Civil Society has published a new podcast episode with Alison Taylor, CEO of CAF Bank and CAF Financial Solutions Limited, ahead of the Charity Finance Summit.
In this episode, Taylor talks about the long-standing banking issues facing many charities, financial resilience in challenging times and sustainability, among other topics.
You can listen to the interview below or on Spotify, Amazon Music and Pocket Casts, where you can find our other podcast episodes.
AI-generated transcript
Léa Legraien:
Hello and welcome to another podcast from Civil Society Media. In this episode, I talk to Alison Taylor, chief executive officer of CAF Bank and CAF Financial Solutions Limited. We discuss the ongoing banking issues facing the charity sector, financial resilience and sustainability, among other things. Alison will be speaking at our Charity Finance Summit, which will take place on 10 October in London. If you would like to attend, you can buy early-bird and team discounted tickets before 6 September. I hope you enjoy this podcast, and I will speak to you again at the end.
Léa Legraien:
Alison Taylor, thanks for agreeing to do this Civil Society podcast with me today. So, how are you?
Alison Taylor:
Very good, thank you. Thank you for having me, I’ve been looking forward to this conversation. I think we’ve had some interesting questions that you’ve highlighted.
Léa Legraien:
Amazing, thank you. So you’re the chief executive officer of CAF Bank and CAF Financial Solutions Limited. So, for people who don’t know you, can you tell me more about yourself and what CAF Bank and CAF Financial Solutions Limited do?
Alison Taylor:
Yeah, sure, thank you. So, I’m a long-term banker by background, originally trained as an accountant but came through the ranks of sort of mainstream banking. I spent a large chunk of my time at HSBC, and I’ve always been involved in the charitable sector through my own volunteering and increasingly at HSBC, as I got involved in the CSR agenda there and our charity partnerships. And there came the opportunity to move across to be CEO of CAF Bank, which is a specialist bank for charities and social purpose enterprises here in the UK. And I just jumped at it, really. It’s great, I think, to have the opportunity to use your day job skills in your passion, and that’s what this is for me, really, deploying all of that, that background knowledge that you hope you’ve accumulated over time, into the charity sector. So, CAF Bank, as I said, is a specialist bank for charities and social purpose enterprises. We provide transactional banking, savings accounts, and lending, all important. And our sister company, CAF Financial Solutions Limited, has a range of further savings products and investments. So holistically, we aim to provide all financial services that most small and medium charities will need. And we also work with our parent organisation, Charities Aid Foundation, which is one of the largest foundations in the UK. We work to bring their sector expertise and advocacy to bear for our clients as well.
Léa Legraien:
Thank you. So, you’re speaking at our Charity Finance Summit on 10 October. So, how are you feeling about this?
Alison Taylor:
I’m really looking forward to it. I think I’ve been honored to be asked in previous years, and I think that there’s a growing thread to that conversation. It’s a very high-quality and well-attended event. You always learn so much from people in the room and around the event sessions more generally. And I think it’s always a great conversation there. I’m looking forward to it.
Léa Legraien:
I’m looking forward to hearing you speak there as well. We’ll talk about your session a bit later but first, I wanted to ask you about the ongoing, long-standing banking issues facing the charity sector. So these issues, they seem to have worsened over the past year, with many charities still experiencing poor service from their banks and encountering problems such as accounts being frozen. So, why do you think banks are failing charities?
Alison Taylor:
I think it’s a really difficult situation where very often, what we find is that banks and charities are sort of talking past one another in different languages. And I think that is because banks are designing increasingly automated digital processes, and they design them primarily with small businesses in mind. And charities operate in a different way. They use different terminology. Their structure is different, and the two just don’t translate. So, they don’t tend to flow through those automated journeys easily. They then need to speak to someone that I think we know is increasingly difficult in a mainstream banking environment, more and more pushes for online interaction. And then if you do get through to staff, then often I think they’re not trained in charity needs and terminology, and so it doesn’t necessarily help. And I think that ends up in what we hear is a lot of back and forth over those issues. Added to that, I think the risk appetite for a lot of banks is quite narrow when it comes to anti-money laundering, KYC, regulatory compliance. And charities can be quite challenging to get through that process, not because they necessarily are high risk, but because they have to navigate a lot of form filling and a lot of questions that aren’t actually designed with charities in mind. And of course, for any that make payments to high-risk jurisdictions that actually is perceived to be higher risk and can lead to different treatment. So I think there are a number of cross-cutting issues that really require working on together. And you know that there is a lot of activity in that space at the moment. And I think we have the privilege of [Charity Finance Group’s] deputy CEO Clare Mills talking at our strategy day yesterday on this topic. And I think it was interesting to hear some of the research. I think 42% of charities in the last polling are experiencing difficulties with their banking arrangements, which is pretty shocking.
Léa Legraien:
It is. So, you mentioned your work experience, so you spent six years at HSBC if I’m correct? So, drawing on that experience, what action do you think the banking sector needs to take to improve the service it offers to charities?
Alison Taylor:
So, I think it is largely about trying to address those failure points where charities are not flowing through those customer journeys in the way that a business customer might. And that is a bit about staff training, a bit about changing those journeys for charity customers, if that’s possible to be done. And so there’s a working group at the moment that John Glenn, in his former role within the Treasury, sort of kicked off, which UK finance coordinates, the Charity Commission is involved, [Charity Finance Group], and numbers of banks are working on that, and that is aiming at producing materials that will help charities navigate those onboarding and those anti-money laundering review processes, but I don’t think we can place... it doesn’t feel right to be placing the owners on charities to do things differently, I think. Banks must respond as well with their own processes and their own training of staff to really make this work better.
Léa Legraien:
Yeah, exactly, I agree. So, last year, so you spoke at our Charity Finance Summit and you delivered a session on moving beyond crisis mode and how charities could adapt to a landscape where change was constant. So, are we still in crisis mode, or are we finally seeing the light at the end of the tunnel?
Alison Taylor:
I’m going to give a slightly politician answer, I suspect, and say that it depends, because there is such a broad span of winners and losers amongst charities. And I think we saw this after the Covid-19 pandemic that some cause areas found it easier to fundraise, and really did exceptionally well through that period, and others had real detrimental impact. And I think the same is true now. I’m cautiously optimistic, I think, on the economy more broadly, and I’m hopeful that we’re going to have a period of more sustained political stability, which should help that, and it will settle down into a more regular environment. And I think that would help hugely. It helps people plan, which has been one of the big challenges, I think, for the last few years. You need to feel that you’re standing on steady ground, don’t you to make your long-term financial planning decisions and hopefully we’re finally coming towards that place. Although, you know, there are still big geopolitical risks out there, but we’re becoming used to that, I think. You know, there are still real pressures on charity services. We see pressure on income, and you know, even those that are maintaining a steady donation base. Obviously, inflation is really eroded. The value of regular donations is quite significantly. And of course, there is still cost pressure. So I think it’s a real mixed picture. And those that are able to still adapt to that sort of scale of change are definitely doing so and others are definitely finding it tougher.
Léa Legraien:
Yeah. So, you mentioned those cost pressures, so some charities still struggling, but based on CAF’s expertise, research and work supporting charities and social enterprises in the UK, do you think that financial resilience has improved a bit or worsened over the last 12 months?
Alison Taylor:
I think for many it has improved. And I think I see... you know, the sector is immensely resilient and full of very determined and passionately driven people. So, you always see, I think, an exceptional response to challenges, and that has still been the case. I think there’s more understanding of it being acceptable to hold a higher level of reserves if people are able to build them. I think there’s more certainty around going out and seeking to fundraise for unrestricted reserves, and we’ve seen a number of charities have more success with that than perhaps was the case in the past. So, I think there are some positive factors, but equally, you know, there are still so many really sad stories of amazing charities that are being forced to either, worst case scenario, wind up or really reduce services. And I was speaking, I won’t name them, but I was speaking to a charity last week, and their CEO, it’s quite a sizable entity. He was saying there are literally no more services that they could cut back. And, you know, I think that's heartbreaking. They’ve had to stand down. It’s a housing-related, anti-homelessness charity, and they, you know, they’ve had to stand down services that they have been providing for over 30 years, and it just... I can’t imagine how hard that is for their volunteer base and their staff base to digest.
Léa Legraien:
Yeah, sadly, that’s a story that we hear too often these days. So, how is CAF Bank supporting charities through the cost of living crisis, CAF Bank and/or CAF Financial Solutions Limited?
Alison Taylor:
Thank you. From a bank context, we’ve reduced our account fee and a number of our processing fees, and I think that’s important. We’ve tried to add services that help prevent fraud, which obviously can be devastating from a charity perspective, that improve cash handling capabilities, because that’s becoming an increasing pain point. We have arrangements with branch networks, but as high street banks are reducing branch numbers, you know, you need alternatives, which is why we’ve launched access to the Post Office with CAF Bank accounts as well. And then a lot of it is around, you know, increasing our savings rate, making sure that... we have an excellent product through CAF Financial Solutions Limited actually, which is the CAF charity deposit platform. That has just grown enormously, it’s been hugely popular because I think that enables charities to onboard the platform and then move any funds around to access best rates, but also spread their risk between entities really quickly and easily. So, it’s trying to see things like that. You know, our investment portfolio, we have ESG funds, designed for charities. And then lending, of course, through our sister entity that is part of Charities Aid Foundation and CAF venturesome, trying to get blended finance to those that won’t be typical bank borrower customers, if you like, they perhaps have a higher risk profile. So, we’re trying to offer all of the financial products that could be needed, but also wrap around that a lot of knowledge and support that we try and bring from our broader sector expertise. So, we have a webinar program, for example, lots of aspects, financial planning and risk management there, the charity resource hub that can be accessed through CAF’s website. And advocacy more broadly, I think we’ve been doing a lot around a bigger seat for charities at the national table, advocating for better treatment for Gift Aid on donations. And, as I mentioned before, unrestricted giving, we’ve done a lot around that, and so think through the cost-of-living crisis. That is hugely important that charities are able to fund for operating costs.
Léa Legraien:
So, you mentioned ESG, and I understand that CAF Bank launched a new green loan product last year. So, if you could just tell me a bit more about this product, why you launched it, how many types of green loans you offer, you know how they’re used and so on.
Alison Taylor:
I think it reflects a bit of a shift that we see across the sector, really, where we have thought about charities very much as the sort of social pillar of ESG, but actually, increasingly, you need to think about them as inextricably linked in environmental matters and each charity’s environmental footprint is increasingly important, both to them, you know, for their own objectives, but also for many donors. They want to see progress and a clear policy and, you know, a net-zero approach and as much commitment to improving sustainability as possible. So, our green loans are designed to enable borrowers to fund their own sustainability ambitions, and this is often around existing buildings retrofitting to a better energy efficiency, which, of course, then has cost benefits as well. And I think a good example, our first green lane actually went to Stockwood Community Benefit Society, which is based in in Worcestershire. It has a big biodynamic farmland and business park. And, you know, the CAF Bank loan, the green lane for that, was around continuing their agricultural mission with more environmentally beneficial methods. And I think, you know, it’s been great to see that... a lot of that was around, you know, ground source heat pump and solar paneling and standard things that many will be familiar with. And I think, having really started on that journey, you know, we want to build out that green product portfolio as much as possible, essentially. That’s, all of what we’re doing, and then we’re considering it in each loan that we make, and through our products more generally.
Léa Legraien:
So, you have more than just one type of green loan, you have... How many do you have?
Alison Taylor:
So essentially, because a lot of our lending tends to be relatively bespoke, you know, we’re not, we’re not doing sort of vast volumes of identikit loans. So, in some ways, we can generally tweak our green lending criteria, it’s quite flexible. Particularly at the moment, while we’re really trying to encourage charities to take up that offer, and think in that way, we want to be as flexible as possible with it. So, that’s the approach we’re taking.
Léa Legraien:
Okay, so would you say that green loans are now more common than ever?
Alison Taylor:
Yeah, absolutely. I mean, I think I did one of the quite early green loans back at HSBC, feels like an incredibly long time ago now. And at the time, I think there were real sort of mixed views from potential borrowers from the client base, from people across the bank, like how popular is this going to be? And of course, you know, then you get into people who have fears of greenwashing and things. I think my own take on it is that everything that we do incrementally moves that agenda forward and leads to more sustainable business practices. We shouldn’t sacrifice good in the pursuit of perfect. So, if we’re making advances, you know, we shouldn’t limit people who maybe can’t do 100% of what would be brilliant with the building if they can make a 50% improvement. That’s still worth having.
Léa Legraien:
Exactly. So, you also mentioned net zero, and I know that you’re committed to achieving net zero in your operations by.. 2030 or 2050?
Alison Taylor:
2050. But I would like us to be moving in that direction faster if we possibly can. I think, you know, I’ll be completely candid about it, we have high aspirations for ourselves, and like every organisation, we tend to do all of the more straightforward things first, which is fair enough, I think that’s the approach that we all have, particularly when, you know, you’ve had quite a difficult economic backdrop. I think it’s unsurprising that most charities will be in that place. So, all of this sort of low-hanging fruit has been done, and all of our work on our treasury policy so that we make sure that we’re investing CAF’s funds in an appropriate way with appropriate counterparties, looking at our pension arrangements, so that we have aligned to a 98% ESG portfolio through our pensions provider, our own product provision and our risk management. The most challenging area for us, probably, and I think many charities would recognise this. We’re fortunate enough to be gifted a building that we use, and that’s wonderful and a massive benefit for us, but it isn’t the most green building ever. It’s of an age, and it’s got the issues that it’s got, and we’ve got to address those over a period of time. And I think that’s... you know, we speak to so many charities about that same issue, and it takes me back to the point I made earlier, I think, about making sure that you’re always doing these incremental steps, regardless of those challenges. I think that’s where we are at the moment, so it’s reasonably early days. But the bank actually, despite that... We were recently recognised as one of the UK’s greenest banks through bank.green. And I think that was a shot in the arm to our head of sustainability, he’s been working hard on these issues and continues to do so.
Léa Legraien:
And I guess the other like difficulty with net zero is that there is not much guidance out there, so especially when it comes to charities. So, everyone is talking about net zero, wants to reach net zero by 2030 or 2050 but we don’t really know how and where to start.
Alison Taylor:
I think that’s true. And I think, you know, I wouldn’t just restrict that to the charity sector. I think for many businesses, for individuals as well, we’re all slightly wondering what that looks like, and what kind of heating arrangements we’re all going to be expected to have, and what do those of us... Like me, I live in a really ancient property, you know, what am I going to be expected to do with that? I can’t imagine. It won’t be easy. I think we’re all slightly in that boat, but our advice to everybody, I think, is just start. Do the things that you can do, particularly where they sound small and maybe a bit silly, but I think particularly those things where you can save energy through looking at all of your appliances, if you have an office or you have service buildings, you know led program for light energy. It’s amazing now that energy... okay, we’re not where we were, the costs are not as high, but it’s still a massive expense, and you can make significant differences, both through your carbon footprint and your energy bill with some quite small changes.
Léa Legraien:
Yeah. So, I said that we’re holding our Charity Finance Summit in October, and you’ll be delivering a session there. So, your session will look at how charities can navigate strategic change with no blank check. So, why did you choose this topic?
Alison Taylor:
Because I think over the last couple of years, in the sessions that I have done, I’ve certainly focused quite a lot on financial planning and on the cost side. To me, at this point, my head is very much in there: How do we generate more income space? You know, I think people have cut back costs, have reduced services, have tried to streamline every which way they can. And the bigger question now is, how do we get income up? So, how do we encourage... our own CAF research shows reductions in the number of donors, and pretty much across the board. Now, total donations are holding up because those that are donating giving more, but we have fewer people donating, and we need to turn that around. That’s been a long-term trend. So, what do we do about that? What do we do to help charities navigate the changing demographics of donors? Because I think that the shift towards female philanthropy, you know, when you’re thinking about individual clients, that’s quite different. The way of engaging with donors is different when you’re targeting that audience. Next gen philanthropy, different again, you know, they want a very different kind of relationship, I think, with the charities that they donate to, and a lot of that involves rethinking the strategy around fundraising and donations. So, that’s really why I wanted to sort of shift the narrative a bit more towards strategy, and because I think so many people are thinking about digital investment to support that, and that is always frighteningly expensive, I think, for everybody. So, what do we do in the face of that? What can we do that saves other costs, maybe, or that is a better income strategy that enables that investment for the longer term? That’s why I wanted to focus on.
Léa Legraien:
Thank you. So, what role do you think artificial intelligence could have in this? Because we have seen more and more charities embracing AI. So, is there any role for AI in this?
Alison Taylor:
I certainly hope so. I mean, I think it’s relatively early days. I definitely don’t profess to be an expert in this area at all, but, we have been doing some research into the use of AI by charities, and I think there are some really promising case studies. And, you know, people are finding, particularly day-to-day operations, administrative tasks, it can be really time-saving and efficient. I’d like to see... you know, one of the real pain points, I think, around income generation, grant applications, we hear so many, not complaints but concerns, I guess, from charities grappling with... you know, it’s, always a bit different from grant process to grant process, you know, they’re really onerous, sometimes, the extent of the application that needs to be written, and the extent that AI can help with that, I think that would be great. So, I’m more for it if we can make it work well, and if we can bring the expertise to bear to make sure that it does really add value. And I think that should be possible, and I hope it will play a role in that.
Léa Legraien:
Yeah, especially if you’re a smaller charity, you don’t necessarily have the same resources as a bigger organisation.
Alison Taylor:
Absolutely.
Léa Legraien:
Well, thank you so much Alison. Is there anything else you would like to add, anything for anyone who might be listening and considering attending our Charity Finance Summit?
Alison Taylor:
Well, I just definitely recommend people to come. Sometimes it’s hard to envisage taking time out from... you know, everyone is always busy, aren’t they, that’s the state of the nation. But I think taking that time out to have the headspace for a bit of thinking time and talking to other people, hearing what others are doing, it can spark real benefit, I think. And so I just encourage people to come along and be open-minded and then ask lots of questions and be prepared to share their own experiences. I think that’s where the real value is.
Léa Legraien:
Thank you for listening to this podcast episode. If you enjoyed it, please like and subscribe. We hope to do more podcasts in the future, and if you have any comments, please do get in touch at [email protected]
You can see the full programme for the Charity Finance Summit 2024 and buy tickets here.
Editor’s note: In this interview, Taylor refers to Clare Mills, who is deputy CEO of Charity Finance Group, which is unrelated to Charity Finance (a magazine published by Civil Society Media)
