7.1 Our goals

mecu’s products and services to be financially viable and to assist our members to live more sustainable lifestyles.  

7.2 Our approach and commitments

As a financial services provider, we recognise that our major impacts are those caused by the activities we support through our products. We want our products to make a contribution towards a responsible and sustainable society. Therefore, we have developed a number of products with features to encourage members to be more environmentally responsible and to help alleviate social issues within the community.

7.2.1 Ethical investment and lending F1 F2 RB1

The manner in which mecu lends and invests members’ money have been identified as key areas where the consequences of mecu failing to act ethically would have significant negative consequences for mecu and members, so mecu has developed an Ethical Lending & Investment Policy to minimise the risk of any such occurrences. The Policy outlines mecu’s key lending and investment issues relating to ethics and corporate responsibility, and details how mecu will ensure standards are maintained. This includes not lending money or investing funds in activities that would be economically, environmentally and socially irresponsible.

Commitment 2005/2006	Progress
Formally incorporate consideration of environmental and social aspects into product development procedures.

mecu’s business and marketing plan objectives are to position the mecu brand as the pre-eminent socially responsible banking brand. The marketing strategy involves developing products that reflect our socially responsible values, appeal to mecu’s strategic markets and enhance economic, social and environmental wellbeing within mecu’s communities of interest. This requirement is now written into the formal product development process.

Some examples of social and environmental considerations in products in 2006/07:
 
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• A home loan was developed for the VicUrban Aurora development. mecu is now a preferred Lender for this project.
• Green car insurance with CGU Insurance Limited.
• Investigating the use of recycled paper for member cheque books for members who require them.
• Currently working with our IT suppliers to develop our e-statements so that our members can get their statements from mecu online.
• Work has commenced investigating a loan product to finance the purchase of properties with Trust for Nature protective conservation covenants.

Exploring a basic insurance product for low income families and a home contents policy which replaces white and electrical goods with the most energy and water efficient products.

Commitment 2005/2006	Progress
Incorporate consideration of environmental and social aspects into the Loan Assessment Process.

Assessing the environmental and social impacts of a loan is a difficult and complex matter. The Ethical Lending and Investment policy (and procedures and processes that flow from this) represents a foundation that will be built on as mecu’s thinking, experience, processes and system for capturing information develop.

The Board-adopted Ethical Lending Investment policy dictates that mecu will not lend money where there will be a significant and negative environmental or social impact in doing so.

7.2.2 Value of lending with an environmental and social benefit
 
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We define ‘total value of lending with an environmental and social benefit’ as lending to members and organisations where the outcome improves the environment and/or social capacity and circumstance.

Figure 7a: Breakdown of lending activity

Mortgage secured lending has increased on the back of two new lending products – First Home Buyer Loan and Premium Home Loan $500K+. Personal Loans continue to fall as a percentage of the total loan portfolio with only a slight increase in commercial loans.

Commitment 2005/2006	Progress
Develop systems to capture all lending with a high social benefit
Develop systems to capture all lending with an environmental benefit.
Develop systems to capture the percentage of our portfolio with a high environmental impact, if deemed material.

mecu has developed a number of loan products specifically designed to address different issues in society and to encourage borrowers to make environmentally positive choices. These products deliver a defined and clear social and/ or environmental benefit and can be tracked using a unique product code. These products are summarised below:

Environmental

• goGreen® Car Loan (advanced after 31 October 2003)
• goGreen® Home Improvement Loan – secured and unsecured

Social

• Premium First Home Buyers Loan

mecu has established relationships with a number of organisations providing products with a high social or environmental benefit. Loans made under these relationships are  flagged appropriately.

Environmental

• savewater!
• Vic Urban Aurora
• Sala Homes
• The Ridge on Binna Burra
• Currumbin Eco Village

Social

• Vic Urban Own Home
• Any other loan to an individual or organisation that has a high social or environmental benefit.

Figure 7b: Lending with environmental and social benefit

Breakdown 2006/07:

*total includes securitised loans of $4,653,319.

The large increase in social loans is a direct result of the Premium First Home Buyer Loan. This loan offers a sharply discounted variable interest rate to assist members purchase their first home by reducing their home loan repayments. A system has now been developed to identify individual loans that have a social or environmental benefit.

7.2.3 goGreen® car loan

We agree that climate change caused by excessive burning of fossil fuels is one of the world’s most pressing environmental issues. In Australia, transport is the fastest growing contributor to this issue. Since motor vehicle financing is one of our lending areas, we recognised our ability to reduce the greenhouse impact indirectly caused by this activity. From this we developed the award winning goGreen® Car Loan.

The goGreen® Car Loan encourages members and potential members to purchase more environmentally friendly cars by providing them with a lower interest rate the higher the car’s Greenhouse Rating and the newer the car; see Figure 7c. We also offset 100% of the CO2 emissions produced by the car, for the term of the loan.

Figure 7c:  Breakdown of interest rates and greenhouse gas offsets for different types of cars

*Rates current at time of publishing.

We currently work with Greenfleet, a not-for-profit organisation based in Gippsland, Victoria to plant and maintain 17 native trees per car financed under mecu’s goGreen® Car Loan. As these trees grow, they absorb the equivalent greenhouse gas emissions that the average car produces in one year (4.3 tonnes of CO2) as well as helping to tackle salinity, improve water quality and provide essential habitat for endangered species.

Figure 7d: goGreen® Car Loans funded

In the 2006/2007 financial year 870 goGreen® Car Loans were funded. Accumulatively, these loans had a value of $15,864,466, which sees a significant increase from last year’s 709 goGreen® Car Loans with a value of approximately $11.3 million. The increase in applications and fundings can be attributed to an increased focus on the product through print advertising and a new simpler pricing model that was launched in April 2006.

mecu reviewed the pricing of the goGreen® Car Loan pricing model during January 2006 in light of information regarding the growth in the small car market due to increasing petrol prices. The review found that the most popular selling small–medium new cars such as Holden Astra, Toyota Corolla and Mazda 3 received the same interest rate as larger new cars such as Holden Commodore. Our goGreen® Car Loan interest rate for cars under 5 years old was also found to be higher than the most competitive rate in the market. Following the review, the pricing model was simplified so that all small cars with a green vehicle guide rating of 6+ received the lowest goGreen® Car Loan rate. The rates for larger cars and cars under 5 years old were also dropped to position them competitively in the market. The goGreen® Car Loan  continues to be competitive in the national car loan market place and picked up Money Magazine’s Best Socially Responsible Product category (Non-Bank), bronze award.

7.2.3a CO2 offset for our goGreenCar loan

For the financial year of 2006/2007, $86,400 was contributed to Greenfleet, resulting in the proposed planting of 36,720 trees. This will result in a CO₂ offset of 9,288 tonnes.

7.2.3b goGreen® Motor Insurance

To complement our goGreen® Car Loan, in partnership with CGU, members can now purchase goGreen® Motor Insurance.

The premium is calculated on the basis that the car insured will be driven by no more than two nominated drivers who are 25 or over and will not be driven more than 10,000 kms during the period for which it is insured.

7.2.4 goGreen® home improvement loan

Our goGreen® Home Improvement Loan offers a discount off the standard variable loan rate for the purchase and installation of environmentally friendly features into the home. This loan product was created to encourage people to install such features in their homes, including but not restricted to solar panelling and wind electricity generation, grey water recycling systems, insulation and rainwater tanks.

This loan product was also offered as part of our ecosaver initiative with our savewater! pilot. Our partnership with the savewater! Alliance has been discontinued for the time being as the program undergoes a review by savewater! 

Commitment 2005/2006	Progress
Extend the goGreen® product range to include a savings account and credit card. To be amended to: ‘Extend the goGreen® product range.’

7.2.5 mecu VISA credit card

We have two credit card offerings:

• Low Rate VISA Credit Card which offers a low rate on both purchases and cash advances
• 55-day interest free VISA card with no annual fee.

mecu is the first financial institution in Australia to launch a credit card using PETG plastic.

We also give members a 100% No More Marketing Guarantee, meaning that we won’t offer unsolicited credit limit increases, or encourage card holders to increase their credit limit or level of spending, all while providing extremely competitive interest rate and features.

7.2.6 Community housing

Commitment 2005/2006	Progress
Investigate and develop profitable strategies for the community housing sector to improve access to finance and therefore provide enhanced low cost housing options for people on low incomes. To be amended to: ‘Investigate and develop profitable banking strategies to support the community housing sector.’

mecu continues its relationships with different community housing groups including:

• Melbourne Affordable Housing (MAH) who are a not-for-profit organisation existing primarily to provide those on low incomes affordable housing options in Melbourne. mecu has provided loans to MAH to purchase affordable housing.
• Community Housing Limited (CHL) who are also a not-for-profit organisation aiming at providing low income earners and those with disabilities affordable accommodation. mecu and CHL are currently investigating ways to introduce private investment into Community Housing thus increasing the amount of community housing available.
• mecu also supports Dalkeith Homes in Gippsland as well as Sirovilla in Geelong. Both provide housing for aged persons.

mecu assists these projects by providing funds for the construction of the units.

7.2.7 Programs and products for students

Last year mecu was in the midst of developing a banking product for the 15–25 year old bracket. The product was envisaged to provide young people with a viable banking option to suit their particular needs. The product developed is known as the mySaver account. Anyone up to the age of 25 can access this account, and they only need to make a $1 monthly deposit (and no withdrawals) to earn up to 5.50% p.a.* interest.

The product was launched in September 2006.

As at 30 June 2007, 1,546 mySaver accounts were opened with a total value of $1.438 million.

The mySaver account took out the gold in Money Magazine’s ‘Best of the Best’ awards for  Best Kids' Savings Accounts (Non-Bank) in 2007.

* interest rate correct at the time of printing.

7.2.8 Community sector banking

Commitment	Progress
Provide support for the Not-For-Profit Sector through building of a banking relationship that caters for their specific needs.

Our values in the area of caring for our communities and environment are aligned with those of not-for-profit organisations and our history with the Education sector sees mecu working closely with both groups. Through our relationships with these entities we began to recognise the special banking needs of not-for-profits and schools. In response to this, we developed a high interest, low or in many cases, no fee everyday transactional account called the Community Access Account. This product has seen some strong growth since its inception last year and as at 30 June 2007, there were a total of 113 Community Access accounts worth $8,136,732.

7.2.9 Premium First Home Buyers Loan

Commitment	Progress
Investigate and develop commercially viable home loan product solutions, which seek to address deteriorating levels of housing affordability.

mecu’s Premium First Home Buyers Loan offers a low variable interest rate for anyone who qualifies for the First Home Owners Grant. It allows first home buyers to borrow up to 100% of the valuation amount.

The loan was introduced to cater for first home buyers who are struggling to enter the property market due to problems with housing affordability. The product was launched on 1 September 2006 and the portfolio has grown steadily to $57,993,531 (as at 30 June 2007).

We have yet to commence engaging with our members about their level of interest in Socially Responsible Investments (SRI). SRI is a style of investing that considers the environmental and social performance of a company along with its financial performance.

As more research, information and choice becomes available in this arena, and with our membership of the Ethical Investment Association, we are better equipped to promote SRIs to our members. We have engaged Outlook Financial Services to provide information surrounding SRIs to our interested members.

7.2.10 Socially responsible product features

In line with our commitment to sustainability, we continue to provide a number of socially responsible product features.

• Loan repayment pause
   
  The high cost of housing and subsequent levels of income required to repay a mortgage have been cited as a key reason why Australian couples are delaying, or not having families. In recognition of this, we introduced a loan repayment pause for a number of home loan products. The clause allows members to defer payments on their mortgage for up to three months, or reduce mortgage repayments by half for up to six months, when a new child comes into the family.

• Free life insurance INS4
   
  In the event of a borrower’s unexpected death, repaying a loan should be the least of a family’s concerns. We understand the importance of protecting the borrower’s family.
   
  For eligible borrowing members, qualifying loans issued by mecu include loan protection insurance at no additional cost. In the event of the unexpected death of the borrower/s, the loan is paid out to a maximum of $120,000 per person, thus protecting the family from the burden of repaying the loan or at least a significant proportion of it.

As at June 2007 36 claims were made, 32 have been paid and 2 claims are pending to the value of  $1,156,816.23.

Table 7e: Loan protection insurance figures 

Commitment 2005/2006	Progress
Ensure that members with a disability are aware of mecu’s No Fee Policy for appropriate services.

7.2.11 Exemptions from fees and charges

We have an exemption from fees and charges for members who represent an organisation or group which is recognised by the Australian Taxation Office as a not-for-profit organisation and operates a Community Access Account. We also exempt fees and charges for any member who cannot conduct their normal banking due to a disability. Periodic emails are sent to staff to serve as a reminder to inform members of their eligibility for an exemption from fees and charges.