Ethical finances: more than words

The financial sector’s interest in improving its social perception is, at its core, a symptom of good news: citizens are becoming increasingly aware of the impact of their consumption choices and demand that companies act consistently with their values. Unfortunately, in many cases, this apparent interest is limited to advertising maneuvers aimed at attracting new clients, without translating into real changes in business practices. To prevent this, both an organized citizenry that monitors and denounces these abuses and stricter regulation by public administrations are necessary.

Alongside this important mission of controlling and mitigating the most harmful impacts of large banks, an alternative financial model has been developing on the margins—one that, in addition to economic aspects, also considers the social and environmental impact of its decisions. Known as Ethical and Solidarity-based Finance, this ecosystem of entities views finance as a tool for connecting and distributing resources to transformative projects that improve people's lives and their communities while respecting the planet’s limits. Though it may sound utopian, these are well-established realities with decades of experience worldwide. Thousands of people in our country already have a checking account, apply for loans, take out insurance, or save their money with ethical finance institutions.

But how can we distinguish these genuine initiatives from yet another marketing trick? While they have evolved over time and may vary across different regions, Ethical Finance institutions share a set of core principles. The first is exclusion: they do not finance projects that violate human or environmental rights or have a negative impact on people or ecosystems. The other side of this principle is commitment: they use positive financing criteria to ensure that funds go to projects dedicated to social transformation, making the world a fairer and more sustainable place. The third principle is transparency: it is easy to verify where their loans and investments are directed because this information is public and accessible. The fourth principle, participation, promotes democratic governance, allowing decisions to be made collectively; for this reason, these entities often operate as cooperatives. Lastly, the principle of coherence ensures that these values are also reflected in the institution’s internal operations, including working conditions for employees and customer relations.

That said, these principles can also be mere words. To analyze their practical implementation, at FETS - Ethical and Solidarity based Financing, we have developed the Ethical Finance Scanner, a tool that allows users to assess the degree to which each principle is upheld based on objective, demonstrable, and measurable indicators. These indicators include salary ratios within the institution, decision-making systems, investments in sectors such as arms or fossil fuels, and access to information. Additionally, we have introduced the EthSI Seal, a certification that evaluates the transparency and best practices of insurance companies and brokers, as well as the products and services they offer.

Shifting consumption towards more ethically aligned options comes with various challenges. The first is identifying which of these options genuinely align with our values and act accordingly, beyond appearances. Resources like the Ethical Finance Scanner and the EthSI Seal help clarify this information and enable more informed decision-making, ensuring that our desire to build a better world through our consumption choices is not swept away by empty promises.