The farm boy CE of Kiwibank has embraced the full progressive business agenda. He tells Duncan Greive why they did it – and the profits flowing from it.

This interview is part of The Spinoff’s long-term partnership with Kiwibank

Steve Jurkovich doesn’t scan as a radical. He’s the Shore boy son of a farmer and was raised by a hard-working mum with massive support from his grandparents. He spent his early years on a dairy farm outside Paeroa. He loves his golf and sport, has worked in banking for most of his adult life, and is close to titans of the industry like Sir Ralph Norris and Barbara Chapman.

He also has daughters in their teens and 20s. Over the past few years the Jurkovich whānau have “had a lot of conversations around the dinner table about the way things should be”. It’s a microcosm of the big national kōrero that has risen over the past few years, largely driven by younger generations, around issues like indigenous, racial and gender equity, LGBTQ+ rights and addressing climate change. 

These conversations were initially greeted with scepticism by most executives, but have now made their way from social media to the boardroom. The movement nestles under many jargonistic names – stakeholder capitalism, doughnut economics, ESG (environmental, social and governance). Pioneered by the likes of outdoor brand Patagonia, which Jurkovich cites as an influence, a real commitment to sustainability has become increasingly common among the largest organisations in the world. In 2020, 95 of the largest 500 publicly traded companies in the US listed a chief sustainability officer among their leadership ranks, a rise of 228% in less than a decade. Yet that number also shows how far it has to go: the glass is less than 20% full.

In its totality this body of work can feel like a vast and very joined up progressive agenda. It has outpaced public sentiment on certain issues, and in some cases outflanked the politically possible even for countries with left-leaning governments like ours. That this is emanating from the gleaming concrete, glass and steel citadels of capitalism is jarring for many. The left suspect the motive; the old right find the idea of business involving itself in socio-political issues an affront to their worldview.

This movement is far from ubiquitous. Most corporates will over-index on one or two areas, while quietly downplaying others, usually to avoid upsetting clients which might not be as on board with that aspect of the agenda. But there is a small group that buys the whole piece, often identifiable by having signed up to become a B Corp. B Corps commit to a rigorous social and environmental performance certification process, and only a relatively small number of businesses attain it. Along with Patagonia, other prominent examples include Ben & Jerry’s, and New Zealand companies Allbirds and Ethique.

Becoming a B Corp is an arduous exercise. It’s not something a business does lightly. Kiwibank achieved the status in August, joining a group of fewer than 50 local B Corps. It’s a major part of the bank’s just-released debut sustainability report, one that shows just how much of that big progressive agenda has been embraced by the bank. 

For any entity, it would be a significant feat. But banks are known to be conservative, risk-averse, eager to avoid upsetting their customers. Which is what makes Jurkovich’s moves all the more remarkable. He’s barely three years into the job, and yet this son of the rural heartland has somehow completed a major transformation of our fifth-largest bank. I spoke to him about why he did it, and the way these seemingly altruistic moves are already starting to pay business dividends – that mythical balance of people and profit sought by the B Corp evangelists.

The following conversation has been edited and condensed for clarity and brevity.

I wonder what a young Steve Jurkovich would have thought about this report and what it contains.

I first joined one of the other banks a long time ago, in 1998. I think that was a different era. I think performance was really valued. I think we were trying to do our best in customer service, those sorts of things.

But to be honest, I would say now there is a reorder of these things. I reflect on it with my own kids. My oldest daughter is 21. She’s been a vegan. She’s a very staunch vegetarian. We’ve had a lot of conversations around the dinner table about the way things should be and how she feels about it. My youngest daughter’s sort of taken after her quite strongly.

I think the world’s changed, hasn’t it? I think the challenge is to try and strike that right balance.

What does becoming a B Corp mean, and why was it the right choice for Kiwibank?

Our chair Jon Hartley has got a really strong passion for the environment. He pushed a book about the story of Patagonia my way. Patagonia is one of the most well understood and best-known businesses in the world, but obviously a very staunch supporter of B Corp.

That book hooked me on getting the right balance between profit and purpose. Around footprint and delivering on what you need to. 

We also spent a lot of time talking to our team. More than 2,000 people participated in a conversation in a business that’s got 2,300 people. They told us that they really love Kiwibank’s purpose, Kiwi making Kiwi better off. But asked what does it mean? What are the goals? What are the things that we’re trying to achieve? It is a bit of a case of don’t talk about it, show me.

Then we started to look into the B Corp work. Like most things, some really passionate individuals inside the organisation really led the charge. They really embraced it and really got across to our board, the ownership holding company, and our team, what undertaking B Corp accreditation would involve and why it would be really important to us.

With the Rainbow Tick, we measure ourselves against accreditation. Same on fair pay, and living wage – on all sorts of things. We seek an external standard to validate what we’re doing. Again that idea of balancing profit and purpose.

That’s not uncomplicated though, right? As a bank, you have to think about who your customers are, what industries they’re involved in. Do you feel like you’ve got a handle on that yet? 

There’s a lot of coverage in Australia around what’s the right level of transition. If you’re a large bank with large emitters as customers, what support are you going to offer them to transition from the current state to the future state? 

You can see in NAB’s results, Ross McEwan, their CEO, he’s facing into that conversation. There will be people in Australia and in New Zealand who think any further support of a large emitter is absolutely the wrong thing. Then there are other people who say, “Well, you’ve got to help businesses transition”. No one wants the lights to go out, so you’ve got to do something in-between. Then there’s those that perhaps want to be wilfully blind to it and just keep on lending.

So I think it is a learning process. I think the first thing you do is you put a line in the sand and you say you don’t want to make the problem worse. I think our Responsible Business Banking Policy was a really clear stance. If you think back to Steve of 20 years ago, I don’t think I would have been part and parcel of a policy that looked like that.

What is that policy?

The Responsible Business Banking Policy is about limiting harm. Harm can manifest itself in a whole lot of different ways. Sometimes, it’s the large emitters. Other times, it might be preying on the vulnerable. It might be lending into areas where we’re not sure people are really clear about the deal that they’re doing or understanding the ramifications.

That means that there are a bunch of customers in areas that we exclude ourselves from. Perhaps there is a customer or profitability cost to that, but that’s one we’re prepared to live with because we think it’s the right thing. That’s the line in the sand.

Are there any of your existing customers that you’ve had to test this against? Whether to end your relationship, or to have a tough conversation with them?

I won’t go into naming individual customers but yes, there is. There have also been customers that have approached us because of the type of work we’re doing. There’s this balancing act which is saying, “looks like you guys are on the right track. We’d like to join you”. We’ve also been in a position where we’ve had to say no, we wouldn’t pursue that opportunity. 

We’ve had some hiccups on that front. We might have had a particular view on some areas and then actually, with better information from that group of customers, they have helped us understand actually that it’s a bit different to what we thought. That’s a classic example of living and learning – by no stretch of the imagination do we think we’ve got all the answers.

Another element which has really risen within the bank over the past few years is its Rautaki Māori strategy, of which the staff tikanga project Te Hoe Ākau is a big part. What does that involve and have you participated in it?

Yeah, I have. That’s been one of the really enjoyable things that the executive team has done collectively. As you can see in the sustainability report, actually our chief risk officer is a kind of classic example. She’s a New Zealand citizen but was born in Australia. We had this really interesting conversation when we talked about Kiwi making Kiwi better off – who is a Kiwi? 

What we’re finding is all sorts of people are really interested, curious about te ao Māori and how it makes up the fabric of New Zealand. Learning the language has been really important but just as important, I would say, has been some insights to the tikanga, the habits, ritual, culture. The things that are tapu and noa. I think actually that’s been really, really interesting.

It’s a classic example of balance. You don’t need to lose your own community to be interested in te ao Māori. You don’t have to have whakapapa to a particular hapu or iwi to embrace the idea of what te ao Māori means for New Zealand. One of our strongest and most vocal supporters of embracing and learning about Aotearoa and te ao Māori was also a lead in celebrating Diwali. We can all learn a bit more from each other.

You have a big goal to provide financial education to tamariki – but they’re growing up in a world of Afterpay and Laybuy, but also crypto and NFTs; stuff that is really complex but can’t be ignored.

The genie’s out of the bottle, right? The Afterpays, the Laybuys, and all these companies are massively high profile in terms of their financial markets support. The acquisitions that are going on around them, the investments that have been made by very well-known large organisations.

There’s always been innovation in financial services but it feels like we’re lagging a bit here in New Zealand. Ultimately, this is just about options, right? In a sense, a credit card is a buy now, pay later scheme, right? I think it’s a bit rich for a bank or someone to look at it and say, “that’s the wild west and I don’t know why you would allow that to happen”. When we offer products that are pretty similar in some areas.

I think ultimately there will be a more regulatory impulse, but probably the regulators take a bit of a light touch until they feel like there’s momentum. They don’t want to stifle things. You’ve got to let them grow and flourish a bit to have enough scale. But not so much that there could be a sort of systemic impact. 

I’ve certainly been observing NFTs from the outside but I’m by no way native in that space. It’s a different version of scarcity. I’m old enough and I’ve been in banking long enough to have been on one of these trips to New York and sat down with a 17-year-old with no shoes on in an office in Manhattan as he explained cryptocurrency to me.

I can remember leaving thinking “have I just seen the future?” It’s a pretty interesting space.

Speaking of the future sort of hurtling at you, there’s reference in the report to the escalating flood risk of your lending portfolio. To what extent is that a present concern?

In recent times we engaged with Minister Shaw around this, and he made a very good point. New Zealand was built on the back of a system which built a city next to a port or a river, because that’s the place where commerce and ships can come and people can interact. Unfortunately, building close to rivers and the ocean means you are more susceptible to floods.

Then you’ve got infrastructure that’s been neglected for decades. So you have cities built close to places that are prone to these impacts and an infrastructure that hasn’t been scaling to support urbanisation. There’s a long-term, long-tail problem.

One way to think about it is how are we managing the risk? Because if you come and see us today, we’ll give you a mortgage and we’re probably not expecting you to pay that off for 25 years, say for instance. None of us, I don’t think, believe that on our current trajectory the world will be in the same place in 25 years as it is today. So I don’t think we’re thinking about the risk very well. I don’t think we’re helping customers think about it that well. I think we’re at the start of that education.

If you look at the report overall, it’s a lot of mahi. It feels very joined up. When you’re talking about it with staff, customers, your executive, with your board – do you find people who might not be on board with the whole piece of it? Or who are passionate about one area but don’t see another, or say it’s not a bank’s business? 

I think as human beings, we don’t feel equally passionate about everything in our lives, right? That’s why it’s called a passion. I might think the single most important thing that Kiwibank can do would be lifting our cultural competence in te ao Māori, while the next person I speak to might say, “look, this is all about sustainability and our climate footprint”.

What I try to describe is a triangle. At the apex of the triangle is purpose. Purpose in a lot of ways serves as that guiding star. At the bottom left hand corner of the triangle is culture. How do we have an inclusive culture? How do we have a culture where people feel safe and they belong? How do we embrace things that are unique about Aotearoa, like te ao Māori? How do we create an organisation where I can still be myself but I can also belong? We don’t all have to be the same and we’re not all the same, but I can still belong, I can still feel part of the team.

Then on the other corner, you’ve got sustainability. B Corp, tackling the climate, our footprint, our emissions and those things. Triangles are so strong because they balance things.

We’ve talked a lot about purpose, but what about profit. What are you seeing already and what do you think that you will see over time that will defend and grow your profitability precisely because you care about all this?

I’m going to give you two examples. One, when we launched the Responsible Business Banking Policy, I probably got 300 “you’re on the right track” responses and probably 30 “you don’t understand what you’re doing, we’re not to blame, why don’t you look in your own backyard”  type emails. That’s 10-to-one. I’m not saying that’s very scientific but that’s certainly what I received. I think there are many, many more people who believe that this is the right direction to move in than those that don’t. 

Another recent example was when we issued our latest financial instruments, the AT1 capital instruments. Without getting too technical about it, we had three large investors say to us that the B Corp certification was a really important consideration in whether they would bid for the offer or not. 

Ultimately, we offered our debt at a lower cost to us because there was more demand. The financial benefits of that are millions of dollars. The work to do B Corp has already this year, or over the five years that those bonds are out there, probably saved us $2-$3 million.

So when people say to me this is greenwashing and there’s no financial benefit, I can show them three emails from large, globally relevant, well-known investors who said you’re on our green list because of B Corp. I think that’s a real tangible benefit of how purpose delivers on benefits for the business and benefits for the customer.

This content was created in paid partnership with Kiwibank. Learn more about our partnerships here.

Follow When the Facts Change, Bernard Hickey’s essential weekly guide to the intersection of economics, politics and business on Apple Podcasts, Spotify or your favourite podcast provider.