Bruxelles, February 6th 2019. Today Banca Etica’s Cultural Foundation issued in Brussels, at the European Parliament, a survey on sustainable finance in Europe.
The report analyses the performances of the 23 European ethical and sustainable banks – members of the Global Alliance for Banking on Values and European Federation of Alternative and Ethical Banks networks -, matching them with the 15 European “systemic” banks as listed by the European Banking Authority (EBA).
Unlike other surveys that only estimate the growth – constant and encouraging, in fact – of invested assets based on sustainable criteria, the Fondazione Finanza Etica’s survey aside investments investigates the credit side. It measures in which degree sustainable finance is doing the bank’s job by giving credit to families and enterprises (the so-called real economy) and supporting the creation of value and jobs while respecting the environment, human rights and in compliance with the law.
This rigorous analysis has been presented while the European Commission is working to approve a European Action Plan to define, regulate and promote sustainable finance in Europe.
The survey’s results leave no doubt: in the last 10 years – while Europe was hardly trying to recover from the 2008 financial crisis – ethical banks kept doing the traditional banking work. Sustainable institutions kept collecting savings and granting loans while systemic banks (the too big to fail ones) were focusing on other kinds of activities (investments in securities, financial services, etc.). In 2017, granting loans was an average of 77% of total ethical and sustainable banks activities, while only accounted 40,52% for big systemic banks.
Ethical Banks show better performances also on the side of returns: from 2007 to 2017 ethical and sustainable banks gave three times more returns than the systemic banks, with an annual profitability average (in terms of ROE – Return on Equity) of 3,98% compared with 1,23%. As a matter of fact, until 2006/2007 systemic banks had profits drugged by speculation and indebtedness, but then that phase ended. So while who contributed to the exponential growth of investments in increasingly sophisticated and speculative financial products had to dedicate itself to reorder its asset to avoid to be overwhelmed by the bubble blast, withdrawing also from credit to the real economy, ethical banks were able to better perform their duty, also finding an increasing way to grow.
During the crisis, the growth of the giant European banks slowed down or even stopped, while assets, savings, loans and net assets of ethical and sustainable banks keep growing at an annual average of 10%.
Regulations and proposals
If ethical banks are structurally different from the systemic banks and shown to be more resilient keyring the crisis, then it’s urgent to approve regulations, both at national and European level, to recognize and support such diversity. The third part of the Survey investigates if the financial system has changed since 10 years of the crisis outbreak, and in what extent the financial lobbies still shape political decisions and how many reforms possibilities have been lost during the last years, along with the recovering of a worrying restoration wave on both sides of the Atlantic. Particularly, the ethical finance movement hopes for more courage of the European Commission that since now seems to be more concentrated only on the environmental aspects, while setting aside the social criteria, of regulation on sustainable finance. It is a perspective mistake that Banca Etica, together with Global Alliance for Banking on Values and European Federation of Ethical and Alternative Banks, is trying to suggest to change, due to some amendments submitted to the regulation that the European Parliament is discussing at the moment.
Fondazione Finanza Etica is the cultural branch of the Banca Etica Group, focused on research, promotion, training on the issues of finance and ethical finance as an instrument at the service of wellness, sustainability and environmental protection, human rights, and new ideas of civil finance. The main activities carried on by the Foundation are: research in the field of finance and social and environmental effects of the economy, communication for the Group throughout the editorial hub Valori.it, critical financial literacy, active and critical shareholding particularly in cooperation with Etica sgr, campaigning, publishing, participation to associations, projects and cooperation with public or private entities.