Initiatives, mission and future prospects of ethical banking in Italy
Ethical financeis that sector of finance that aims to protect general interests, which go beyond the proper functioning of the market, such as the protection of the environment and the economic interests of the stakeholders who enter into a relationship with the financial intermediary. Ethical finance can be traced back to three main categories of activity: finance that supports certain sectors commonly considered ethical by the collective conscience; finance that supports the fight against financial exclusion; finance that respects laws and company codes, which identify rules of correctness and transparency in the conduct to be assumed. In this way, financial support is assured only to those sectors judged ethical by the lender: thus, for example, the armaments, intensive farming, alcohol or tobacco sectors will be excluded.
Financial intermediaries have also begun to operate in the marketplace according to ethical criteria. In particular, an “ethical” bank can be defined as a bank whose initiatives and mission are inspired by the principles of ethical finance: in this case, the institution provides its customers with normal banking services by adopting ethical or socially responsible choices in the selection of investments, as well as ensuring maximum transparency to the customer about the realities financed with their savings.
The ethical bank aims to create opportunities for non-speculative investment of savings, understood as an individual asset that contributes to the common good of the community. The Ethical or solidarity investmentsare aimed at financing initiatives operating in the field of social services, the environment and sustainable development (this is the so-called Triple P Approach: People, Planet, Profit), and it is precisely for these purposes that the ethical bank excludes all investments in sectors that, although profitable, are not consistent with an ethical vision of the use of money. Based on traditional ESG analysis(environmental,socialand governance) , an example of ethically responsible investment is represented by greenbuilding projects, i.e. homes that are characterized by a low environmental impact thanks to the use of sustainable materials and renewable energy.
In coerenza con la propria mission, una banca etica si propone anche di sviluppare nuovi percorsi nell’ambito del crowdfunding. The crowdfunding (from crowd and funding) is a tool that allows you to start an online fundraising campaign which is online and it’s used to finance initiatives focused on issues of primary economic or social interest and that involve the community in an articulated project for the recovery of a common good or initiatives with a strong collective impact.
In Italy, a banking reality of this kind is represented by Banca Popolare Etica, founded in 1999 through the initiative of some third sector organizations “with the aim of using the resources of savers and investors to support economic activities with positive impacts on the environment and people”. Banca Etica, characterized by a mutualistic spirit, by the participation of members and savers in the choices of the company, by the attention to the development of local communities and by a fair distribution of resources, has excluded from the beginning some sectors from the possibility of access to its financing (arms, alcohol, oil) and, over the years, has opened to many social enterprises promoting development initiatives in socially relevant sectors such as sustainable tourism, renewable energy, social innovation. By way of example, in September 2020 the Banca Etica Group opened a call for proposals aimed at supporting inclusive educational projects capable of offering educational and cultural opportunities to children and young people between the ages of three and eighteen in conditions of economic poverty or mental disability, aggravated by the effects of the Covid-19 pandemic. Of the twelve projects that passed the selection process, eight reached, thanks to crowdfunding, 75% of the set budget and were co-financed by Gruppo Banca Etica for the remaining 25%.
Having reconstructed the essential features of ethical finance and, more precisely, of ethical banking, a question arises spontaneously: are ethical criteria really sufficient to define the activities described as ethical or socially responsible? In concrete terms: excluding financing in the alcohol sector is certainly a responsible and socially oriented initiative, but can such a choice go so far as to exclude even the activity of the winemaker who performs his work efficiently and responsibly? And again: if, on the one hand, supporting children in economic or psychological difficulty by promoting inclusive activities is certainly a worthy goal, on the other hand, is this really sufficient to define as ethical even the funding intended to support such initiatives?
In the light of these questions, to which it is extremely complex to provide a single answer, it is clear that the concept of ‘ethicality’ is entirely relative. Consequently, the ethical bank can simply select the sectors and products that can be defined as ethical according to a common sense of fairness, leaving the individual investor the possibility of evaluating, according to a subjective judgment, the destination of his or her investment.
In order to understand whether a fund is socially oriented, the investor must acquire a range of knowledge in order to make an informed choice. Undoubtedly, in order to identify the degree of ethicality of a fund, the investor must go beyond the mere declaration of intent of the company in which one decides to invest and delve into the history of the same, in order to verify whether this company has a constant commitment to socially responsible practices. A very useful tool for these purposes is the so-called ethical rating, i.e. a model that assesses, according to certain key performance indicators (Key Performance Indicators, KPIs), the social reliability of a company (for example, by measuring CO2 emission levels).
Ethical finance is undoubtedly contributing to producing a value which, in addition to economic value, also contains a benefit for the civil community and the environment. From a prospective point of view, the next necessary step is probably to determine the operational boundaries within which to extend the ethical criteria described above and, above all, to identify suitable instruments to verify that the ethical and social aims do not remain a simple “façade”, instrumental only to raising the reputation of the company, but that they are concrete and contribute to shaping a real ethical culture of sustainable business.
Silvia Ciceri
Insights
Banca Etica, Crowdfunding in Banca Etica, available at www.bancaetica.it/progetti-speciali/crowdfunding-banca-etica;
Costi, Banca etica e responsabilità sociale delle banche, in Banca borsa titoli di credito, 2011, I;
Gwendolyn Gordon, David Zaring, Ethical Bankers, in Journal of Corporation Law, 2017;
La Torre, Microfinanza e finanza etica, in Bancaria, 2005.