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Banking on Biology

If you were a small business owner looking for a loan, you'd expect financial and perhaps accounting advice from your banker.

By | May 23, 2005

<p>Kathleen Sayce</p>

Courtesy of Shore Bank Pacific

If you were a small business owner looking for a loan, you'd expect financial and perhaps accounting advice from your banker. But if you're a specialty dried-fruit producer in Oregon seeking funding, you might end up with a lesson about tadpoles.

The fruit producer had been cited by Oregon agencies for water-quality violations. He was using sugar brine to infuse more flavor into fruits, and then dumping tons of waste brine into a pond, where it decomposed. Kathleen Sayce, the banker who worked with him, realized that without a way to reuse the sugar, "He couldn't see how to ramp up production without costly additional ponds."

With her encouragement, the owner installed a centrifuge, which removes water and raises the density of the brine solution without altering flavor. That led to greater brine reuse. The resulting 80% savings in monthly sugar bills allowed exploration of alternative brine disposal. "Now, a tanker hauls it to an ethanol plant – he's paid for waste brines! We already knew we'd do the loan; I helped find more efficient ways to handle brine output."

Realizing he no longer needed his expensive pond, the fruit producer asked, "How do I know when it's safe for fish?" That was a question Sayce was ready for: "Watch the water. When you see tadpoles, it's safe."

Most banks examine a company's financial statements before approving a loan. ShoreBank Pacific is just as likely to check its pH levels. America's first commercial bank committed to improving customers' environmental performance is probably the only one employing a full-time bank scientist.

Daughter of a marine biologist, Sayce never expected to work in finance. After earning a BS in biology and an MS in botany, she had gone on to have typical jobs given her training: working in marine biology and for a Washington state agency monitoring health hazards of biotoxins and algal blooms. By 1998, she was employed as science program director of Willapa Alliance, an Oregon nonprofit that protects local marine life.

FROM BIO TO BUCKS

But then ShoreBank approached her. Founded in 1997 by a Northwestern conservation group, the bank is based in Ilwaco, Wash., a waterfront town near the Oregon border. Initially, bankers with no scientific experience headed the institution, but they soon realized they needed someone like Sayce. She joined the bank in 1998.

"Kathleen's unique because she was raised in a rural community and is a real business[person] at heart, though she'd never admit it," says Shore Bank president and CEO David Williams, a former physicist. "Blending the whole scientific process into a business setting is special. Her skills help make our bank distinctive, by helping customers identify ways to perform better – both economically and environmentally."

Sayce's job affords autonomy, variety, and occasional reminders that it's a bank, not a laboratory. In one meeting several years ago, "I tried to tell a lender why CO2 emitted from a local coal-burning plant could be offset by preserving forestland elsewhere," Sayce says. "He was fixated on thinking the CO2 would just stay in one place, so how could conservation in the tropics be affected? I had to explain the oxygen/CO2 relationship between everything on Earth."

Concern about future health risks affects all ShoreBank business decisions. Sayce reviews every loan request for brownfield reuse or rehabilitation. "If they're polluted, where will contaminants go? Can we help reduce them below dangerous public-health levels?"

ShoreBank itself is on a designated brownfield, the site of a former gas station. To decrease ground-water contaminant levels, Sayce was adamant about spending money on porous pavers (more expensive than typical asphalt) in the parking lot, rather than on amenities inside the bank. The pavers allow more water and oxygen into the ground, so that bacteria can break down the ground-water contaminants. So far, it's worked, according to samples taken at monitoring wells at the site.

Sayce spends half her time in the field, does database maintenance in her typical bank office, and performs any lab work, such as testing for harmful species in water, at home. After preliminary screening, "I go and evaluate where a business is, and could go, environmentally" she says.

For example, several banks had rejected a well-established craft paper processing company that sought financing to expand its plant in a small town. Having always used resins containing a methanol solvent, the company planned to invest in a switch to a water-based resin, which would reduce the need for indoor air-exchange equipment to prevent workers from inhaling solvents. Unable to see why resin type made any difference, bankers were reluctant to fund the new mill.

When the company finally approached ShoreBank, Sayce immediately recognized the connection between its resin and its concerns with plant operational safety issues, air-quality regulations, and workers' health. Presenting the proposed loan to ShoreBank's lenders required her to discuss volatile organic compounds (VOCs). "The bankers couldn't understand how there could be direct health risks," she remembers. "One asked, 'How could painting my house with the wrong paint possibly affect my health?' My role was persuading our lenders that these were good changes, with financial as well as environmental benefits: Reducing the methanol would lower both operational and capital expenses."

Her minicourse in VOCs brought loan approval. The larger plant created several dozen jobs for a rural timber town. The company reduced its methanol content by about 75%. Its new plywood overlay, made for the same cost as its traditional, less durable materials, produces something that can be reused 15 to 20 times, instead of five. "The client now feels that their bank really communicates with them, so they're happy. They're innovators in timber and industry," Sayce says proudly.

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