Includes additional remuneration of £12,662 (2019: £12,384) in relation to assigned senior management regime responsibilities for oversight
of the risk function.
Executive Directors’ remuneration
Performance Taxable Contributions to
Salary related pay benefits pension scheme Total
£000 £000 £000 £000 £000
2020
Paul Ellis (Chief Executive) 114 – 5 9 128
Pam Waring (Deputy Chief
Executive and Finance Director)
(leave date 31.5.2020) 43 – – 3 46
Amanda Chambers
(Finance Director) 98 – – 7 105
Totals 255 – 5 19 279
2019
Paul Ellis (Chief Executive) 105 5 4 9 123
Pam Waring (Deputy Chief
Executive and Finance Director) 97 5 – 7 109
Totals 202 10 4 16 232
On behalf of the Board
Andrew Gold
Chair of the Remuneration Committee
5 March 2021
28 Ecology Building Society | Annual Report &Building
Accountsa greener
2020 society 13Measuring what matters Our positive impact
“
Ecology’s activities are guided by its We have calculated the emissions from
mission to build a greener society, Ecology mortgaged properties arising
through enabling the transformative
In accordance with from their heating and electricity use.
power of finance to benefit society and the Paris Agreement, In general, Ecology mortgages enable
the environment. The need for positive we commit to align our homes to achieve a much higher energy
impact has never been greater. Here, portfolios to reflect and efficiency, and lower carbon emissions,
we provide a snapshot of our progress finance the low‑carbon, than the UK average. However, if we are
in 2020.
The journey to net zero
Net zero is achieved when there is
a balance between the amount of
greenhouse gas emissions produced
climate-resilient economy
required to limit global
warming to well below
2 degrees Celsius,
striving for 1.5
“ to play our part in achieving the goals
of the Paris Agreement, we know that
emissions must be further reduced in the
coming decade. Guided by science‑based
methods, emission reductions will be
achieved through combinations of
high levels of energy efficiency through
and the amount removed from the insulation, low-carbon heating, domestic
atmosphere, either by technological or renewables and potential natural
and supply chains, and have offset all
natural solutions. Many countries and solutions to absorb emissions.
our operational emissions since our
organisations have committed to achieve
creation in 1981. Our energy-efficient We have used the new Global
net zero, most with a target date of
office has electric vehicle charging Greenhouse Gas Accounting and
2050. However, the coming decade will
points, solar thermal and photovoltaic Reporting Standard launched in
be a critical time for action.
panels, a sedum roof, rainwater November 2020 by the Partnership
Given all financial institutions have a harvesting and a mechanical ventilation for Carbon Accounting Financials
responsibility to reduce the emissions with heat recovery system. In 2020, (PCAF). Ecology became one of the first
arising from their activities, including emissions decreased to 275 tonnes, members of the PCAF UK group when it
their loans and investments, we are a partly due to the reduction in colleague formed in October 2020.
signatory of the GABV Climate Change commuting. The 2020 footprint includes
Commitment and of the UNEP Finance 4.9 tonnes of carbon emissions arising
Initiative Collective Commitment to from electricity and heating use by
Climate Action, supporting the transition colleagues working from home.
to a net-zero economy by 2050.
Emissions arising from our lending
Our operational emissions
Ecology is the first building society to
Since 2012, we have reported the carbon report our carbon accounts – the carbon Energy Performance Certificates
footprint from our business operations emissions arising from our lending. (EPCs) are currently the best available
information on property emissions,
,
calculated using a property’s fabric and
Carbon emissions arising from the Society s heating system. At the end of 2020,
48% of Ecology mortgages secured on
business operations and staff commuting property had an EPC. Some properties
do not have an EPC, either because their
purchase pre‑dates the requirement
Total CO2 (tonnes)
for one, or an EPC assessment has not
yet been carried out since works were
completed, or the property is still under
construction. We have used known
2020 2019 2018 EPC data to estimate emissions for the
275.3 338.7 299.8 properties where works are complete but
their EPC is not yet available.
14 Ecology Building Society | Annual Review 2020The annual emissions from the
completed properties in our Annual emissions from
mortgage portfolio at the end of
2020 were 1785 tonnes. In line with mortgage portfolio
recommendations of PCAF, we have
calculated the emission intensity, the Properties with an EPC (48% of Ecology mortgages)
emissions from the mortgage properties Emission data quality score 3, based on PCAF Standard
per £ of lending. The average emission
Outstanding balance Attributed CO2
intensity of our mortgage portfolio
£000 tonnes
is 0.015 kg CO2 per £ of lending. We
will continue to develop our carbon Self-build 43,481 384.5
accounts, improving data quality and Renovation and conversion 21,760 583.7
methods.
Other new build 13,850 238.1
Our EPC data for 2020 show 67% of
Community housing 1,708 56.3
Ecology properties achieve an energy
efficiency rating of A or B, well above Commercial 1,059 88.6
the average rating of EPC D from the Sub-total 81,858 1,351.2
English Housing Survey 2019-20. Our EPC
data show 10% of Ecology properties Properties where works are completed but no EPC yet available
are rated E, F or G. These ratings reflect (24% of Ecology mortgages) Emission data quality score 5, based on PCAF Standard
the fact that Ecology mortgages enable
Sub-total, all types 33,910 433.9
renovation of properties which start off
in a deteriorated or derelict condition. Total 115,768 1,785
When renovation works are completed,
these properties will achieve a higher
energy efficiency rating.
Mortgages per energy CO2 emissions
We are collaborating with PCAF UK
efficiency rating (tonnes) per energy
to test and develop these carbon
accounting methods in the run up to 60% efficiency rating
COP26. Our carbon accounts provide the 1400
basis for setting science-based targets to
meet the goals of the Paris Agreement.
45%
1050
Principles for
Responsible Banking
30%
700
15% 350
In September 2019, Ecology became
the first building society to sign the
first global sustainability framework 0% 0
for the banking industry: the United
A B C D E F G
A B C D
Nations Environment Programme Renovation/Conversion All other types E F G
Finance Initiative (UNEP FI) ‘Principles
for Responsible Banking’. Signatories
commit to align their business strategy The graphs show information on the EPC rating and carbon emissions for
properties with an EPC available.
Building a greener society 15and practice with the Sustainable which recognise the organisations Paying responsibly
Development Goals and the goals of the playing their part in the global effort
Paris Climate Agreement. In line with to tackle the climate crisis. We also We make sure that we reward our
UNEP’s reporting requirements, we are came ‘highly commended’ at the latest colleagues fairly. Ecology is an accredited
publishing our first progress report, What Mortgage Awards for our shared Living Wage employer. This means
showing how we are implementing the ownership mortgage. These 2020 awards, all Ecology staff members, including
principles. together with endorsements including contractors who work on our premises,
the renewal of our Ethical Consumer are paid a fair wage. We stipulate that no
basic salary will exceed eight times the
Innovation in Best Buy accreditation for our savings
and mortgages, stand as a testament lowest full grade salary, with our actual
sustainable housing to Ecology’s ongoing commitment to ratio for 2020 standing at 6.58:1.
The UK needs to retrofit a million building a financial system that benefits In 2016 we announced that Ecology had
homes a year with energy efficiency people and planet. become the first UK building society to
measures to reach the UK Government’s
be awarded the Fair Tax Mark showing
goal of net-zero emissions by 2050. As Changing finance we take a responsible approach to paying
well as providing sustainable lending
We have added our voice to the call for our taxes. Our re‑accreditation each year,
for renovation projects, we continue
financial institutions to set net-zero demonstrates our genuine commitment
to participate in policy initiatives to
targets for no later than 2050 through to doing the right thing when it comes
deliver mechanisms to deliver mass
our support of the Bankers for NetZero to taxes.
retrofit at scale, including joining calls
for a national retrofit programme initiative.
and participating in innovative Sponsorship and
Ecology also continues to participate in
financial solutions to inform national the work of the Green Finance Institute’s charitable giving
decarbonisation of housing in Wales. Coalition for the Energy Efficiency of We were pleased to sponsor the 10th
We are partnering on a collaborative Buildings (CEEB), which is exploring new anniversary event of the Passivhaus
innovation project to transform local mechanisms to support the financing Trust, of which Ecology was a founding
supply chains for zero‑carbon, affordable of energy efficient homes including the member.
homes, using modern methods of development of the Green Home Retrofit
construction (MMC). This involves Finance Principles, which are designed to Despite the social distancing restrictions,
standardised components which are provide a recognisable standard for green a number of colleagues continued to
fabricated offsite from sustainable retrofit projects. Ecology was one of the volunteer their own time to a range of
materials and then transported and first lenders to sign up to the Principles. community organisations including local
assembled on site. This approach will foodbanks, a local health and wellbeing
transform the way new homes are Recognising that the transition to charity, various sports groups and a local
built, reducing costs, emissions and a low‑carbon economy needs to be community trust.
construction time. approached in a way that benefits
everyone, Ecology participated in the In addition we made £550 of donations
advisory group for the London School of to our charity partner, Trees for Cities, as
Leading the field a result of members’ AGM voting.
Economics’ Grantham Institute’s report
The Society has achieved widespread on ‘Banking on a Just Transition’. The
recognition for its work in 2020. We report sets out a route map for banking Enabling people-powered
were awarded ‘Best Self-Build Lender’ providers to deliver a sustainable, fair housing
in the 2020 Build It Awards. The award and inclusive future and, since then, the
recognises Ecology’s role as a leading Society has become a founder member In 2020, Ecology supported five new
supporter of self- and custom-build in of the Financing a Just Transition community-led housing projects
the UK for nearly 40 years. We also won Alliance, which is implementing the across the UK: in London, South
‘Mortgage Provider of the Year’ for the findings of the report. Wales, Lancashire, Leeds, and Devon.
second year running at the Yorkshire Amongst these is Bradley Big Local
Financial Awards, as well as being CLT, a community land trust in Nelson
shortlisted for the 2020 Ashden Awards, which provided four affordable, EPC B
16 Ecology Building Society | Annual Review 2020rated new-build homes for local families the most deprived neighbourhoods in Society in London with its vision to
this year. We also began supporting England. Broadhempston CLT in Devon create a shared, mutually owned home
Chapeltown Cohousing (ChaCo), a refinanced to us on their project of six for its members, and Golem Housing
Leeds-based housing co-operative and self-built eco-homes for local families. Co-operative in South Wales, on the
cohousing project, on the development Ecology was also pleased to support purchase and retrofit of its second
of 29 affordable dwellings in one of Quaggy Mutual Home Ownership property for affordable housing.
Climate and ecological emergency plan
In 2019 Ecology made a climate emergency declaration. Our climate and ecological emergency plan includes the actions we are
taking to accelerate efforts to ensure that the planet does not exceed 1.5 degrees Celsius of heating and preserves and restores
natural habitat. The actions are summarised here:
Our current and n Measure and report the ‘financed Our local community
emissions’ from our loans and investments
future members so they can be fully aligned with the Paris
Climate Agreement.
n Participate in community tree-
Our activism planting activities and other nature
n Ensure our savings and lending conservation activities.
activities are fully focused on n Support educational and cultural
addressing the climate and ecological initiatives that build understanding and
emergency. action to address the emergency.
n Deliver members’ events, engaging n Campaign for rapid, meaningful
experts and practitioners to share new action to avert a climate and ecological Our premises
knowledge. catastrophe.
n Support members to participate in n Use our voice and influence to share
our campaigning activities. and rapidly scale up impactful solutions.
n Provide vegetarian or vegan n Continue to advocate for rapid and n Maintain the high environmental
catering at our members’ events. far‑reaching positive change in the performance standards of our offices.
financial sector.
n Evaluate potential zero-carbon
Our lending heating systems for our premises.
Our colleagues
n Continue to offset all carbon
emissions from business operations and
travel.
n Expand our carbon offsetting schemes
n Ensure our mortgages continue to
n Coordinate, Green Team, activities for to include peatland restoration.
incentivise greater energy efficiency.
colleagues to engage and be inspired n Maintain our gardens and green roof
n Increase support for innovative to reduce carbon emissions and protect using organic, permaculture principles.
sustainable construction techniques nature.
and low-impact materials.
n Promote sustainable modes of Our supply chains
n Connect borrowers with resources transport, including cycling and electric
to increase knowledge of innovation in vehicles.
sustainable building and low‑carbon
heating. n Provide free electric vehicle charging at
our office for colleagues and visitors. n Use suppliers (local where possible)
n Invest in zero-carbon, renewable with good environmental performance.
energy generation projects. n Support home working.
n Work proactively with our suppliers
n Support adaptation to the physical to reduce the carbon and ecological
impacts of climate change. footprint of the supplies and services
we use.
Building a greener society 17You can also read
