Waiting for the results of European elections it becomes current again Banca Etica's proposal for a new finance in Europe. A topic outside the electoral campaign whose impact can, however, determine cascade effects on the policies of EU countries. There are three cornerstones of the appeal of Banca Etica to the candidates for the European Parliament: pass a community law that requires banks and financial institutions to be transparent about their business with the arms trade; report adverse impacts and initiate binding processes for those who wish to declare Net Zero; help and not penalize them social enterprises in accessing credit.
In decades of history, the ethical finance has grown tremendously throughout Europe, combining more than positive results from an economic and financial point of view with full coherence in the values and principles that define it and which have always guided its choices. In light of this coherence, legitimacy and credibility, the Banca Etica Group, founding member of the European Federation of Ethical and Alternative Banks FEBEAformulated some concrete proposals to be placed at the center of the European agenda of the coming years to respond to three of the major challenges facing the Union: the promotion of peace, the fight against climate change, the support and promotion of social economy actors.
Finance for peace
Investments in weapons cannot be declared sustainable. This is the position Banca Etica is asking for more transparency on the role of banks in the arms trade. The ethical finance movement asks that a delicate sector such as that of the production and trade of armaments – which has a violent impact on human rights and geopolitical balances and which, according to Sipri, is responsible for over 40% of global corruption phenomena – be subjected to special and strengthened rules of transparency.
The Banca Etica Group asks the next European Parliament to pass a community law that it imposes on banks and financial institutions transparency about their affairs with the arms trade. Citizens and savers as well as institutions need to know if their bank is using their money to finance arms deals that are not always transparent.
Even one serious action to combat tax havens it would go in the direction of limiting less clear financial operations to support arms supplies, as well as finding resources for the most urgent public policies that the Union needs.
Finance for the environment
The objective for Banca Etica is report adverse impacts: binding paths for those who want to declare Net Zero. The role of finance in directing the economy towards models and solutions with low environmental emissions is now recognized by all. The EU has already done a lot in this field: the efforts have unfortunately been diluted during the works and even the investments in gas and nuclear energy are now classified as sustainable. Many studies have highlighted widespread phenomena of greenwashing by financial institutions that verbally declare commitments to sustainability, but continue to massively finance fossil fuels. THE largest 60 banking groups – often the same ones in the front row in magnifying their own “sustainability” – have provided $5.5 trillion to the fossil fuel industry for the last seven years.
In this scenario for Banca Etica some regulatory changes they could reverse course. Report negative impacts: today sustainable funds, pursuant to European legislation, must rightly report the list of the main negative impacts (Principal Adverse Impacts or PAI); funds that do not declare themselves sustainable do not have to report anything. Binding criteria for those who want to declare “Net Zero”: in recent years, voluntary initiatives by banks and companies declaring they want to eliminate their emissions have proliferated, but these have often resulted in failure due to various “tricks”, such as measuring only the direct emissions of banks. A central theme to be addressed by the next European Commission will be to define stringent and transparent criteria, with verifiable objectives and milestones, for those who want to embark on a path towards zero net emissions. There is a strong need for a binding regulatory framework for tackle greenwashing in all its forms. It is not possible to continue to stand by and watch the proliferation of arbitrary initiatives in which the central objective seems to be only to protect the reputation of banks and businesses, certainly not of the planet.
Finance for the social economy and the fight against inequalities
The European institutions say they want support the development of the social economy of the continent and its protagonists, as predicted by the recent Action Plan. Access to credit – underlines Banca Etica – is a fundamental lever for the growth and consolidation of these companies but the current European regulations seem to respond exclusively to the needs of multinationals and large companies. It is, therefore, appropriate stop penalizing banks involved in supporting organizations and businesses busy in promoting social inclusion. In this regard, the Banca Etica Group proposes to change the capital absorption requirements: many social economy entities are unfairly automatically classified as high risk and therefore subjected to a 100% capital absorption. The world of social economy demonstrated one solidity and resilience even if not higher than that of other sectors “conventional” economic ones. In fact, there are no technical reasons that justify this penalty. The introduction of a social supporting factor that reduces the absorption of capital for the realities of the social economy would constitute a fundamental tool. In addition to this, in recent years European institutions have moved decisively to ask banks to reduce exposure to non-performing or problem loans (so-called Non-Performing Loans or NPLs).
