Page 24 - Economy_Sustainable Global Economy

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4.2 Finances vs Ethical Finances

Ethics and Finances could at first seem antagonist. When talking about finances, what first come in your
mind might be Wall Street traders, only interested by making more money with money, far from any
ethical consideration.

Surprisingly, even traders might develop some code of ethics to place the integrity of this profession and
the intest of clients above their own, as they will, as in any activity, face some ethical issues, such as
dealing with their self-interest that can turn easily to selfishness, the professional duty that can enter in
conflict with company demand, and over all, the legal vs moral behaviour. Because something that is
technically possible, and legal, is not necessarily ethical, or moral.

Also, one of the major issue faced by traders and professionals of finances are the way finance sector has
grown, and the perverse incentives and conflicts of interest that have been created. Joris Luyendijk iw the
author of the book Swimming With Sharks: My Journey into the World of the Bankers, where he draws on
200 interviews with people from financial institutions in the city of London. The biggest issue, he says, are
the perverse incentives. “If you are rewarded for undesirable behavior and punished for good behavior,
then you can have all the ethics promises you want but people will act on those temptations.”

It is difficult to change the functioning of trading and finance, because no one will cut off the branch they
are sitting on. However, alternatives to finance exist. Indeed, beside this trading world, “Ethical finance” is
another way of practicing finances. This expression is commonly used to describe finance which takes into
account not only financial returns but also environmental, social and governance (ESG) factors. This
reflects an increasing recognition of the importance and value attributed by investors, both institutional
and retail, to delivering measurable positive environmental and social impact on a sustainable basis.

Ethical finance and investment is growing momentum, globally and nationally, at an exceptional pace.
Previously, it was principally the remit of specialist finance providers and investors supporting enterprises
with an environmental or social purpose, now it has morphed into the mainstream with an ever-increasing
recognition of the importance and value of taking ESG factors and values into account.

As the investment and finance market has developed, ethical principles are increasingly being seen as the
new normal, providing essential controls to underpin investment and finance decisions. Increasingly, funds
and lenders are being challenged when they are perceived as failing to apply suitable ESG factors in their
decision-making processes.