This week I talked to the head honchos of Dutch-based sustainability bank Triodos which invests in projects offering social and environmental value.

Triodos' funds total EUR3 billion ($US4.25 billion) and its products include a European renewables fund, a large-cap equity fund, a bond fund and a thematic sustainability fund. Its business banking division provides loans to charities, community groups, social businesses and environmental initiatives such as wind farms, and other businesses such as organic food and fair trade organisations. In its investment banking business, Triodos manages venture capital funds to invest in social and environmental enterprises across Europe. Its investments exclude companies associated with tobacco, animal testing, alcohol, nuclear power, gambling, fur, arms and genetic modification. Its investment portfolio has few mining and oil companies but plenty in the renewable energy sector.

In the interview I talked to Peter Blom, chairman and chief executive of the executive board of Triodos, and Bas Ruter, managing director of its funds management division.

SOX FIRST:Tell us about the origins of Triodos.

RUTER: We started off as a sustainable bank in 1980. Our mission was to be as transparent as possible. Our first fund invested in wind energy after Chernobyl. As a bank, we thought it was not enough to say no to nuclear power if we could work actively on the energy crisis. So we started financing with risk capital in wind energy in Europe. At end of the 90s, our clients wanted a product for life insurance and retirement, so we began investing in stocks and bonds selected on the basis of a thorough research process. In the mid-1990s, we offered those type of investments without insurance attached, like regular mutual funds. Within every regular sector we identify the 50 per cent best in class in that group. We do not invest in some companies even though they may have a great corporate social responsibility profile on all these issues if they dig oil or start mining in national parks. We are seen in the market as a brand that has the strictest criteria both on the minimum we set and the best in class criteria. We end up with 25 to 30 per cent of the companies we screen.

SOX FIRST: Tell us about your performance.

RUTER: About 12 per cent over the last three years and our equity fund has produced 16 per cent in 2006. We have a list of companies that we invest in, about 300 names out of 1800 on the MSCI. There is no under or outperformance of that universe. It is almost exactly the performance of the index itself which is our reference index.

SOX FIRST:As investment criteria, how effective is it?

RUTER:The companies we have in that list are better prepared for what society will give them as challenges because they have principles and policies and they have management systems for a number of issues that society considers relevant. It reduces the risk of that company entering into controversy and the risk of losing clients is lower.

SOX FIRST: I take it you would take financial criteria into account?

RUTER: Yes. And the list we provide goes to our investment management.

SOX FIRST: Where do you see sustainable investment heading

BLOM: It will become more mainstream. What IT was 10 years ago, is now sustainability. People are turning to it now because they feel things have become really serious. It's different from the past when they thought there would be a long-term solution. Now they hear the situation will create problems in 10 to 20 years so they know they have to do something now.

SOX FIRST: What are the big trends in renewable energy?

BLOM: I see solar as the real alternative because if you calculate how many square kilometres are needed for solar and wind energy and biomass, solar is really the only one. It will be used more in buildings and all sorts of applications.

SOX FIRST:But solar is expensive and heavily subsidised.

BLOM: Solar is expected to be competitive around 2020. That's when the cost price will come down and it will be non-subsidised competition.

SOX FIRST: If sustainability is that important for investment, how do you account for the stellar performance of Exxon Mobil?

BLOM: We see the paradigm shifting. We are talking 2020, we are not talking about the share price of last month.