An ethical bank , also known as social , alternate , civic , or a sustainable bank , is a bank concerned with the social and environmental impacts of its investments and lending. The ethical banking movement includes: ethical investments, impact investments, socially responsible investments, corporate social responsibility, and also associated with movements such as fair trade movements, ethical consumerism, and social enterprise.
Other areas of ethical consumerism, such as fair trade labeling, have comprehensive codes and regulations that must be adhered to in order to be certified. Ethical banking has not developed to this point; because it is difficult to make concrete definitions that distinguish ethical banks from conventional banks. Ethical banks are governed by the same authority as traditional banks and must comply with the same rules. While there are differences between ethical banks, they have a desire to uphold the principles of the projects they fund, which most often include: transparency and social and/or environmental values. Ethical banks sometimes work with narrower profit margins than traditional banks, and therefore they may have several offices and most operate by telephone, Internet, or mail. Ethical banking is considered as one of several alternative forms of banking.
Video Ethical banking
History
Since the first Christian community has been based on the anti-materialism of Jesus, banking is ethical and all forms of "Usura" (interest loans), are considered immoral. In England, King Offa of Mercia in 791, then the great King Alfred (849-899), and King Edward the Confessor (1042-1066), forbade the loan sharks.
The mainstream financial banks have varied relationships with corporate social responsibility and ethical investment. However, more vivid movements have emerged since the 1990s. With the changing social demands, and as more is known about the impact banks can have on their lending policies, banks are beginning to feel pressure from the general public, NGOs, governments, regulators and others to consider their social and environmental impacts.
Maps Ethical banking
In general, banks play the role of intermediaries in the economy; because it is possible for banks to contribute to sustainable development is very wide. Jeucken 2002 The bank has an efficient and proven credit approval system that gives them a comparative advantage in knowledge (related to sector-specific information, legislation and market developments) < class = "reference plainlinks nourlexpansion" id = "ref_Jeucken & amp; Bouma1999"> Jeucken & amp; Bouma 1999 Banks are experienced and able to weigh risks and attach prices to these risks; Because these banks can fulfill an important role in reducing information asymmetry between market parties and allowing them to make better decisions. When depositors allow banks to invest for them, they can assume that banks will try to select investments to maximize their returns. However, if clients care about more than simple refunds and they, for example, are interested in costs for society and the environment, then they may need to turn to ethical banks that take into account their ethics and morality when investing.
Some businesses externalize costs to the environment and society. Aiming to create a fairer distribution of costs in society, banks can raise interest rates or apply borrowing rates to clients and projects with high external costs. This means companies will pay more if their business causes extensive environmental damage; take part of the cost of the community as a whole and put it in the company. Such tariff differences can stimulate the internalization of environmental costs in market prices. Jeucken & amp; Bouma 1999 Through such price differentiation, banks have the potential to grow sustainability. Jeucken & amp; Bouma 1999 .
The bank may be able to support progress toward sustainability by society as a whole - for example, by adopting a 'carrot-and-stick' approach, where environmental and social offenders will pay less interest than market rates to borrow capital, whereas a sluggish environment will pay interest much higher. Jeucken & amp; Bouma 1999 Banks may also develop more sustainable products, such as environmental, social, or ethical investment funds. By investing in value selectively, ethical banks can promote socially/environmentally responsible companies and punish those who do not comply with these standards. But there is a risk that banks can easily adopt certain practices that make them appear ethical (see greenwashing) while not adopting other practices that will have a greater impact.
Ethical Initiatives
Many ethical banks (as well as some conventional banks) allow customers to contribute to organizations that have a positive social/environmental impact either in the local community or in the developing world. Examples include the evaluation of home energy efficiency and potential improvements in this regard; carbon-offsets; Coro Strandberg 2005 credit cards that benefit charities or lower interest rate loans for low-emission cars.
Community engagement
Ethical banks excel in community engagement, as do other financial institutions such as credit unions. Community involvement is not limited to ethical banks because conventional banks also take part in such actions. Here are some examples of community engagement by ethical banks, credit unions, and conventional banks:
- Affordable housing projects (eg Vancity & Citizens bank)
- Projects to improve financial literacy in the community
- Give local scholarships & amp; sponsor.
- Financially supporting community events (eg annually, TD Canada trust contributes to local causes).
Environmental standards for borrowing
Environment is the main focus for ethical banks and also to some conventional banks believe adopt ethical practices more environmentally friendly for their benefit. Banks operating in this field are often referred to as sustainable or green banks. In general, bankers "consider themselves to be in the industry relatively environmental friendly (in terms of emissions and pollution). However, given the potential of their exposure to risk, they are surprisingly slow to examine the environmental performance of their clients. The reason stated for this is that the examination such would 'require interference' with client activity. " Jeucken 2002 While the desire not to disrupt the business of the client is valid, it can also be noted that banks are required to participate intervene in their client's business on a regular basis to ensure that the client's business plan can run before issuing them a loan. The type of analysis that all banks take part in is called a single bottomline analysis (this analysis only considers financial performance). Analysis can be debated whether or not the triple bottom line (analysis that considers the performance of environmental, social, and financial) will be more intrusive.
Internal vs. internal banking. external
Conventional banks deal with most of the internal ethics, ethical banks add to internal concerns by applying external ethics.
Internal ethics: process in bank
Internal ethics is concerned with the well-being of employees, employees and customer satisfaction, benefits, wages, unions, fair sex and racial representation, and a standing bank environment. By environment, the potential combined effects of banks turning to more eco-friendly practices (ie less paper usage, less electricity use, solar power, energy-saving bulbs, more careful employee travel policies with attention to travel and travel air) is very large. However, when compared to many other economic sectors, banks do not bear the same energy, water and paper expenses. Jeucken & amp; Bouma 1999 Many times energy efficient changes are not based on moral concern but on cost efficiency.
External ethics: products of a bank's relationship/product./span>
External ethics is concerned with the wider consequences of bank action. External ethics looks at the impact that their business practices, like who they borrow or invest, will be in the community and the environment. In applying external ethics, one looks at how bank products can be used unethically, for example how the borrower uses the money lent by the bank.
Discussions
Banks are often reluctant to extend the scope of their external ethics policy due to the significant nature of the changes. However, by incorporating an ethic that takes into account social costs in their practice, banks can enhance their reputation.
Ethical banking is a relatively new sector and this relatively underdeveloped nature causes some problems. These problems can be divided into two categories: the first concerning the depositor, and the second concerning an ethical bank.
In the first category there is a problem of understanding how ethical banks measure or qualify their ethical policies. For example, when Vancity/Citizen Bank states 'we are trying to work with organizations that demonstrate a commitment to ethical business practices,' the depositor can not understand what it means to 'seek'. These claims do not disclose to potential depositors how the bank evaluates or uses these statements. Even when given the opportunity to view accountability reports, it is difficult to really understand what their screening process is. For example, the Van City Responsibility Report for 2006/07 (for credit union Van City and Citizens Bank in Canada) states:
"The Ethical Policy requires that all business accounts be screened at the time of account opening by staff members." Social and environmental risks of larger business banking loans (non-credit-valued loans) are assessed at the time of the loan application, guided by the Ethical Policy and Loan Policy. "
This statement does not give the reader the information they need to understand the criteria used in assessing the client. However, statistics such as that provided by the Bank of Cooperatives (UK), stated that in 2003 they reviewed 225 potentially problematic financial opportunities and of these 20% were found to be contrary to their ethical statements and subsequently denied business, bank fees 6,887,000 pounds Coro Strandberg 2005 , gives consumers the impression that the ethics proposed by the bank, however ambiguous, is taken seriously.
Another problem in this category is the code of ethics. Many ethical banks and conventional banks voluntarily join larger bodies that propose certain rules which, in accordance with the rules set by the body, must be followed by the members. Such external bodies may act as a comprehensive body that can guarantee a certain degree of compliance with certain rules. For example in the United States is the Food and Drug Administration. Deposits using ethical banks do not have this guarantee because no external regulatory body has established an acceptable minimum legal standard.
In the second category ethical banks face such barriers as losing business and consumer support to conventional banks, and must regulate beyond and beyond the current international legal system.
According to Cowton, CJ and P. Thompson, "the banks that have signed the United Nations Environment Program Statement (UNEP), a voluntary industry code that announces environmental management, transparency and sustainable development, do not act significantly different from non - signer. " Cowton & amp; Tompson 2000 They concluded that, for the code to be more effective; regulators, monitors, and enforcement methods must exist. Cowton & amp; Tompson 2000 This problem is similar to the problem faced by a fair trade movement. Both fair trade movements and ethical banks rely on people to pay extra for known ethical goods. There is a limit to how many people will pay for that guarantee, after which further initiatives will undermine bank earnings and therefore will likely not be followed.
Losing business to a bank that does not filter very tight is a problem for an ethical bank. Many times ethical banks have to work on a much lower budget because of this. Unethical bank exceptions to unethical borrowers often result in borrowers going to other banks, this raises the importance of broad industry regulations. One way to improve the widespread industry regulation is for citizens to apply pressure on banks. Without this increase it is difficult to deter unethical businesses from seeking banks to finance their projects. The increase in regulation related to moral topics is not out of the question. Current industry wide codes, for example, prohibit the financing of illegal drug production. This reflects the societal morale that stands out against such drugs.
Ethical banks can not rely solely on the legal system to determine whether potential clients have acted unethically or whether their future plans are unethical or not. This is because of the many laws around the world. Although a business may be legitimate in an international setting, this does not mean that the law complies with the moral standards on which the bank originated. For example, extensive pollution and labor laws that would not be considered legitimate in many developed countries are permitted in many less developed countries.
Assess what's ethical
Claiming an "ethical" bank requires an objective way of determining what is ethical. Popular ethical theories that can be used include Mill, Kant and Aristotle.
John Stuart Mill
John Stuart Mill extends the utilitarian theory of Jeremy Bentham. The fundamental axiom of Bentham holds "it is the greatest happiness of the greatest number which is the right and wrong measure". Mill observes that this axiom alone will allow actions that have no morality, in an ethical and even legal sense. For example, under Bentham's unqualified fundamental axiom, it would not only be acceptable, but "right" to live in Robin Hood society, where the happiness of a person (the rich robbed) is sacrificed for the happiness that increases substantially from the greatest. amount. In this account Mill outlines the ethical dimension of Utilitarianism, measuring the right and wrong actions of good actions in terms of aggregate happiness, or "utility", following Bentham's fundamental axioms, but not without neglecting the moral or ethical qualities of self-action.
Therefore, in the perspective of Mill a bank would be moral if it tends to "to promote happiness". (P.Ã, 10) Mill 1957 If the question bank acts in a way that produces the greatest happiness for the greatest number of people then it will act morally according to Mill. Because the banking sector is so large, complex and far-reaching, it is difficult to accurately assess the happiness of everyone affected by the behavior of banks in general or by particular banks in particular. Yet it is sometimes possible to distinguish which of the various actions that might produce the greatest happiness. For example, generous philanthropic actions in forms such as giving back to society, employees, members, neighborhood/development groups, etc. Will increase the overall happiness. Similarly, lend to businesses that do not "produce the opposite of happiness" (p.10) Mill 1957 by, for example, giving to businesses that treat employees in a way fair and concerned with such public goods because the environment would also be considered ethical according to Mill. Given that things like global warming, air pollution, water pollution, and soil pollution negatively affect large groups of populations, if not all populations (in the case of global warming), banks that choose to take part in the above example may be viewed as contributing to the overall happiness of all people and therefore will have a moral value. Immanuel Kant
According to Immanuel Kant's Imperative Categorical, morality concerns intentions, and not results. A person is moral as long as they act in good faith, regardless of the consequences. With this knowledge one can propose that the act of lending money itself is immoral and according to Kant's perspective, banks should not be judged as moral or immoral based on the outcome of their loans. But the second formulation of the Kant imperative states that categorically: "acts in such a way that you always treat humanity, whether in yourself or in the person of others, never only as a means, but always at the same time as the end." pg. 66-67) Aristotle
For Aristotle, halal is important in the measurement of morality, such as equality and justice. Whether an act or disobedience to the law is an important measure of morality for Aristotle. Many banks do business in accordance with the law in all practices. They can also specifically seek to do business with law-abiding clients. However, this can be a problem, because the law varies internationally. This means that banks can be considered ethical even when funding clients who legitimately do business with dangerous behavior. Yet this measurement is challenged by Aristotle's statement: "what is just in transactions is something just, and what is unjust is something unfair" (p.Ã, 84) Aristotle 2002 . This means that the bank needs to take into account the unfair/unjust behavior of its borrowers to qualify as an ethical bank. For example, lending to law-abiding companies that do not pay their employees for a living wage would be immoral.
Thoughts of Indian scriptures
1. The Puru ?? rta ( Dharma , Artha , Kama , Moksha ) Concept: This ethical guide talks about the need keep Dharma (Truth) as the foundation for every choice made. Artha stands for generations and fortune wealth, including monetary wealth. Kama is related to the choice made about the fulfillment of wishes, and Moksha is about spiritual fulfillment. The related explorations of Artha and Kama should be done in the context of Dharma and Moksha . Moksha is considered the highest goal. These four are considered Purushaartha .
2. Paropakaaraartham Idam Shareeram : The body is meant to serve the most noble ideas and contribute to the well-being of all people.
3. Atmano Mokshartham Jagat Hitayacha : A person's actions in achieving one's liberation/fulfillment must be made in the context of the welfare of the world.
Bank and free market regulations
One of the arguments against bank governing is that the rules will violate the functioning of the free market economy. Severyn T. Bruyn disputes this argument in his article "The Moral Economy". Bryun 1999 He claims that extreme severance between market and moral action never happens. the minds of market economy thinkers, especially Adam Smith. He argues that laying standards and regulations in a place that depends on the basic morals of society should not conflict with free markets, but is actually an essential part of the functioning of the free market. The conclusion is based on the statement made by Adam Smith. When Smith first imagined the market economy, he did not divorce the moral of the market. In fact, morals should be a natural part of the working of the market economy. He believes that economic transactions must be the result of mutual agreement and must involve morality and friendship. He claims that selfishness can hinder the market economy from walking morally. If interpersonal relations do not play a role, then the interdependence experienced by the individual may vanish and unfair games based on greed and distrust will exist. Bruyn discusses today's society as one that has lost its basic moral in the marketplace. He stated that there is a need to revive civil society. Bryun 1999 Initially, civil society is assumed to be naturally able to regulate market morality, but with great distances between individuals involved in transactions over time, the main regulator of morality in economic exchange. In history, the government was pressed to stop harming the economy. This has enabled agencies such as companies, which operate immorally or amoral best, to create extremely destructive results without legal or community punishment. Bruyn promotes the rise of civil society, calling people to demand fair practice and to regulate economic morality. Bryun 1999
Rudolf Steiner suggests that capitalism has the task of funding economic initiatives; capital should be directed toward a productive direction for society. He proposes that rather than a set price either through total government regulatory control, or the total lack of control of the free market, each industry can have self-regulating associations of producers, wholesale and retail businesses, and consumers. This association will set a fair price for all three groups. The state will not interfere with economic decisions alone but will be responsible for protecting human rights (this may include minimum wages and safety at work) and equality of citizens. (See Steerful Threefold Social Order.)
Differences from credit unions
Non-bank credit unions, but they offer many of the same services as banks (eg investment opportunities, commercial and business loans, checking accounts & savings accounts, etc.). Credit unions belong to members not owned by shareholders. It affects every member in the decision-making process. When credit unions have a surplus, the resulting profits will be invested into the community or will return to members in the form of "patronage rebates" (ie checks). Credit unions focus on members because they are also owners, and in the communities in which they belong. Credit unions place a higher focus on developing local communities than banks. Most credit unions lend strictly to people and businesses in the communities where the union is. This fact leads to credit unions affecting the public more positively than ordinary banks.
However, credit unions do not always have the same potential to cause widespread change in business practices as do ethical banks. This is because credit unions largely avoid the problem of funding unethical corporate/business activities by focusing on local business financing, which is easier to monitor and arguably less able to generate wide range of social and environmental benefits.
List of ethical banks
Europe
- Denmark
- Andelskassen Oikos
- Arbejdernes Landsbank
- Dragsholm Sparekasse
- Folkesparekassen
- Merkur Andelskasse
- Ikano Bank
- German
- GLS bank
- EthikBank (German wiki article)
- Triodos Bank, triodos.de
- Umweltbank (German wiki article)
- Spanish
- Colonya Caixa PollenÃÆ'§a
- Caixa Ontinyent
- Coop57
- Fiare
- Triodos Bank, triodos.es
- Switzerland
- Alternative Bank Schweiz ABS
- United Kingdom
- Charity Bank, charitybank.org
- Handelsbanken, [1]
- Cooperative Bank
- Ecology Development Institute
- The British Islamic Bank
- Reliance Bank
- Shared Interest
- Triodos Bank, triodos.co.uk
- Bank Trust Unity
- Other European countries
- Austria: EthikBank (German wiki article)
- Belgium: Triodos Bank, triodos.be
- French: CrÃÆ' Â © dit coopÃÆ' Â © ratif, (French wiki article)
- French: NEF (French wiki article)
- Hungary: MagNet Bank
- Italian: Banca Etica
- Netherlands: ASN Bank
- Netherlands: Triodos Bank, triodos.nl
- Norway: Cultura Bank
- Sweden: Handelsbanken
- Sweden: JAK member bank
- Swedish: sv: Ekobanken (Swedish wiki article)
- Switzerland: Alternative Bank Schweiz
North America
- Canada ATB Financial, based in Edmonton, Alberta. owned by Alberta Province
- USA
- Urban Partnership Bank, based in Chicago. Successor of ShoreBank
- RSF Social Finance, based in San Francisco, not a 'bank', but offers social investment accounts at rates that are comparable to bank CDs
- New Resource Bank, based in San Francisco. The New Resource is a business-focused commercial bank that shares their mission for sustainability progress in their community.
- First Green Bank, based in Mount Dora, FL is a commercial bank dedicated to ethical practices and green investment.
- Beneficial State Bank, headquartered in Oakland, with branches across California in Sacramento, LA East, North Hollywood, Fresno, Bakersfield, Santa Rosa, Porterville and Visalia, and Portland, OR and Seattle, WA. Beneficial State Bank is a community development financial institution (CDFI), B Corporation certified, and a Global Alliance for Value Banking members.
- Spring Bank, Based in the Bronx, New York, with branches in the Bronx and Manhattan, New York. Spring Bank is a FDIC-certified commercial creditor and a certified community development financial institution (CDFI) with another mission to expand financial inclusion in low-income environments.
- City First Bank, based in Washington, DC, First City Bank is an FDIC-insured commercial bank, which is nationally chartered with a mission to support and strengthen underserved communities in Washington DC and surrounding areas.
- Australia
- Bank Australia, based in Kew, Victoria, is a financial cooperative that seeks to operate responsibly by upholding environmental, social and economic values.
- New Zealand
- Prometheu
- Carbon Disclosure Project
- Climate ethics
- Corporate social responsibility
- Equator Principle
- Socially Responsible Investment
- Ben Cohen and Mal Warwick, Value-Based Business , ISBNÃ, 1-57675-358-1
- Christopher J. Cowton & amp; Paul Thompson, "Does the Code Make a Difference? Case of Bank Loans and the Environment", Business Ethics Journal , v.24, n.2 (March 2000)
- Clark Schultz, "What Green Banking Is Meaning", Green Bank Reports http://greenbankreport.com/green-bank-deals/what-is-the-meaning-of-green-banking/
- Paul Thompson & amp; Christopher J. Cowton, "Bringing Environment into Bank Loans: Implications for Environmental Reporting", English Accounting Reviews , v.36, n.2, pp.Ã, 197-218 (June 2004).
- FEBEA, European Federation of Banks of Ethics and Alternatives.
- INAISE, International Association of Investors in Social Economics
- GABV, Global Alliance for Value Banking
- "At Bank Of Happiness, Kindness Is Currency," National Public Radio, July 18, 2013.
Other value-based banks in the United States and around the world can be found with the Global Alliance for Banking on Values.
Oceania
Alliances and networks
Global Alliance for Banking on Value
The Global Alliance for Value Banking (GABV) is a membership organization established in March 2009 by BRAC Bank in Bangladesh, GLS Bank in Germany, Shore Bank in the US, and Bank Triodos in the Netherlands. It currently consists of 27 leading global banks, from Asia, Africa, Latin America to North America and Europe.
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The National Society Investment Fund (NCIF) invests in mission-oriented banks and other financial institutions that provide responsible financial services in underserved communities. The NCIF Network includes more than 30 US banks eligible for inclusion based on their Social Performance Metrics and on their participation with the NCIF initiative to advance mission-oriented banking.
See also
References
Further reading
San-JosÃÆ'Â ©, L. de al. (2011). Are ethical banks different? Comparative analysis uses radical affinity, Journal of Business Ethics. indexhttp://www.springerlink.com/index/3533206g86u841j0.pdf
External links
Source of the article : Wikipedia
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