Banking ethics are the moral or ethical principles that certain banks chose to abide by. There isn’t an ethics ombudsman or a universal code of ethical conduct, but the banks that vaunt their ethical credentials vet the ethical standing of potential investors and partners and also choose the companies that they in turn invest in with their ethical policy in mind. This means that a typical ethical bank will require potential investors to complete an Ethical Policy questionnaire. Should the nature of the investor’s business run counter or in some way compromise the bank’s ethical policy, they will refuse to accept the investment. Similarly, an ethical bank will often seek out investment opportunities that encourage environmental or social enterprises.
The number of ethical questions that the banking industry faces are many and multifaceted, but in broad brush strokes an ethical bank must have a policy that takes into consideration those questions that twenty first century globalization and the social and environmental issues attendant thereon pose. For example, the banking ethics that the Co-operative bank (UK) adopted in 1992 mean that it refuses to invest in companies involved in the arms trade, companies contributing to climate change, animal testing, genetic engineering and those companies who exploit sweat shop labor.
Banking ethics and profitability are not mutually exclusive, but being an ethical bank does sometimes mean that they maintain their moral rigor at the cost of profitability. This was the case with the Co-operative bank who in 2005, turned away investments totaling $20 million US Dollars (USD) because the investors were involved in what they considered unethical enterprises. These included a company who made traditional Scottish sporrans from fox pelts and a shoe-making company that decorated its footwear with sable.
In the United States ethical banks such as ShoreBank, Wainwright and RSF have sought out investment opportunities in those under developed areas and communities that are perhaps unattractive to banks with fewer ethical imperatives. ShoreBank has prospered within this moral framework and has seen its assets grow to $2.1 billion (USD). Equally, RSF has loaned in excess of $100 million (USD) and has reaped profits of over $50 million (USD), with an annual growth rate of 60%.
Banks that are known to have functioning ethical policies are found all over the world, and include the following: Triodos Bank (UK), the Co-operative Bank (UK), ShoreBank (USA), RSF Social Finance (San Francisco and New York, USA), Shared Interest (UK) based in the United Kingdom, Wainwright Bank (USA), La Nef (France), GLS Bank (Germany), Banca Popolare Etica (Italy and Spain).