They are not NGOs or little sisters of charity. Like any other financial institution, they only lend to those who, at least on paper, guarantee repayment with interest. However, investment optimization here is not limited to evaluating profitability and risk; Its social impact is also measured. So, in addition to not buying sovereign debt from countries that violate Human Rights or shares of funds that finance the arms industry, the so-called ethical banking is also characterized, for example, by supporting the creation of housing cooperatives in transfer of use, distribution of renewable energy or direct sale of agricultural products.
Entities such as Fiare, Triodos Bank, Coop57 or Oikocredit are some of the most representative of a banking model that, according to the latest 'Barometer of ethical finance' published by FETS-Financiación Etica y Solidaria, twenty banking entities follow in Spain and parabanks – such as 'crowdfunding' – which, in 2022, reached a credit record by allocating 1,920 million to “transformative projects.”
Like traditional banking
These funds come from the 186,386 users who entrusted them with assets valued at 2,594 million euros. And although the sector registered a slight drop compared to 2021 in both indicators – 3,400 clients and 46 million fewer –, since 2007 the savings captured have multiplied almost twenty-fold. Good proof that these entities also offer the most requested financial products, such as savings accounts, cards, deposits or funds in a manner comparable to so-called traditional banking. «When we talk about money there is always a certain degree of caution or mistrust. Overcoming this reluctance costs less if you share the values of the entity, so, originally, the profile of the typical ethical banking client was closely linked to activism in causes such as the environment, international cooperation or support for people with disabilities. disability or social exclusion. But, as we have grown and had more presence, people have begun to come who are no longer so related to those causes, but who prefer to support them to maximize their investment,” explains Juan Garibi, head of Development and Strategy at Fiare Banca. Ética, born ten years ago from the union of Banca Popolare Etica, which has been working in Italy since 1999, and Fundación Fiare, which has been working in Spain since 2003.
And, be careful, because not making the most of your savings does not mean leaving them at the mercy of inflation. Right now we can find deposits at 2.6% APR with which to obtain a very market-level return while financing, for example, projects that promote the energy transition, the promotion of collaborative housing or small businesses in underdeveloped countries, Although if we are truly disinterested – never better said – we can waive the collection of interest and assign it to finance new projects.
However, it should also be noted that if what we are looking for is financing, we may have to open a second account in another entity. Given the social and responsibility values that define them, we must rule out going to these entities if what we want is a loan to go on vacation, “but they can grant it to us to change cars if we opt for a hybrid or electric model or to improve the energy efficiency of our home. In fact, there are already entities that offer mortgages if it is a first home and is not luxury or if it has been built in compliance with sustainability standards,” explains Garibi.
These limitations, together with the small number of branches and the charging of commissions, are today the main barrier to entry for many clients, but the latter also has its meaning in terms of responsibility. «As a society we have to become aware that maintaining certain services has a cost and whoever requests them must pay for them. So there is a monthly payment that includes a series of operations, but we are not commission entities; We don't charge for things like overdraft or mailing. We live fundamentally off the difference between what we charge the credit client and what we pay the savings client,” Garibi emphasizes.
Its origin
In 1971, Luther Tyson and Jack Corbett, two Methodist reverends from Boston and Maryland, decided not to allow anyone to use the money of their congregations to finance the Vietnam War, so they did not hesitate to look for a manager to whom they entrusted the mission to create an investment fund that agreed with its values. The PAX World Fund – today renamed Impax Sustainable Allocation Fund – immediately served as an example for other social movements that wanted to protest against apartheid, tobacco or gambling or that fought for the improvement of labor rights. With them, socially responsible investment was born, whose flag is fundamentally, although not exclusively, raised by the so-called ethical banking.
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