Guest Blog – Is finance the last bastion of immorality?
April 23, 2015
Is finance the last bastion of immorality?
I only ask because it seems that in no other walk of life are professionals actively encouraged to be immoral.
With the prioritisation of personal profit, anything goes. If the target is double digit returns, how they are generated is not a matter for concern.
In financial services, fund managers are encouraged not to muddy their mandate to make as much profit as possible with ethical considerations, which, it is universally believed, put a dampener on returns. The money machine is innately Machiavellian.
But while the great Prince might still be held in high regard by some outmoded Alpha Gordon Geckos in the City, should we all still be buying into a world view shown by the financial crisis of 2008 to be completely flawed?
The way money functions in society at the moment is as a distancing or “screening” agent – separating us, the earners, from where our money goes and what it does. Financial advisers, fund managers and bankers play a part in our money’s Great Disappearing Act, where it is reduced to an abstract, onscreen set of numbers going up and down that we check a few times each month.
All we know is that it goes into a bank account, or a savings account, or a European growth fund, for example. We trust in this system, partly because we have little choice, and partly because what that money ultimately funds is often completely concealed from us.
But that money does end up somewhere.
It could be somewhere you consider to be completely harmless, like sustainable farming, or something counter to your own values, such as controversial mountaintop mining, a practice that Barclays has only just committed to stop funding, directly or indirectly.
And that’s not to mention the fees and commission being siphoned off along the way.
The International Monetary Fund recently stated that fund managers are a threat to global financial stability.
Without knowing, your money could be being used for activities that harm the environment, or communities in other parts of the world. And honestly, it is likely to be.
Fossil fuel and mining companies are among the biggest in the world, generating huge profits for the banks and asset managers that fund them with our money. The global economy is reliant upon ill-gotten profits – things we wouldn’t be proud to tell our children about. Things that humanity, at its most empathetic, would be collectively appalled by.
But an enlightenment of sorts is slowly taking shape across the Square Mile.
Progress has been made by things like the John Kay report, which criticised short-term thinking in the City and set out the benefits of more long-term profit-making strategies that are sustainable, although many of the recommendations it made have not yet passed the statute books.
But until we dissect for ourselves the subconscious assumption that underpin financial systems that profit is at best morally neutral and at worst, can only be made in a moral vacuum, and that thinking ethically about money is a flawed approach to making money, then we are stuck in a world that contradicts itself, outwardly condemning practices we all agree are beneath us, while secretly funding them.
What is needed is a kind of pincer movement: people – the savers and investors whose hard work funds the system, need to develop an awareness about their own money and what it is doing, and then to take action to put their money somewhere better. At the same time, lawmakers need to re-engineer the mechanisms that enable brokers, traders and hedge fund managers to make often flagrantly immoral, short-term decisions driven only by the dollar signs in their eyes.
But baby steps. If you agree with what you have read in this blog, you can start by voting with your money. Because there ARE options out there for those who do not want to compromise on profit, with returns on “ethical” matching and sometimes even trumping those from conventional “non-ethical” returns.
Renewable energy crowdfunding platforms are a relatively recent innovation that aims to tick the profit and the principles boxes – and to do so for people who do not necessarily have a lot of money to invest, but want to make a small difference with their own cash. Loans to renewable energy projects on Trillion Fund start from £50. You can read more about Trillion Fund’s #votewithyourmoney campaign here. As Kathryn Heaney, a lender to the E5 Energy raise on the platform says: “It’s a chance for the little people to do something about it”.
The platform is currently featuring a 7% a year, three-year fixed rate peer-to-peer loan that finances UK wind turbines. The raise closes on April 30. If you choose to lend, remember that your capital is at risk.