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INTRODUCTION TO ETHICAL FINANCE. Where to start?. What makes Ethical Finance ethical ?. How it operates Where it puts our money To whom it loans. Common Values (From the Febea manifesto 2012). Origin of Money : where it comes from
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WhatmakesEthicalFinanceethical? How itoperates Where it puts our money To whomitloans
Common Values(From the Febea manifesto 2012) Origin of Money: where it comes from Destination of Money: orientation of investments and lending activities Criteria and values for the Use of Money:transparency, symmetry of information, social guarantees Responsible Management and Reinvestmentof profits
Historyand Evolution of EthicalFinance in Europe Where does Ethical Finance comes from? • “MontidiPietà” (Montes de Piedad), church-run pawn shops: • 1431 in Spain (“Coffers of Mercy”) • 1462 in Italy • Savings banks (Spar-Casse, Casse di Risparmio): • Scotland: 1810 • Austria: 1819 • Italy: 1822 • Spain: 1839 • Cooperative banks • Austria: 1849 • Italy: 1883 (32 shareholders, 107 18 months later)
History and Evolution of Ethical Finance in Europe • Nowadays Ethical Finance has still the same principles Howdidtheyworked? • Financial inclusion: • People affected by "structural unemployment“, that is, people able to provide for themselves by means of their own labour who found themselves a burden on public assistance. • Focus on the local and real economy • Borrower and lenders directly connected to the bank • Profits should stay in the local community: schools for the low-class children, hospitals, scholarships, etc. • Interest rate ceiling (even interest-free) • Fight usury • Pledge goods
Cultural paradigms Area 1 - Mediterranean, influenced by the Catholic culture Area 2 – Central Europe, with a Steinerianinfluence Area 3 – Francophone area in which there is a stronger mutualistic and cooperative matrix; Area 4 – Northern Europe with a clear focus towards social and environmentalresponsibility Area 5 – Anglosaxoncountries characterised by the development of responsible investment fund management; Area 6 – The “Former Warsaw Pact” countries where the economic and social necessities after the fall of the USSR have favored the diffusion of microfinance.
Ethical Finance DOES... Invests money in people and the environment, supporting actions for social and/or environmentalenhancement and developingdepressed areas at a high risk of social exclusion Provides credit without discrimination, based on wealth, gender, ethnicity or even migration status Uses money as a means and not an end
Ethical Finance DOES NOT Aim at maximising profits (at the expense of peopleand the environment) Use money for purely speculative purposes Support any activity or organisation that is not sustainable in social and/or environmental terms Use money merely as a charitable action
IsEthicalFinanceeconomicallysustainable? What support does a bank provide to the real economy? How resilient is a bank in the face of economic challenges? What returns does a bank provide to society, clients and investors? What growth does a bank achieve to expand its impact?
IsEthicalFinanceeconomicallysustainable? The difference between the two groups in the research is striking: for sustainable banks this level is nearly double that of the GSIFIs and it remains core to their activity Sustainable banks rely much more on client deposits to fund their balance sheet compared with GSIFIs: higher trust and lower liquidity risk
IsEthicalFinanceeconomicallysustainable? Sustainable banks had much higher growth in Loans, Deposits, and Total Income compared with GSIFIs over the cycle, especially post-crisis
The Pillars Common principles and values between Fair Trade and EthicalFinance [from: the Charter of Principles of Fair Trade (developed by the Fairtrade FLO and WFTO in 2009) and the Manifesto for Ethical Finance (based on the Italian version, 1998)]
