A brief history of the ethical finance

The finance, it is good to repeat it, is the "armed arm" of economy and its purpose is the management of its fluxes. In ordinary words, it is the shifting of money from those who have it to those who do not have it, through the saving management.

Particularly in USA, around the first years of 1900, we assist at an interesting debate of the relation between finance and religion (protestant) and between profit and morality. Many Protestant churches consider immoral for their own faithful the saving deposits in banks and finance societies, to be later invested in weapons and wars economy, in the industries of vices (alcohol, tobacco, "veneering", gambling), practically, all that is contrary to the Protestant morality. The first ones are the Mennonites. In 1928, the first Fund of ethical investment was born: the "Pioneer Fund". The criteria are all negative (acting by exclusion). A further evolution of the Ethical Finance was realised also in the USA(mainly) after the Vietnam war (pacifying movement) and the development of the nuclear energy (antinuclear and environmental movements). From the negative criteria they passed on to positive criteria, that is, prizes are awarded to enterprises which, besides avoiding doing certain things, orient the production towards goods and socially useful services.

But the first  meaningful modern experiences of ethical Finance, at world level, go back to the years '70. The motivations, which pushed towards such a direction, are to be sought in the development of two big and complex events, the social and the environmental (ecology) one. This development is also due to the inability of the state to realise politics of a more just distribution of resources and of protection of the environment. The credit, and more generally the finance, become  the instruments to facilitate the access to the credit for some realities/activities which had been excluded till then, as well as to state in the economic field the importance also of the non-economic values (peace, solidarity, respect for the environment, etc.).

Another element which has favoured the development of the Ethical Finance is the change, in the years '80,  of the strategies of the official credit system, more and more oriented to segment the market by withdrawing from certain geographic areas and from certain sectors, to concentrate on specific sectors; in the specific things, even the close relation between the management of the credit and the local development disappears. Finally, in the years '90, the figure of the ethical saver comes to be shaped (even as a movement of opinion),  which requires, with awareness, social saving systems, and the state starts discovering in the context the opportunities which the ethical finance offers in the sector of the social development (partnership between private and public). The Ethical People's Bank represents, in this sense, a pioneering  case, having among its actionists local Entities and promoting a series of projects and initiatives in partnership with the public administration"1

The movement, which will support the affirmation of the Ethical Finance in Italy, was born in 1978, with the creation, in Verona, of the first MAG (Mutua Auto-Gestione), and which will take to the constitution of the "Banca Popolare Etica". I shall speak of the Italian reality in the next article.

1^st consideration

Starting with a provocation, we can say that it is absurd to speak of this theme: Ethical Finance, because the finance, as an institute within Economy,  should by itself be ethical, if not by definition, at least by praxis and logically: in fact, Don Luigi Sturzo said that economy without ethics is a diseconomy. On the other hand, in facing this topic, we enter consequently the field of a pathology of the economic system, in which we hope that the presence of the clutches of thought,  precisely the ethical finance, can be at first a prognosis and successively a medicine to cure something absolutely important for the human nature.

It is, since long, consolidated that all the human activities answer the dictates of Economy: the use of money, in general, acts in such a way as the continuing or the end of an action depend in the greatest part by an economic liking; in good peace with the politics that seems to have thrown  the sponge in favour of a more strongly economic/mercantile presence. If this is consolidated, we cannot say that it is right; in fact, one of the purposes of the ethical finance is, as we shall see, just that of re-establishing a natural order of the human acting. It is just from this principle that our journey must start.

Preliminarily, we must know that the difficult situation of today's humanity depends on the strong lack of a well shared economic doctrine (globally), which could, actually, allow a good application of political theories, elaborated long ago;  but these situations clash always against a complex reality which makes the applications difficult, if not really vain. Universal principles like peace, justice, well-being, solidarity, fraternity, freedom. equality, sharing and so on and so forth, are possible only on two alternative conditions: either a society with an absolute lack of economy (therefore a decidedly utopic society flowing to anarchy), or a society with a strong presence pf general political responsibility, with an aggregating economy of solidarity;  but in the actual phase we have neither the one nor the other, and naturally things are not going on well. In fact, how is it possible to go on complaining and then to accept supinely all that the market offers us, without a bit of reflection? One would say, "But this is impossible. How to bring all to the same agreement? " The answer is simple: "It is possible", especially if we move with a true ecumenical spirit, strengthening all that our Christian faith teaches us about the greatest commandment: love for others ( on the other hand, haven't  many multi-nationals succeeded in bringing to agreement, much more prosaically, the persons and the tastes of half the world on drinks, fashion, cars, etc.?)

We know too well what our cross is in this historical time: living in a world that does no longer treasure up the wisdom which, generally, the thought has been giving us for thousands of years, and the overturning of a vision; in fact,   when the material goods were scanty, we reasoned in terms of social growth to detach ourselves from poverty, with an economic vision at the service of values; today -since we have much, though at the loss of others- we tend to look at values at the service of richness (and, somehow, we could say: at the service of hedonism  and of egoism/personal possession), forgetting poverty almost completely. It is not an insignificant thing: in fact we discover ourselves as hypocrites, if not schizophrenics (though we think that others are, not we): we state that we love the family,  but we try our best so that it may find it difficult to live, especially, and also, because of economic problems; we want peace, but continue to subsidise wars;

we speak of ecology , but we go on worsening the natural conditions of the planet; we discuss on faith, but it is so very difficult to become a martyr, namely, a witness to the Father's love. By doing all this we find it difficult to understand and to make ourselves to be understood; we discuss matters about justice, while we keep on practising violence;  we say that we love equality, while continuing to accept a world of discriminations; we work for solidarity, yet the parameters between richness and poverty are beyond 20/80; and so on and so forth.

Second consideration

When things are no longer in their natural order, what we already know explodes up and happens: disasters.

 On a Sunday morning, 18^th January 2004, The Bishop of Parma celebrated Holy Mass at Collecchio, a famous town in his Diocese. Collecchio, at the doors of Parma and, is the place of a factory everybody knows about: the Parmalat.

In his homily, the eminent Prelate invoked and strongly underlined that the economic activity is to be based on ethics, with the consequent commitment of all to contribute to the social and not only to the individual well-being. The work, he continued, is finalised to the growth of the person and, therefore, we need to discern very well the role of the financial activity within the economic world. The bad consequences of illegal affairs and/or the bad administration, would fall down on the poor and undefended families; by losing their work, they would lose also the capacity of being the living and pulsating cells of society.

In other words, He spoke of Ethical Finance.

Considering the many business scandals of these latest times in all the most industrialised countries of the world, like those of Enron and Wordcome in USA,  Vivendi in France, Cirio and Parmalat in Italy (to quote just the principal ones), the problems linked to the economic and financial market, which does no longer care about ethical thoughts, whether of Christian  or lay matrix, are enormous and we are unconsciously touching the depth of a system which now makes water on every side, since it seems that just what sustains man is being destroyed, namely a social morality characterised by a comprehension of well-being, understood as joy, happiness and man's capacity of actuating the dream of God: the on going creation of a kingdom of Peace, of Justice and Harmony, just because we are all brothers and sisters, daughters and sons of the same Father.

All this happens within a big problem (connecting myself to what I have previously said) : the fall of the "old" economic theories which, though they have caused man, the whole humanity, to make a jump forward for all that concerns man's concrete life, they have not been able to help him in his existential plan. Thus, today we are orphans and unable to create new theories, because of the ever serious problems and of a Globalisation  which turns the world into a true "global village", in which, it seems that the propaganda, the power, money and prestige are the only gods to bow in front of.  The financial activity, that is, the use of money, has so much worsened the terms of the question,  that money itself has become the end, and not the means of a producing activity: the base of living is no longer work, but the more or less liquid capital, independently from the true richness given by the production.

How far can we go this way? Very little, evidently, thus the human greediness, full of possessions, seems to have had today the upper hand on the being, and life, inexorably, has become more difficult for all. It is difficult today to find a serious work on which to build a future (like that of a family); the youths will have more and more to change work; they will have to face new situations to survive, and even then with  a little certainty of stability; the useless expenditure has very much outbid  the useful ones. This leads us to look for other modalities of income, perhaps by seeking financial activities producing ephemeral richness. The financial speculation, born for a higher problematic, is utilised for much meaner purposes: they try to invest in order to earn as much as possible, without caring for what is goof or bad. But by so doing, they favour a vicious circle which benefits only "the big professional speculators", because the little ones, sooner or later, will be utilised in such a way as their invested patrimony may support the huge capitals. These small savers, utilised also in the above mentioned business companies, will have nothing to do but to lick their wounds, because of the investments which had been judged good, but which have generated loss.

This reality was well expressed by Cardinal Dionigi Tettamanzi who, facing recently the problem with relevant lucidity, has stated that, while the producing economy often keeps, in its functioning rules, deep and indelible ethical traces, the finance more easily runs the risk of estranging itself from it.

The Bishops of Parma spoke well when he said: We need ethics in economy! We need that the commitment of each man (and, without perhaps, the Christian must be in the first line!) be for the building of a world where the market may be there for the development of all, and not only for the usual few.

Is it a healthy economy the one that allows milliards of people to live as miserable, as slaves, as excluded, when there would be plenty of bread, work and well-being for everyone? I think this to be the rue blasphemy of man against God: a God who is thought to be unable to feed humanity, a God who is thought to eat back his care for man, manifested in the wedding of Cana,  where God gave to man, abundantly, all that he needed!  What to do while waiting for a new economic theory for the third millennium?

In order to keep on going, we may need to take back what we have spoken of in the first article: To think, To discern, To act.

We have underlined, so far, the importance of "thinking", and now the moment has arrived in which we are expected "to discern" the financial reality. In the following article, we shall speak more specifically of the Ethical Bank, we shall ask ourselves about a possible way of acting.

The latest advice is that of  our participation in this world reality of involvement, for a better future of humanity, to let it go ahead in a constructive and sincere manner, without personalism and excessive defence, though still unaware of one's own status quo, whatever it may be.

Perhaps the most right thing is that of re-thinking  man and of going back to the Ethics of a right behaviour, especially for what regards money: yes, the Ethical Finance.

The Ethical Finance

Does actually Ethical Finance exist? What is it all about? Today, many make this question.

Well, yes, it exists and it is strongly expanding all over the world, including Italy, whose diamond point is the Ethical Popular Bank. Another datus, however, exists: just because of the above-mentioned negative realities, many institutions, under the impulse of responsible citizens, but also of the conquest of market segments, are offering financial products  defined as "ethical".

For the Italian saver, one of the strongest in the world, the question about what "ethical finance" is all about, appears to be pertinent, seen the offering of many so called ethical finance products, because, as it is said, the product is sold well … the product, we say. However, this time, behind this "product" there is no trick, but there is a word that generates a stir: Ethical. For the majority of persons it is not clear what this may mean, the same as with the "expert "financiers". The only persons who know what ethics means are the philosophers and theologians: but their explanations risk to confuse the ideas further.

Today the term "Ethical Finance" is a fashion, but its meaning remains always obscure;  the vocabulary is surely consulted! We, however, have the intuition that it has something to do with behaviour, with a way of living; linked, however, with money; there is the tendency of considering it as a way of doing good, as a beneficence,  not as an adequate behaviour or an ideal urge to modify certain least discussible economic situations.

The confusion is then magnified by the fact that each man, according to his own conscience, tends to say that what he does is often more just (and ethical) than what other people do, thus adding a subjectivity to a scheme that should be as objective as possible.

It is, therefore, a must to clarify well what Ethical Finance is all about, so that confusions will no longer be generated. We must underline that there is no norm in our juridical order (also in others) concerning the use of the term "ethical" with reference to financial products, which means that anyone may use this term without restriction of any kind.

Actually, we can say that the term "Ethical" in the financial world has a less ample connotation, with regard to its philosophic position 4. In fact, in the Anglo-Saxon world the term "Ethical" is often translated with Politically correct, Gentlemen's agreement; they speak also of Customer satisfaction and Customer's service, Socially responsible investing. Social responsibility of enterprises, possibility of economic support, and so on and so forth;  about ethical investing, considering the instrument Common Funds, they speak of ethical funds, humanitarian, ecology, green, Mutual Funds, a devolution, etc. One can very well perceive how there is a tendency of reducing the field of action of the term "ethical".

Some specification is to be made about the societies which emit the Funds: in most of the cases the "ethical" products come from the profit reality and move towards a particular type of sub-writer, indicated as "buonista". That is, in these cases there is one more possibility for the saver. In these cases, unless a product at devolution be produced, we turn to a society of "ethical rating" which selects the various titles (actionists, etc.), on the basis of its specific and often subjective motivations. Thus also the principle of "prevalence" can  be affirmed, that is, to consider that the activity of a firm is ethical if "the good" is more than the "non good!" It is understood that this situation leaves many doubts.

However, treasuring up what the deepest thought has produced in the world and in Italy (let us read, for instance, the easy texts of the Nobel prize for the A.K. Sen Economy); keeping in view on one side the philosophical idea of ethics  and on the other side the theoretic economic progress (let us remember that the "economic science" was born in 1700: before that it was within the Moral Philosophy), we can state, almost securely, the following on what the Ethical Finance is all about, grouping the motivations into two big areas: the theoretical area and the practical or actuating area.

About the theoretical side we can give the following statements:
 

- The activity of the Ethical Finance requires a reflection (and a denunciation) of the present distortions of the economic system and proposes itself, at the same time, as a hint for the research of a new living the economic relations.

- The profit, which has been obtained from the possession and from the exchange of money, must be the consequence of activities oriented towards the common good and must be distributed with equity among all those who contribute to its realisation.

-     The enriching based only on the possession and exchange of money is considered to be illegal.

 Money is, therefore, a means and not the end of financial activities.

-     It assumes the social and environmental responsibility, as a criterion of reference, for the operations of deposit as well as of employment.

-     The ethically oriented finance is sensitive to the non economic consequences of the economic actions.

-     The credit, in all its forms, is a human right.

-     They foresee the participation in the important choices of the enterprise not only of the partner, but also of the savers.

-     According to what the Nobel of Economy Sen says, " An attentive evaluation of the consequences is crucial in the ethics of finance. In matters of finance, not less than in other fields of economy, what is truly meaningful goes beyond what we have under our eyes, it goes much beyond what is immediate, beyond what is near"5

In the practical area

-     We consider the transparency and efficiency composing ethics and essentials.

-     We do not mean the gift of part of the interests to eventual associations of beneficence, but a loan that, though keeping in view the risk, puts the whole capital at the disposal of the projects on which the values of reference reflect themselves.

-     This does not mean to renounce part of the profit achieved by financing the traditional sectors, but to give it to enterprises and subjects which shoulder socially relevant ethical objectives.

-     A global  and coherent adhesion is required from the manager who orients the whole activity.

The Ethical Finance looks like the summing up of the gathering and employment instruments which respect the following requisites:

-     An interest rate detached from the marked: the saver has the possibility of defining the rate to be applied on his savings,  choosing from a maximum fixed by the Bank and the zero rate; in this case the advantage is not economic, but allows more adhesion and participation in the financed projects.

-     A management of the savings and employment in a transparent way: the saver is given the possibility of knowing the functioning of the structure which manages the saving and the destination of each single financing.

-     A politics of the employment aiming at giving value to persons.

This last requisite represents surely the peculiar aspect of the Ethical Finance: in fact, it is oriented towards the human development, which can be realised through a different and more just  production and distribution of richness.

Therefore the Ethical Finance is not a "different" finance, it is not an "alternative"  as for other disciplines (for instance: the "non official" medicine against the "official ones", the "paranormal" against the official science). It is a classic finance with all its rules; the difference is to be found in its end; in the well-being of the global man and not only of a "segment" of the world. It is a discipline for man, and not only for "some" men.

• In conclusion, the difference between Economy of the Market and Civil Economy (that is, what the Ethical finance proposes) is given by:

• ° Money as force of social de-construction: dead money.

• ° Money for projects aiming at the building of social bonds: living money.

•  

• ° indifference for the consequences of the environment;

• ° responsibility for the consequences of the environment;

•  

• ° exasperate competition;

• ° collaboration and competition in solidarity;

•  

• ° free and absolute market

• ° market in solidarity

• ° development model that creates exclusion

• ° development model that creates inclusion

•  

• ° creation of multi-nationals in competition;

• ° creation of enterprises and alliances nets;

•  

• ° uprooting from the territory;

• ° rooting in the territory;

•  

• ° concentration on richness;

• ° distribution of richness.

Even in this field we could state that " what shines is not always gold", in the sense that it is not insignificant to distinguish between what is truly ethical from what it is not. The risk, no longer hidden, is that of a possible watering of truly ethic products, in the sense of decreasing the great valance and bearing of the Ethical Finance, that is "changing everything, so that nothing changes".

Conclusion

Today the "Ethical Finance" is fruitfully present in all the States of the world both in the full way -that is with reference to all the requisites and the problems described by me, in the rich Western countries- and as micro-credit in the following article). Its expressions are different: from the Banks to the Financiers to the Co-operatives, the Societies of Management (the SGR) of Common Funds of investment to the Pension Funds (let us remember that the most powerful are, the Anglo-Saxon countries, those of the teachers:  the campaign against the Glaxo was started in England by one of their enrolled/retired - Glaxo is a society which produces anti-Aids medicines.  a From the beginning it was inserted in the Ethic Funds, but it did not want to sell its products at low cost in the poor countries- for the exclusion of the same from these funds, because of her non ethical behaviour. Not to lose its reputation and value, the firm abandoned the cause that wanted it as an active protagonist  in South Africa. This is due to the power of women and of the Ethical Finance), etc. All, however, claim and want back an active role in the humanitarian management of economic things, by gradually re-establishing   values based on the exigencies of the Person.

A very few years ago, one who was interested in this subject was seen not so much with suspicion as with sufficiency; today the situation is deeply changed, compelling the great economists to be aware of this and urging the Universities  to start treating these themes in their regular curricula of studies, as well as in their master. A proof of this is given by the conferring of the degree "Honoris Causa", in the Parma University, to the President of the Ethical Popular Bank, Fabio Salviato, as the official representative of the Ethical Finance. Gradually the world of finance, as well as thousands of savers, among which Public entities, Dioceses, and Parishes and many religious Institutes are becoming aware of all this. Just these latest years, in the 2003 Assembly of the General Economist, they have faced the theme of living ethically, the money and the Ethical Finance.

May we then, truly hope that our world and, what is dearest to us, namely the ecclesial world, will take this theme with vigour, science and knowledge as paradigm of a concrete help to man? I ardently hope in the positive.