“As ethical finance institutions, we consider ourselves tools for social change”

We interview Pedro M. Sasia, Chair of the Board of Directors of the European Federation of Ethical and Alternative Banks and Financiers.

11/05/2022 - 11:23 h - Enterprise Ajuntament de Barcelona

Pedro M. Sasia, Chair of the Board of Directors of the European Federation of Ethical and Alternative Banks and Financiers (FEBEA), gives us the lowdown on the FEBEA’s annual meeting and the transformational role of ethical finance. 

What is the current situation of ethical finance at the state and EU levels?

At present, we can identify a change of scale in acquiring influence, recognition, reputation for the exercise that ethical finance has had over the last few decades, and its behaviour in financial issues has been analysed, as happened during the 2008 financial crisis and the financial responses to the pandemic.

Ethical finance is now regarded, with this name and characterisation, as a regular partner in European development programmes. We are explicitly cited in the Social Economy Action Plan for injecting money into the social economy’s development from the EU. And it is recognised there, and in other areas, that in carrying out our ethical finance role, we are intermediates rated highly for the same features we have as ethical banks.

What is the role played by the authorities, especially local ones such as Barcelona City Council, ​​in this boost to recognition and ethical finance itself?

As ethical finance institutions, from the very moment of our creation, we consider ourselves tools for social change, but we are not self-sufficient in this process of social change; we cannot manage it alone. There is an entire context that can more or less facilitate or impede development.

City councils are extremely important potential partners for ethical finance. For city councils where social impact is one of its management priorities, we are certainly partners with whom mutually beneficial alliances can be established. And this occurs in a very large number of municipal policies; housing, social, cooperative, economic development and so on. It is very important for all these policies to have reliable financial intermediaries capable of aligning these policies with the mission itself. Ethical finance operates and can grant credit, highly rated credit from the economic, financial and socio-environmental points of view.

How is this concept of sustainability defined from ethical finance?

Our companies are currently extremely unequal and with very serious gaps in a good many aspects. We understand that sustainability has an environmental component that is much more than climate change. It is an environmental component having an impact on many other aspects, but which also has a social component that is inseparable from the environmental. And, in addition, there is also a component relating to governance when we speak of financial sustainability. Finance needs to radically change its way of relating itself, as organisations, to society.

What other differences do you see between traditional and ethical finance here?

Good intentions arose, from the start of the 2008 crisis, for putting an end to opacity in financial operations, to high-frequency stock trading, to tax havens and so on. A whole host of issues appeared that had to be dealt with. Broken promises, all of them. None of that has properly reined in the finance system. So the challenge of sustainability is presently one that also has to do with how these same financial organisations are being governed. It is not just how much I invest in my climate or carbon footprint or in recycling or in renewable energies. These are situations or circumstances that ethical finance has long been calling for as inseparable components of the concept of “sustainability” and that is how we have been acting.

What does ethical finance imply for citizens, whether or not customers? How does it influence other areas of society?

This is a whole niche of economic alternatives whose role is not exclusively linked to the economic circuit they belong to. We have a political-cultural challenge that is inseparably joined to our economic activity. We are tools of political action that attempt to transform our society and change the way it relates.

From this point of view, the proliferation of economic alternatives is targeting citizens with messages that go beyond “consume ethical banking”. It is a message of “build ethical banking and understand, above all, the non-economic consequences of your economic decisions”.

This is a very powerful message, in my opinion. Our consumer decisions have a political impact. And being a responsible citizen these days means having to necessarily include questions about what we consume and whom. That also includes a city council that has publicly pledged to carry out a specific project through a social player of this alternative-economy nature. This same message is being launched once again. That is, “beware, beware, consuming certain providers is not the same as consuming others, as the effects on social justice are different”.

FEBEA is holding a meeting in Barcelona this coming 23 and 24 May. Can you tell us a bit more about this annual gathering and the federation meeting?

Our federation has an extremely cooperative governance. It is a federation with 33 members (banks and financiers, ethical finance foundations) from 17 different European countries. 24 May is the date of our annual meeting in Barcelona, the first face-to-face one in three years. We will be approving the new strategic plan and the admission of three new members, and taking the opportunity to hold workshops with the European Investment Fund and other institutions to strengthen our members’ capacities.

Whenever we organise meetings, we hold an open conference the day before, which we will be doing in Barcelona this year as well. There will be a conference on 23 May, entitled “Credit and Beyond”, which will be bringing together the who’s who of Europe’s ethical finance.

What’s behind this beyond? What training and workshops will you be including in this open session?

As ethical finance institutions, we are experimentation laboratories. We are interested in activity niches with a clear social and environmental impact and which are very often, as it is usually said, outside the market. Big operators are not interested in them because they are complicated, because they do not understand them.

So, we’ll be sharing various interesting experiences in innovative funding. There are good practices that have to do with public-private agreements for developing microfinance circuits, with renewable-energy funding or agro-ecological project funding. Others have to do with funding recovered-enterprise projects, workers buyout. We will also be bringing important know-how which has one of the FEBEA’s members in this case, Banca Ètica, which I’m the Deputy Chair of. More specifically, we will be bringing our experience in co-housing funding, something very imminent for Barcelona City Council as it has launched highly innovative and fresh co-housing projects, and we are taking part as financiers.

Banca Ètica, towards the end of 2021, presented its new Barcelona office, which was already in operation during the pandemic. What does having a street-level office with these features involve?

Banca Ètica is a cooperative with a social base in the States of Italy and Spain. We have 46,000 members in both States. Starting an ethical finance project is very complicated. There are scale factors which are clearly overwhelming for the sustainability of a project like ours and, in our case, being capable of opening offices in Barcelona ​​has entailed the consolidation of an international project.

Ethical finance projects do not grow by making investments in several places while thinking of market opportunities. They grow because a sufficient social fabric is first created and later, the appropriate financial structures are gradually established on that social fabric. Building the Catalan social fabric was an extremely rich construction process, owing to the very wealth enjoyed by Catalonia, and Barcelona in particular; a wealth that has economic alternatives, a tradition of social activism and commitment with regard to economic alternatives. This social-base construction has made the opening of the office in Barcelona coherent and consistent.

When we started to create the Fiare Banca Ètica project, we had no idea whether there was a social demand sufficiently interested in economic alternatives and committed or whether everyone loved life with bank, towel, bicycle and calendar. It has been shown, effectively, that when you are on the ground, when you have a sufficient social base, as in the case with Barcelona, ​​the demand is there and is extremely wide.

What challenges will ethical finance be facing?

The impact of ethical finance as a tool that starts off being economic and inserts itself into the finance system, which is the heart of the economic system, must also be capable of fertilising the context. It must be capable of transforming and collaborating in the transformation of policies towards the goals clearly linked to the true meaning of sustainability (social, environmental, organisation governance, big economic players), and that is the most important challenge we have.

As for the regulators and regulations that govern the banking market, they ought to adopt specific regulations that attempt to provide support and enable growth where it is clearly a social asset: non-profit organisations. The EU announces that biodiversity in the financial ecosystem is very welcome, yet instead of implementing any measure to promote this biodiversity, it does just the opposite.