 
A fair trade boutique in Belfast: making sure producers get a fair end of the deal.
Each time members of Canada’s Citizens Bank use their credit card, the bank donates
about 10 cents to Amnesty International...
... or Oxfam
Triodos Bank supports the Flemish campaign for the prevention of HIV/Aids. Here,
stands set up in Antwerp (Belgium) on World Aids Day, December 1999.
‘I strongly
believe that the economy, much more than politics, is controlling world development,
and that banks have a crucial role in deciding which kind
of development it will be.’ |
Ethical banks that include
socially responsible investments in their bottom line are winning support from people
who share their ideals
 The jobs and wages of millions
of people throughout the world depend indirectly on a bell which at four o’clock
every afternoon marks the end of trading on the Dow Jones, the index of leading shares
on the New York stock exchange. Almost two billion dollars shift each day from one
continent to another at staggering speed. Speculation can make almost every currency
tremble, and few trading floors are shielded from an abrupt slump in value. But people’s
desire to live in a better world is increasingly affecting a commodity that, whether
we like it or not, determines our lives: money.
Profit and solidarity have stopped giving each other the cold shoulder and are becoming
partners explains Juan Pina, a Spanish journalist who specializes in the social economy.
“We are heading towards a set of ethics more attuned to reality, in which profit
stops being a kind of necessary evil linked to greed, while the public good stops
being the exclusive responsibility of politicians.”
Alongside credit cards whose issuers and users contribute a fixed amount of money
or a percentage of takings to groups like the Red Cross, Greenpeace or Amnesty International,
a number of “ethical banks” have set up shop in Europe, Japan or Canada, and are
measuring their profitability more in social terms than by pure financial gain. The
basic message which these banks try to spread is that, through no extra effort, the
small or large amounts of savings that many people deposit each month in their bank
accounts can be used to further their ideals. And that this can be done without abandoning
the guarantees offered by traditional banking: solvency, interest, readily available
cash and good returns.
The slogans of some of these banks are more than explicit: “The highest interest
is that of everybody,” announces an advertisement for the Italian Ethical Bank. “Are
you content to turn a blind eye to the way your money is being used, or are you ready
to put your principles into practice?” the UK Co-operative Bank asks its potential
clients. “The Citizen’s Bank’s mechanism is value-driven, rather than by economic
growth and efficiency,” declares a pamphlet from Japan’s Citizen’s Bank.
Historical
roots
The roots of
modern ethical investment can be traced to the United States in the 1920s. The Methodist
Church, which until then had regarded the stock exchange as a shady gambling den,
decided to start investing, but only on condition that it would not put money into
the liquor trade or get involved in the betting industry. But social investment did
not come into its own until the 1970s.
During the Viet Nam War, groups of citizens decided to boycott the firm that made
napalm gas, which had been deployed in the Vietnamese jungle, causing terrible physical
deformities in affected communities. From then on, churches, foundations and universities
started to ask themselves what their money was being used for. Nowadays, ethical
considerations are found in a wide spectrum of bank products: from “ethical investment
funds”, which look very closely at the companies they buy shares from, excluding
those with unacceptable business activities or a proper wage or social policy; to
current accounts that offer interest lower than the going market rate, but promise
to invest some of their profits in development projects. Likewise, ethical investment
institutions come in all shapes and sizes. Some work like normal banks, with branches,
cash machines and chequebooks. Others are more like mutual funds or credit co-operatives,
such as the French NEF (Nouvelle Economie Fraternelle), which since 1988 has been
lending funds solely to teaching, organic farming and health projects.
In keeping with the Internet era, several banks base themselves largely in cyberspace.
One of them is Italy’s Universal Ethical Bank, which opened its doors for business
in Padua just over a year ago, and now has offices in Brescia, Milan, Rome, Florence
and Modena. Its president, Fabio Salviato, speaks proudly of having assembled in
a short time funds totalling $4.5 million used to finance 250 projects in Italy and
abroad. “Our slogan is defence of the poor. In the Third World, of course, but also
in Italy, where approximately seven million people live below the poverty line,”
says Salviato. His bank specializes in social investments made in four areas: the
co-operative sphere–fundamental in a country like Italy, which has more than 4,000
co-operatives, the voluntary sector, the environment and international partnerships.
“Above all,” Salviato says, “we finance NGOs with micro-credit projects in Albania
and Macedonia. In Guatemala, we’ve helped set up a small community bank in the town
of Chajul, which produces coffee to sell to businesses which agree to fair trading.
The return we pay on deposit accounts is the same as the Italian rate of inflation,
which oscillates between two and 2.5 per cent, while the interest we pay on current
accounts is one per cent, somewhat less than the going market rate. But the account’s
administration costs are also lower than those in conventional banks.” This is made
possible in large part by the thousands of volunteers from other non-profit organizations
who were behind the creation of the Ethical Bank, and which have current accounts
and credit needs.
Two thousand registered groups and 10,000 people now have savings in the Ethical
Bank. Environmental engineer Loris Rinaldo is one of the bank’s customers. “I strongly
believe that the economy, much more than politics, is controlling world development,”
Rinaldo says, “and that banks have a crucial role in deciding which kind of development
it will be. I don’t accept that the only criteria guiding investment policies should
be ‘giving money to those who already have money.’ I believe the right policy is
to give money to those who do good things, even if the return is less. That’s why
I’m a member of an ethical bank.”
Ethical investment, Rinaldo adds, “is a concrete response to criticism of our economic
system, which is centred on maximizing profit. This is the start of a revolution,
a real revolution based on each one of us, showing that it’s possible to build an
economy that is also based on values such as the common good, conservation of the
environment, peace, respect for marginalized people. In short, an economy centred
on people.”
Clearly not everybody is as keen as Rinaldo. In an Internet discussion forum on ethics
and the economy initiated by Canada’s Citizens Bank, there were several comments
along the lines of “congratulations for your intelligent marketing campaign, but
I’m not interested in banks’ ethical opinions. I would prefer them to concentrate
on giving the client better service at lower cost.”
Reconciling
different views
It is also
worth asking whether ethical investment, which on one side owes its existence to
people’s aspiration to live in a better world, might also become part of an image
campaign waged by traditional banks desperate to capture this new and socially conscious
client base. Guy Hooker, the director of Britain’s Ethical Investment Co-operative,
believes that “people are choosing ethically sound investments and ethically sound
banks because they have become collectively conscious of the power of their money,
and because in many cases they get better customer service.”
The idea of what is moral is obviously not the same for everyone. Some of us might
think it appalling that a bank finances businesses which deal in arms, though they
would not think it so bad if the funds were lent to tobacco companies or to political
parties. Likewise, some might prefer to finance literacy programmes rather than save-the-whale
campaigns or fair banana trading projects. With these discrepancies in mind, a number
of banks, including the Triodos Bank created in the Netherlands in 1980 with affiliates
in Belgium and Britain, offer their clients the option of directing their investment
to specific areas, such as organic farming or the development of solar energy projects
in countries of the South.
Bank spokesman Thomas Steiner explains how his bank tries to reconcile different
viewpoints: “Our offices in Belgium, the Netherlands and the United Kingdom do not
work like McDonald’s, which is exactly the same in every country. Our Belgian partner
has a certain Belgian flavour, and emphasizes social development projects; in the
United Kingdom we focus more on helping charitable organizations; and in the Netherlands
our main concern is the environment.”
When the time comes to hand out loans or choose companies that will receive funds,
the Dutch bank applies very strict standards. “Like any other bank, we make loans.
The criteria we use before deciding whether to grant them are ‘positive’; anyone
who asks us for money must belong to one of the areas in which we work: nature, the
social economy, non-profit organizations, culture and development co-operation. We
only lend money to projects that comply with these positive criteria. On the other
hand, we have investment funds. We invest the money that our clients entrust us with
on the stock exchange through criteria we call ‘negative’. We invest only in firms
with no links to nuclear energy, arms or tobacco.” After 20 years of existence, Triodos
has a portfolio of 40,000 savers and 4,000 shareholders.
The
goal of transparency
Transparency
is a prized goal for ethical banks, including Switzerland’s Banque Alternative Suisse
(BAS), which in a country where the law protects bank secrecy annually publishes
the names of people and businesses that have received its loans as well as details
of the sums involved. Citizens Bank, owned by the Vancouver City Savings Credit Union,
Canada’s largest credit union, goes one step further. As part of its community donations
programme, clients are invited to suggest groups which they believe deserve a share
of a fund. The suggestions are classified into four groups according to the area
in which they fall. Clients are then invited to vote on which groups should receive
50 per cent of the fund, 25 per cent, 15 per cent and 10 per cent, and funds are
allocated according to the results of the poll. In 1999, for instance, clients voted
to donate $17,700 to the Canadian Catholic Organization for Development and Peace,
which fights against poverty and injustice in the world through its partner groups
in 50 countries. Second place went to Frontier College, a group of university volunteers
active in literacy programmes, which received $9,000. “This procedure involves an
externally-facilitated advisory committee comprised of NGO leaders and bank members
and staff,” explains Gillian Dusting, the bank’s public relations director. The Citizens
Bank also pledges to reply within 24 hours to all queries about its ethical standards
sent by e-mail, while its website hosts a chatline on ethical investment. After three
years in business, the Canadian bank has deposits worth over $680 million, while
its pre-tax profits in 1998 were almost three million dollars.
Credit
and ethical banking
The power of
ethical banks in the world economy is still small, though it is growing year by year.
According to figures published by EIRIS, a research group on ethical finance, the
total volume of ethical funds invested in the United Kingdom rose from $3,300 to
$4,100 million between January 1999 and January 2000. The Organisation for Economic
Co-operation and Development (OECD), meanwhile, recognizes that
although ethical banks “have had some success, they are far from changing the attitudes
of conventional banking institutions”. In OECD’s opinion, the banks’ main
attraction is that they offer social firms an alternative response to the problems
of getting credit.
David Perry, head of the Markkula Centre for Applied Ethics at California’s Santa
Clara University, concurs that “such banks are sometimes the only means of obtaining
loans for people with no credit history and no major assets. And they often combine
loans with training in starting and running businesses, which can be extremely helpful
to folks with no experience in commerce.”
As for the future, Giovanni Acquatti, president of the Milan-based financial co-operative
MAG2 and a leading proponent of ethical finance in Italy for the last 20 years, believes
it will “depend less on the involvement of public authorities like the World Bank
or the European Commission, and more on the strength, courage and resources that
we use in personally convincing people that they should behave in a different way.
We have a lot of work to do, and we mustn’t lose hope. And I never do.”
Citizens Bank of Canada: www.citizensbank.ca
Triodos Bank: www.triodos.nl
Banca Etica Universale: www.bancaetica.com
Banque Alternative Suisse: www.bas-info.ch
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