Tena Moore, Freelance Writer

Interview with Kathleen Sayce

Kathleen Sayce is the Bank Scientist for ShoreBank Pacific , a Washington State chartered, FDIC insured bank. ShoreBank is the first commercial bank in the United States with a commitment to environmentally sustainable community development and land management. ShoreBank Pacific is a wholly owned subsidiary of ShoreBank Corporation , the nation's first community development and environmental Banking Corporation. As of late 2003, the bank had approximately $78 million in assets with $27.6 million in loans and $68.2 million in deposits. In line with the company's unique business focus, they are distinguished by the presence of a biologist and certified wetlands specialist on staff. With a background in botany and community ecology, Kathleen Sayce brings a special competency to ShoreBank's land oriented business. Her clients include investors, depositors, and others in the local community who may find value in the bank's special green market niche.

EAG: Hello Kathleen, and thanks for agreeing to an EAG profile. Could you tell us a bit about your background and how you came to be with ShoreBank Pacific?

KS: I grew up in one of the world's special places, on Willapa Bay, next to the Pacific Ocean and the Columbia River . I intended to be a professor of botany, and studied plant ecology to that end. But we live with the cards we are dealt: I left graduate school due to poor health, returned home, and ended up working on a series of ecological problems in the community where I grew up. I was a fellow with Ecotrust, then the science program director for the Willapa Alliance . When ShoreBank Pacific started, the president came to me to discuss how to get access to the evaluation services and analyses that were needed, and eventually I joined the bank to provide those services. I've been with the bank for almost six years. It has been fascinating to take core ecological principles, convey them to lenders, and use those principles to evaluate potential clients.

EAG: The field of environmental banking is new, even for the sustainability arena. Is ShoreBank Pacific the only environmental bank in the US , or are other banking institutions moving into this market niche? Who is moving into this arena, and has ShoreBank developed relationships with them?

KS: Most banks have at least a few loans on their books that could be considered conservation loans. These include loans to organic farms, and other organic food entities, to land conservation organizations, to distributed power production, to holistic or sustainable farm or ranch organizations, and others. The lender, who may focus only on collateral quality and cash flow, often ignores the sustainable business focus.

ShoreBank Pacific is not the only lender doing environmental lending. Self Help Credit Union has an environmental CD program. Deposits in this CD go to fund organic farms, recycling businesses, eco-tours, and other businesses with a sustainability focus. Triodos Bank in the Netherlands developed this approach. Triodos Bank takes deposits in specific areas, such as for farming, energy, and housing, and lends out of those deposit funds in those specific areas to businesses that farm organically, put in wind installations, build low income housing, and so on.

Some banks say they are doing environmental lending, but most look at environmental lending as guidance for risk avoidance or risk reduction, or marketing. They don't see lending as a way to help businesses be more profitable, or to help needed structural changes to occur. They also don't understand that the changes that are needed should be taken up externally (with clients) or internally (inside their own operations), and that's another place where we differ – we also try to walk our talk in our own internal operations.

EAG: The Natural Step provides a framework for eco-friendly business, and has become an informal yardstick against which many sustainability operations are measured. ShoreBank apparently uses this process to track its own progress, and to evaluate potential clients. Can you tell us how all this came about?

KS: We looked for a framework that could be used as the basis for our evaluations. We didn't want to reinvent any wheels, and we needed a process that fit within physics and ecology, that was based in science, in other words. TNS (The Natural Step) fit that need. TNS is anchored in thermodynamics and ecology, has trained presenters and facilitators. Anyone interested in learning more about it has access to websites, presentations, and in some areas, active chapters with regular seminars, working groups and coaches.

This also helps us with regular reviews of where we are as a business, and where we'd like to be. In one session we went from a goal of reducing the need to drive (we work in widespread rural and urban areas, and drive many miles each year), to envisioning a highspeed rail system, so when we need to travel we could work on the way. From a productivity point of view, thinking time is more valuable to me than driving myself somewhere. Now I don't look at driving the same way I used to – someday I could be riding a train instead, talking to clients, working on projects, rather than holding a wheel, knowing if I let my attention drift that I'll end up in a ditch. Of course, if I'm working on a train there's always the danger that I'll be so involved in work that I'll ride a few stops too far!

EAG: No doubt our readers would like to know how your work with wetlands or other natural resources contributes to the bank's business success. Can you tell us about some of your favorite projects, as well as new projects that might be on the horizon?

KS: ShoreBank Pacific loans me out to work on ecological projects, which in many cases help state and local agencies better manage wetlands and other natural resources. As an ecologist, I tend to take a long view -- sometimes a very long view -- of what constitutes good land use and what competent land management should include. At the same time, improving the public's education about how to use land wisely is also important.

Two of the projects I am working on involve public access to historical sites and public art along the Columbia River, where we work both sides of the river, and I live and work in Washington . Both projects are related, as both came about through the bicentennial commemorative of the Lewis & Clark Expedition, which is going on now through 2006. I'm providing ecological services to ensure that restorations are done with the correct plant materials and in sites that are suitable for these uses.

One group of projects deals with developing infrastructure, including new and expanded park sites, to tell more of the story of the Expedition and of Native Americans on the Columbia River . This includes fish habitat restoration, creation of water trails, additional day use parks, hiking trails, public art and interpretation in the lower 15 miles of the Columbia and at Cape Disappointment State Park . As a part of these projects, new national parks and multiple historic parks are also being developed.

Another project is the Confluence Project, with public art designed by Maya Lin for 5-7 sites along the Columbia River, from the confluence of the Clearwater and Snake rivers on the Idaho-Washington border - to the confluence of the Columbia and the Pacific Ocean at Cape Disappointment. All sites will be linked thematically by Ms. Lin's designs at each site. The project encompasses spectacular landscapes. This is not another history of Lewis & Clark. Instead, her project emphasizes how the past can inform our future, sustaining both natural and cultural resources. I'm on the statewide board for the Confluence Project, in addition to providing botanical advice for the coastal site at Cape Disappointment .

Both projects are being developed with public and private funds, if people are interested in making donations, they can do so via the websites referenced below.

EAG: ShoreBank seems to have had an active partnership with Columbia Land Trust , helping landowners discover tax value from conservation banking. How did the relationship with CLT begin? Do you work with other non-profits, such as The Nature Conservancy or the Conservation Foundation , to achieve similar land management goals?

KS: My involvement with CLT ( Columbia Land Trust) began when I realized that private voluntary land conservation services were needed in southwest Washington and northwest Oregon . At the time, there were no similar non-profits working in this region, yet there was growing demand for these services. The local communities are generally very poor, some of the poorest in the state and in the country. CLT agreed to expand their working area, and I agreed to take the lead along the coast and lower Columbia River Estuary to assess projects for them. My involvement is at several levels, working with local donors and landowners, helping to strategize long-term plans and providing stewardship advice.

CLT works with other conservation organizations. Where TNC (The Nature Conservancy) protects natural habitats, private land trusts recreate habitats, expanding the benefits of conservation by restoring landscapes. CLT also works with other private, local, state and federal partners, and with Ducks Unlimited.

I also work with TNC to help with local ecological management issues. My interest here is in seeing that land capacity is protected and restored. We have unique plant communities, island aquifers, vital shellfish, timber and fishing resources to protect, and for all these resources, protection begins upstream in habitats that are not isolated from the larger landscape.

EAG: Other than conservation banking, have you worked to bring other kinds of natural resource value to your clients? For example, do you help your clients achieve wetlands credits, or other ecological assets?

KS: I work to help landowners value the resources they have, to resolve land use issues, and to increase capacity. I'm very interested in reducing exposure to natural disasters; solutions range from relocating buildings, to finding new construction methods, to moving roads, or adding stormwater capacity. Few people really understand how vulnerable our society is to natural disasters, let alone to determined terrorists.

On private lands, getting reputable appraisals can be a problem. Every deal we do is unique, with unique problems and solutions. One of the moral dilemmas we try to avoid is using wetland conservation in one area to justify destroying wetlands in another, but we work in a uniquely wet environment along the coast, with instream fish habitat and shellfish beds downstream, so we are probably more cautious about this particular aspect than other communities might be.

EAG: In a way that may be familiar, EAG founder Bill Coleman worked with Allegheny Energy a few years ago to achieve an eco-asset based appraisal of 12,000 acres of the Canaan Valley in West Virginia . This acreage was being sought as an addition to a local federal wildlife preserve. It was first appraised by the federal government -- based on recreational & commercial development potential, minerals and gas, etc., on the property -- to the tune of $16M. Based on the special character of this property, Allegheny felt there might be greater value to be realized, and turned to Bill's team (he was then with the EPRI Environment Division ) for an eco-asset based appraisal. Bill's team came back with a $32M appraised value based on the property's potential to generate saleable wetland credits, CO2 credits, conservation credits and other market based ecological assets.

Allegheny subsequently sold the property to the government for the original appraised sum -- $16M -- but claimed the incremental $16M as a ‘gift' or donation subject to bargain sale treatment under IRS code. Based on this approach (accepted by the IRS), the result was a $6M reduction in tax liability for Allegheny during 2001, in addition to the $16M property sale value. The overall value realized from the sale was $22M.

No doubt this is familiar, especially the IRS bargain sale donation. But, does the market value for ecological assets –- credits, allocations, certificates, etc.-- make sense in the work you do for landowners? As a new banking and conservation system, there is a lot to educate landowners about, yet doing so is imperative. Do you believe we could work together to help your clients develop a new appreciation for the value of land transfers?

KS: We are always concerned that appraisals stand up to the highest scrutiny possible. The current political environment has resulted in the need to screen each project very carefully. For many landowners, this means that they may not realize the value they might want to get based on current appraisal processes.

The delay at the national level in taking up carbon credit trading has also delayed the development of this market. However, valuation based on economic and ecologic criteria will continue to develop. After all, as a society we are dependent on those natural goods and services, so we should be taking them into account, not hiding them by shoving them off the books.

EAG: Related to all this, especially in the region you serve, is the Oregon Biodiversity Project , organized by Sara Vickerman of Defenders of Wildlife 1 .

The project's main goal was to develop a strategy to conserve Oregon 's native biodiversity. The strategy intended to reduce the risk of future endangered species designations and give landowners more flexibility in resource management decisions. An important part of this was a recommendation that the state establish more market based incentives, species and habitat credits, resulting from targeted restoration of habitat or the reintroduction of listed animals and plants.

Do you think initiatives like this will make a difference within your service territory and with respect to the kinds of business you're pursuing?

KS: Yes, I do think this will help, as the recognition of multiple values is more widely accepted and standardized. This was the original intent of ESA (the Endangered Species Act): to help private landowners better value their lands for what they were, instead of what they envisioned through development.

EAG: Where do you think all this is leading, Kathleen? Would you agree that ShoreBank seems to be ushering in a new era in banking, one especially relevant to the emerging ecological economy?

KS: My work with landowners is only one part of what we do at ShoreBank Pacific. Another part of it is working with conventional businesses to change their practices. Some businesses come to us because they are already practicing sustainable business operations, and want to partner with a bank that understands what they do. They are innovative and thoughtful, and often have great ideas that could be widely adopted.

Some are willing to work on new ideas, but want help to get there. And some are at least willing to listen to us, if not to make changes right now at least to discuss possible new directions. By working with more than the core true believers and early adopters, we help widen the pool of businesses that are thinking long term, becoming more innovative, more connected, and we hope, more profitable as a result.

After all, there are many different paths that lead to sustainability. And change itself is not necessarily good, or sustainable. We are still dealing with many, many people, and many corporations, who want to continue with business as usual, repackaged to appear to be sustainable. So by working with a wider range of businesses, we help increase the number of approaches to true innovation.

EAG: Could you share the long-term business plan for ShoreBank Pacific? For example, is the bank planning to expand its core operations in the near future, or are there plans to possibly diversify?

KS: We plan to grow. Envision this: a network of banks across the country where you can put your deposits to work, wherever you live, and know that that capital will come back to your community in innovative loans that support organic food, sustainable and holistic farming, community diversity and stability, education, affordable health care, local power production, durable and affordable housing, and a range of non-profit organizations that help make communities vital, stimulating places to live.

At the core of that vision is restoration of ecosystem health, for without healthy environs no community, no matter how affluent, vital or well-designed, can be truly healthy, or sustain itself for long.

EAG: That is quite a vision! Earth Assets Group is working to educate others about ecological asset value, and to provide services related to eco-asset management. How do you see this mission fitting into the work that ShoreBank Pacific is doing?

KS: Many of the goods and services supplied by ecosystems are not on economic balance sheets; they exist in an area often called ex-accounting, or off the accounting system. Our future as a society depends on no longer ignoring critical goods and services provide by nature, which are being casually degraded and lost.

EAG: Thanks so much for sharing your perspective with us Kathleen! We wish you lots of success in your future endeavors!

1 See: http//www.biodiversitypartners.org/index.shtml for additional information.

For more information about Kathleen Sayce and her work, please explore the following links:

Published Link: http://earth-assets.com/pdfs/profile_sayce.pdf

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