Economia Social i Solidària

What is FETS and how would you define ethical finance?

FETS is a second-level organisation that promotes ethical finance in the banking sector, the non-banking sector and the insurance sector. In the past, we used the concept of ethical-finance organisations to define organisations that, at a banking and para-banking level, followed a series of principles in carrying out financial intermediation. Now we’ve developed a methodology that enables us to extract indicators from these principles and, therefore, to see if there are any other organisations that we hadn’t identified which meet these principles and, as such, can be considered ethical-finance organisations.

But they are basically organisations that solely and exclusively fund projects which have a positive impact and have largely incorporated the principles of exclusion, commitment, transparency, participation and consistency.

How did you develop this methodology and how do you assess compliance with these principles?

For each of these principles, we looked for indicators that allow us to determine whether these principles are being followed or not. Some of them are simple. When we talk about exclusion, it means ensuring that the organisations do not fund certain types of projects that are harmful to society, to the planet.

The same goes for transparency. The financial sector is very opaque, and so, what we’re looking for here is their degree of transparency in terms of what they do with the money. As for participation, we evaluate the opportunities to participate in these organisations, if they operate on a cooperative basis, and if not, whether there are spaces for participation and direct influence within those organisations, or if the principle of one person-one vote is respected.

And the other principles you mentioned?

Ultimately, the principle of commitment means that the organisation practices what it preaches, that it applies all these principles and values to the products it creates. We also have the principle of consistency, which is similar to commitment, but means that an individual organisation does not have an outrageous wage ratio, that there are no regulatory violations, that it works as a team, etc.

When you carry out this analysis, I assume they don’t all have the same degree of compliance and that there’s a range. What would the threshold be for classification as an ethical-finance organisation?

That’s why we looked for these principles. What indicators we could find that were public, easy to find and, above all, based on objective data, as objective as possible, allowing us to evaluate and determine the degree of compliance with these principles, in regard to the organisation being analysed. We’ve seen that there are organisations where the degree of compliance with these principles is zero, not even 1%, while others almost reach the maximum level. At FETS, we consider organisations that have reached at least 80% compliance with the principles to be ethical-finance organisations.

You carry out this analysis via the Ethical Finance Scanner. How does it work? How often do you share the analyses?

The Ethical Finance Scanner has been around for less than a year; it’s a very new tool. Even so, we would like to update it at least twice a year. Many indicators are linked to reports that are updated annually. We also collect suggestions people make: Hey, I don’t see this organisation, could you include it when you can? And we collect the data and try to include it. This tool is not static, i.e., it’s a starting point and, as we discover new indicators and new ways of being able to incorporate these indicators consistently, we will do so.

And how has this scanner been received by ethical-finance organisations, and even non-ethical-finance institutions, conventional banks?

Very well received by ethical-finance organisations, because it helps them to showcase their work. When we talk about these principles, it sounds a little, let’s say, esoteric, philosophical. But these indicators provide a concrete definition of what it means to be participation-based or transparent, or follow the principle of commitment.

In regard to conventional banking, absolute silence from management, perhaps because they don’t look so good. It’s true that we hoped to find a middle ground, organisations that are not considered ethical-finance organisations, but that due to their principles and values, are not completely divorced from ethical finance, either. There aren’t many organisations like this on the scanner, I’d say because they aren’t aware that they could showcase things they’re doing.

In other words, there are organisations that don’t meet any of the indicators analysed, and it’s clear that they are unwilling to do anything. But there are some we see as having a series of practices and the organisation may be unaware that if they emphasised them more, showcased them more, if they were more transparent, they would certainly be closer to becoming an ethical-finance company.

So, what’s the difference between the Scanner and the Ethical Finance Observatory?

FETS is an organisation that promotes ethical finance. It includes the Ethical Finance Observatory, which creates tools that help general public find out about ethical-finance organisations. And the Scanner, for example, is part of the Observatory.

What about the Ethical Finance Barometer?

The Barometer is another tool, another report that we create ourselves every year, on a regular basis. The Barometer offers a highly quantitative overview of ethical finance. Therefore, it tries to see, on aggregate, what ethical finance has generated in Spain during the year.

We collect data on the total amount of loans, the accumulated savings, the share capital of all the organisations, the arrears they have, all at the level of banking, and for each bank, and we also collect data for all the organisations that are certified with the EthSi seal.

How would you summarise the results of this Barometer in a single sentence? Are we on the right path? How are we doing?

The Barometer includes some indicators that have already reached all-time highs, but there are others that are breaking these records year after year. In this case, we’re saying that we’ve surpassed €1.900 billion in loans, and this is a really important indicator, because it’s money that has gone directly to projects with a positive impact.

And what type of projects have been possible thanks to this funding?

Here, we mostly look at four main areas: social, cultural, environmental and “Other”, which includes funding for institutions, public agencies, and individuals. And here, we can focus on Barcelona, for example.

We have organisations that provide support for mental health, such as the Tres Turons Foundation, a cooperative school called Nou Patufet, Oxfam Intermón, for example. We also have an energy consultancy cooperative, Aigua Sol Enginyeria, and there are others working in the area of culture such as Justícia i el Pau, IACTA cooperativa, which defends people’s rights, and nearly 500 other projects in Barcelona.

The other project you mentioned was the Segell-EthSI seal. What’s the difference between an insurer with or without the seal?

It’s a certification seal we’ve created which focuses on two main areas. What do they do with the money? If they have investment policies that, obviously, avoid investments that harm the planet and people. And the other is their sense of responsibility in relation to the community and region. This ranges from how they relate to the region to whether these companies actively promote culture and create products for the cooperative or association network, if they go beyond conventional products when addressing needs and if they create products that are less commercial but very much necessary for the entire Social and Solidarity Economy (SSE).

Can you give me an example of this type of product?

Nowadays it seems as though it has always existed, but maybe 15 or 20 years ago, it was quite surreal for a company to insure solar panels. In this case, ethical insurance policies were pioneers in insuring that kind of material or installation. There are also insurance policies for associations that help people with functional diversity, and which sometimes need very specific insurance policies or a clause reflecting the particular circumstances of those groups.

The idea is for them to include clauses that take social vulnerability into account.

What would you say to someone who’s thinking about including ethical finance into their everyday life?

Beyond just supporting ethical finance at a moral level, it’s important for people to really take part and get involved, and ultimately move some, if not all, of their financial products to ethical finance. In fact, when we face recurring events such as these crises and unpleasant situations, fostering robust ethical finance helps to minimise their impact.

Simple things are not always the best solution. Similarly, the cheapest solution is not always the best one. If we look for alternatives and we don’t like what we see, we have to do things differently. Sometimes, getting access to ethical finance seems to be complicated, but once you do it, you see that you can operate normally. And if not, you can always ask for help.