OPEN EDUCATIONAL RESOURCE III

ETHICAL BANKING

Ethical Banking

Origin Concept and characteristics Advantages and disadvantages Differences between traditional

banking and ethical banking

Origin (EE.UU.) XIX c. not invest in projects

related to slavery and alcohol in the ‘60s opposition to

apartheid and the Vietnam War

1971 Pax World Fund

Origin (Europe) 1968 Triodos Foundation

coherence between ethical-moral values and investment

Italy, in the ‘70s MAG (Mutue

per l’Autogestione)

Ethical Banking CONCEPT

banking entities real economy (no speculation) positive social impact

Ethical Banking CHARACTERISTICS

Ethics is the basis finance committee & ethics committee

Combat the economic exclusion of the poorest

Ethical Banking CHARACTERISTICS

Transparencycustomer is always informed Real economy no speculationno secondary markets

Ethical Banking CHARACTERISTICS

Social profitactivities that produce something positive to society A more sustainable world

Ethical Banking Advantages & Disadvantages Coherence Social and sustainable

commitment

Less competitive products on the market

Differences between traditional banking and ethical banking

ETHICAL BANKING TRADITIONAL BANKINGObjective: social and economic performance

Objective: economic yield

Main guideline: ideological (counting with the stakeholders ideas)

Main guideline: maximise profit

Differences between traditional banking and ethical banking

ETHICAL BANKING TRADITIONAL BANKINGIt offers few products (current accounts mainly)

Product variety

Assets placement based on: added social value

Assets placement based on: economic guideline (high profitability)

Differences between traditional banking and ethical banking

ETHICAL BANKING TRADITIONAL BANKINGHigh transparency: It allow to assess if the ethical objectives are being achieved

Banking privacy: customers don't know where the bank is investing

Sustainable investment (long-term profits)

Investments based on profit, even short-term

Differences between traditional banking and ethical banking

ETHICAL BANKING TRADITIONAL BANKINGIntegration: needy groups can access to financial system

Limited access (lack of guarantees)

Alternative mechanisms for participation: connection between bank management and customers

Only managers make decisions.

Differences between traditional banking and ethical banking

ETHICAL BANKING TRADITIONAL BANKINGAlternative systems for guarantees: project's viability and confidence

Credits are conceded only with bank guarantees

Customers can decide where to invest money

Customers can not choose