Main products/services: Retail and business banking (deposit taking and lending), commercial mortgage lending, investment advice and services
Highlight of their unique approach
Profit-sharing program that invests in community-focused regenerative and distributive initiatives, and values-aligned services and products.
Highlight of their unique design
Democratic ownership model
Vancity branch at Alert Bay, British Columbia
02 | Founding story
In the early 20th century, Canadian credit unions began to emerge in response to the difficulty of average working citizens to obtain loans and mortgages. Initially, most credit unions formed around a common bond, such as a workplace, trade, church or ethnic affiliation. Later, some credit union activists began promoting the idea of an open-bond credit union, open to anyone living in a given community.
In 1946, 14 Vancouver residents, frustrated with the lack of access to financial services for many working people, came together to sign a charter to establish an open-bond credit union, and formed the Vancouver City Savings Credit Union. Today, Vancouver City Savings Credit Union, known as Vancity, is Canada's largest community credit union.
From its founding, Vancity has aimed to operate as a values-driven business. It has focused on helping its members gain financial confidence, build their financial future, and address emerging financial needs. In addition, Vancity has aimed to remove barriers to financial participation, widening financial health and inclusion. To varying extents, it has also attempted to address some more systemic challenges that prevent many people from fully sharing in economic prosperity – challenges such as climate change, housing affordability and the rising cost of living, and racism and discrimination.
03 | Industry Context
Financial institutions play a crucial role in our economy. By making decisions about whether or not to make an investment or to approve a loan request, financial institutions have outsized influence over what action and which actors get funded. These decisions can end up placing barriers on the economic participation of certain groups as well as on attempts to take regenerative and distributive action.
For example, when deciding on a loan or credit request, banking institutions will typically look at the applicant’s credit score and credit history – which makes it more difficult for newcomers to a country to get loans and credit as they have no local credit history. For decades into the 20th century, women in the US and Canada could not get a bank loan or mortgage without a male co-signer. In 1961, Vancity became the first in Canada to do away with this practice.
Similarly, when deciding whether to finance a housing development, banks have traditionally given significant weight to a developers’ history of generating profits. This privileges the development of profit-maximising, market-priced housing – while making it almost impossible for community organisations and non-profit developers to obtain financing to develop affordable housing or housing for economically marginalised populations.
04 | Regenerative & Distributive Strategies and Actions
Regenerative and distributive business model
According to Vancity, they employ a values-driven business model. This model balances generating profits with driving benefits for its members and the communities it operates in. Driving community impact is stated as one of Vancity’s three strategic priorities, alongside meeting members’ needs and ensuring profitability.
Performance against impact-focused targets is embedded in executive compensation, the board’s review of executive performance, and Vancity’s annual reporting (which has a heavy focus on its environmental and community impact and how its actions derive from its values).
Lending, investment and procurement decisions must satisfy both a financial analysis, and an analysis based on impact potential and alignment with Vancity’s core values. This latter analysis has formal processes and guiding frameworks. For example, Vancity’s lending and procurement decisions must satisfy its Ethical Principles for Business Relationships. Vancity works actively to grow both the volume, and the share within its portfolio, of the loans, securities and Assets under Administration that generate profit while also advancing its values and impact-focused goals. At the end of 2023, that share stood at 33%.
This strategic business approach translates into multiple other regenerative and distributive actions such as its community-focused profit-sharing program, its early and aggressive commitment to achieving net-zero financed emissions, its products and services, and its impact-informed approach to its operations, policies and practices.
Profit-sharing program
Since 1994, Vancity has allocated 30% of its net profits to investing back in its members and communities through its Shared Success Program – a total of over $440 million CAD. Part of this money is returned to members as annual dividends, with the rest dedicated to community grants.
Shared Success community grants are given to organisations working in the program’s key focus areas: climate action, reconciliation, financial inclusion, affordable housing, and equity & anti-racism. They include funding for smaller neighbourhood-based projects and larger strategic programs. Examples include:
Affordable Housing Program – Supports community organisations and non-profit housing providers in getting affordable housing developments off the ground during the pre-construction phase.
Non-Profit Housing Retrofit Program – Provides non-profit affordable housing residences with funding for climate-resilient retrofits.
First Nations Retrofit Fund - Supports climate-resilient retrofits in First Nations communities.
In addition to its Shared Success Program, Vancity dedicates 5% of its credit card profits to helping local businesses and community organisations accelerate climate-related programs. Examples of recent recipients include:
Synergy Enterprises – Grant to provide coaching, environmental audits, and emissions calculators to local businesses.
BC Federation of Labour – Grant to develop a climate justice policy and green jobs plan for British Columbia.
Empower Me – Grant for an energy conservation education program for multicultural communities.
Net-zero commitment
In January 2021, Vancity became the first financial institution in Canada to commit to bringing the emissions across all its mortgages and loans to net-zero. While many other Canadian financial institutions – including some of the world’s largest financiers of oil and gas projects – have followed suit since then, Vancity’s commitment remains among the most ambitious, with a 2040 target timeline compared to the 2050 target more common in the industry.
Since making this commitment, Vancity has introduced a number of products and services focused on supporting emissions reductions by its members. It also works closely with the largest emitters in its business loans portfolio on tailored, business-specific, transition plans.
Products and services
Vancity’s offers a range of services and products with either an ecologically regenerative or a socially distributive focus. Examples include:
Complimentary home energy checkup and emissions-reducing advice, and emissions-calculating tools.
Lower-rate retail loans to incentivise GHG emissions-reducing actions such as energy efficient renovations. In 2023, Vancity provided $14.4 million CAD worth of climate-focused loans and commercial retrofits to support its members in taking climate action in affordable ways.
Wealth Mindset, a financial literacy workshop taught from an Indigenous perspective that honours a different definition of wealth and recognises systemic challenges. In 2023, Vancity supported 21 Wealth Mindset workshops for 201 participants.
In partnership with a community organisation, basic banking services to homeless and underhoused people in Vancouver who wouldn’t ordinarily qualify for banking services. For example, Vancity enables them to cash government supports without using predatory payday lending services, and to get assistance on basic financial needs from specially trained staff.
In partnership with First Nations governments, tailored mortgage products in accordance with those Nations’ unique land arrangements. Vancity was the first financial institution in Canada to recognise a First Nation as a government for lending purposes, and works with partner First Nations to recognise alternative identification beyond the identification documents recognised by other banks.
Operations
As part of its impact-focused business model, Vancity also uses its operations, where it can, to advance its values and impact. For example, 63% (~$108 million CAD, in 2023) of Vancity’s procurement is sourced from local businesses. Similar to its lending decisions, Vancity’s procurement decisions must satisfy its Ethical Principles for Business Relationship to demonstrate alignment with its values.
As a Living Wage employer, Vancity is committed to ensuring even its lowest paid employees are paid a wage commensurate with the cost of living across British Columbia – a requirement extended to external contractors working for Vancity. Through its Shared Success program, Vancity is also a key funder of a campaign to enlist more British Columbia employers as Living Wage ones.
Vancity has also tried, where feasible, to use its facilities for regenerative and distributive action. For example, in 2015, Vancity installed a heat capture system in its head office building that uses waste heat from the data centre to heat the rest of the building in winter. The award-winning project was used as a demonstration project that informed City of Vancouver policy and actions as well as similar private sector projects.
Policies and practices
Vancity’s impact-focused business model also guides a number of policies and practices.
Vancity has committed to several ambitious equity-focused representation targets for its senior leadership team and Board of Directors. These include the Government of Canada’s 50-30 initiative (50% gender parity and 30% equity-deserving groups), the BlackNorth pledge of 3.5% of Black leaders in senior leadership roles by 2025, and its own target of 40% of senior leadership and board directors that identify as Indigenous, Black, people of colour, 2SLGBTQIA+, gender or sexually diverse, and people living with a disability. Compared to its peers, this latter 40% target is particularly unique as it targets various identity factors and equity-deserving groups. Vancity is currently meeting or exceeding all these targets except for the BlackNorth pledge, which is still in progress.
Vancity applies a “co-operation among co-operatives” mindset and works to support the co-operative economy and growth of other like-minded co-operatives. This includes serving the banking needs of over 300 co-operatives, providing start-up financing for new co-operatives or existing businesses that switch to a co-operative model, and providing grants to organisations that are building capacity in the sector.
Vancity has implemented a Responsible Investment Policy that ensures investment funds must follow one or more of the responsible investment approaches laid out in the Canadian Investment Funds Standards Committee (CIFSC) Responsible Investment Identification Framework. While other major financial institutions also offer socially responsible investment options, Vancity is unique in transitioning all the funds it manages to be socially responsible, and offering only socially responsible investment options to its members.
Since 2019, Vancity does not directly invest in, or lend to, fossil fuel companies, and all its investment funds exclude oil and gas producers, pipeline companies, coal power producers, natural gas distribution utilities, LNG operations, as well as service companies whose primary business is supporting the fossil fuel industry. This is in keeping with Vancity’s commitment to addressing the impact of climate change on people and the environment, and stands in contrast to Canada’s five major banks, which are among the world’s largest financiers of the oil and gas industry.
05 | How the Deep Design Enables Strategy and Action
For Vancity, its business model and approach to banking are directly tied to being a financial co-operative. Under the co-operative governance model, anyone who banks with Vancity becomes a member and shareholder. All members receive a share of Vancity’s annual profits in the form of a Shared Success dividend.
The co-operative model is inherently democratic. All members have equal power through the “1 member, 1 vote” aspect of the co-operative model. Members can participate in, and formally raise issues and concerns at an annual general meeting where the board and executive leadership must respond to these concerns. In addition, Vancity’s Board of Directors is democratically elected; every year, a number of Board positions are up for election and members have the right to run for these positions and to vote on them.
The Board provides oversight on many items including audit, annual reporting, appointing an Equity and People Committee, incorporating climate risk into overall risk oversight, and reviewing progress on climate commitments and targets. Key impact initiatives such as Vancity’s net-zero commitments require Board approval, and the Board reviews progress on climate commitments and other impact targets.
Vancity’s democratic ownership model allows for decisions to be made that create value and improve financial health and well-being for its overall membership, not just a small group of shareholders. While many publicly-listed businesses may have great purpose statements, their ownership structure limits their decision-making to respond to the priorities of its shareholders which often results in a disproportionate accumulation of wealth instead of redistribution. Vancity’s model allows it to pursue impactful investments into local communities and develop and offer products and services that better serve the needs of its members.
06 | Reflections and Lessons for other Businesses
Vancity is able to pursue many of its strategies with greater ease and ambition due to various aspects of its co-operative design. The fact that its board is elected on a 1 member, 1 vote basis by its broad community of owners seems to be a major factor in ensuring that its social and ecological goals are prioritised to a greater extent than most financial institutions.
In addition, the absence of shareholders who focus solely on maximising profits appears to give decision-makers across Vancity the space to pursue these broader goals, make capital available for internal investment, and unlock financing for ideas that pursue broader social and ecological goals.
While the co-operative model is a vastly different way of designing the ownership and governance of businesses, there are ways that other businesses can draw insights from Vancity’s design and its many practices and strategies.
Some key questions to consider in applying the insights from Vancity include:
Can other banks that aren't cooperatively owned draw inspiration to set up a subsidiary that mimics some of Vancity’s design?
Can other businesses set up a way to reinvest a proportion of profits for below-market rate loans that help with low cost housing and/or climate impact for instance?
Even if someone cannot turn their business into a co-operative, is there something they can draw from the strategies and design of Vancity to replicate some of the benefits in a part of their business?
For decades, financial institutions have been prioritising financial risk and profit considerations when making decisions. Considerations such as climate impacts have only been factored into decision-making when they directly grow the profits of the company or significantly reduce its financial risks. As a result, financial institutions have achieved high returns by readily fuelling the oil and gas industry, even as awareness of this industry’s impact on our climate has grown.
Similarly, on issues related to housing affordability, human rights, social inequities and other challenges, banks and other financial institutions have failed to transform the core of their business model to move away from damaging activities and exclusively finance the solutions.
The Vancity case study gives hope that a redesign of the ownership, governance, and other aspects of their enterprise design (alongside other factors, such as stronger regulations, and greater pressure from consumers and investors) will be essential to enabling the actions by these financial institutions that will help overcome humanity’s biggest challenges.
Wynnie Zhao
Toronto, Ontario, Canada
Hoping to learn more about place-based action, transforming deep design of business, and academic research on regenerative econ!