What organisations do with their money is being increasingly caught on the public radar, bringing ethical issues to the forefront.
From dodgy tax decisions to questionable investments, businesses are being highlighted more and more for what they do with their customers’ money.
Ethics and values are at the core of co-operatives and mutuals, meaning they can offer more examples of sensible investments and long-term decisions. This luxury comes from not being held accountable for a fast buck by shareholders – and it’s one that should be celebrated more widely.
Whether you are looking to make personal financial decisions or corporate choices, determining what is, and is not, ethical can be a minefield.
Ethical Consumer this year produced a handy guide on ethical finance. Out of the top 40 list of banks for consumers to switch to, the top half was full of building societies, alongside niche ethical providers such as Triodos and Charity Bank. One obvious tick box is that the organisation you’re investing in shares the same values as yourself/your organisation.
Ethical Consumer has a simple scoring chart looking at the honesty of the bank (for instance, over tax and lobbying), as well as customer service, culture and support for the economy.
Of course, it is no coincidence that Ecology Building Society tops this list. Now, Co-operative News has teamed up with Ecology to look at the world of ethical finance over the next 12 months.
While banking institutions are the common choice for investments, there is much more to consider. Through analysis, sharing of best practice and other insight, this monthly column – and online hub – will look at investing in mutuals, finding ethical capital and exploring the latest investment innovations.
Over the past few years, traction has increased in the number of community share offers. From village stores to large-scale energy projects, these types of investment opportunities are real for people; they can see where the money goes, be beneficiaries of their own investment and create a real social return. There is even tax relief on some schemes.
Co-operatives UK’s work with the Microgenius community share website is one of the innovations in this area, along with other share issues through Ethex and Abundance. There are also the more general calls for crowdfunding through Crowdfunder, IndieGoGo and Kickstarter.
Co-operatives are pioneers when it comes to community investment. Earlier this year, the Co-operative News Community Impact Index highlighted that the largest co-operatives significantly outperform their supermarket competitors in this arena. Ten consumer co-operatives invest 6.3% of pre-tax profits in helping communities, compared to only 3.7% of the supermarkets.
But the question ‘what is ethical finance’ means so much more than this. It can and should cover every channel of where your money goes, which can include pensions and ethical funds.
Socially responsible investing is on the minds of investment managers. According to the UK Sustainable Investment and Finance Association (UKSIF), 34% of asset managers look at how socially responsible investments are, as well as indicators around environment, social impact and governance.
According to the Climate Bonds Initiative, green bonds with a value of £10.7bn ($18.35bn) were issued in the first six months of 2014. Last year just $11bn was issued in total, and the bonds have quickly moved on from being known as a niche product just three years ago.
Public awareness is increasing on the need for ethical finance, too. Good Money Week (19-25 October), organised by UKSIF, highlights those organisations that “benefit society and protect the environment”.
Bringing ethical investment into the mainstream, the week-long event, which has been rebranded from last year’s National Ethical Investment Week, aims to grow the UK’s sustainable finance market.
With increasing attention and scrutiny being brought on organisations to be more transparent with their funding and investment strategies, now is a good a time as any to look at where your funds are being distributed and how ethical they are.