Ethical Finance

Ethical Finance

Do we know what banks do with our money? It is in the context of this reflection that we can delve into ethical finance.

Ethical finance is a different way of saving and investing that combines economic benefits with social and environmental ones. This concept is of transversal application since the ethical criteria and principles must be incorporated in all the activities with which the ethical entities are related.

Ethical and solidarity finances are those that make economic and financial profitability compatible with the achievement of social and environmental objectives. It is a question of incorporating ethics throughout the entire financing process, capturing citizen savings and channeling it towards the financing of entities and companies, and applying ethical, social, and environmental criteria.

For ethical entities, speculative behaviors are prohibited and their investments are focused on the real and solidarity economy. They focus on investments with a positive effect on people, with social benefits and sustainable development.

In addition, the projects that request their financing are evaluated under ethical-social criteria, to analyze their ethical, social, and environmental responsibility. Investors seek to give economic support to projects with outstanding social, environmental, and cultural impact.

Origin

Ethical finance is a consequence of alternative economy movements that seek a real economy and activities with a positive social and environmental impact.

In the 1960s, political scandals and international war conflicts gave rise to a citizen’s conscience that wanted to decide the fate of their savings and give them greater coherence about their values, questioning whether their money could be used to finance contrary causes. to their beliefs or ideology.

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Initially, therefore, ethical finance was born to promote coherence between our system of values ​​and the destination we want for our money. For this reason, they emphasized the exclusion of certain investments with negative social or environmental impacts.

And during the 1970s, impoverished countries found themselves excluded from the international financial system, giving rise to a multitude of alternative local financing networks, often in the form of microcredit.

All of this developed a type of sustainable finance that, until recently, was in the minority and little known. Currently, ethical finance is a globalized financial trend.

Goals

Ethical finance pursues two objectives in parallel:

  • be economically profitable.
  • Obtain social and environmental benefits by financing economic activities with a positive social and environmental impact.

In summary, ethical finance works to maximize social benefit, not being its only objective economic benefit.

The principles of ethical finance

These are its principles :

  • Transparency
  • Coherence
  • Ethics
  • Implication
  • Stake
  • real economy
  • Sustainability
  • social profitability
  • Efficiency
  • Long-term relationship with clients

Entities and services

The ethical financial system encompasses various initiatives, from community savings groups to financial services cooperatives and banking entities regulated by the agencies and regulations that govern the financial system, among others.

Regarding regulated ethical banking entities, an ethical bank is defined as a financial entity that operates under the principles of ethical finance and that offers the full range of banking products and services. In addition to being regulated by the organizations and regulations that govern the financial system, it must also ensure the return of funds and guarantee their continuity.

An ethical bank must finance economic activities that have a positive social impact and be economically viable, obtaining benefits. And both lenses are compatible. For all these reasons, an ethical bank is a tool, not an end.

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Broadly speaking, and from the perspective of ethical finance, the economy must be at the service of society. For this reason, economic decision-making must put the well-being of people, the community, and the planet at the center (people, planet, profit).

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