An Appeal to Bankers

The United Nations, supported by 193 UN members recently adopted the Sustainable Development Agenda, which features seventeen ambitious goals aimed at radically improving our planet by 2030; making it more sustainable and more equitable for all.

Relevant and significant goals for a world in need of deep change.

However, the adoption of those goals by the United Nations, while an important milestone, is not enough. We need a majority of countries collaborating to adopt the seventeen sustainable development goals, and that adoption needs to be supported by citizens, and the political and economic sectors, to facilitate lasting change.

If there is one sector whose commitment to sustainable development goals is of a paramount importance, it is banking.

Although, it would indeed help, I do not mean that all banks should be devoting a small part of their profits to charitable initiatives in line with the sustainable development goals. I’m talking about something else, something deeper, and something that could radically change the face of our planet.

Banks are economic players, intermediaries of savers/investors and borrowers/investees. Banks have an opportunity to rethink their role in society, to place themselves back in service of the people, organisations and communities that entrust them with their hard earned cash. Banks can be incredibly powerful catalysts for positive economic, social and environmental change.  And banks can have it both ways: maximizing good profits for shareholders and stakeholders in the long term, and supporting a more equitable, healthier and balanced world. 

A great first (and simple step) for banks is to incorporate positive screening criteria in their lending policies to ensure they invest in more responsible and transparent ways. A second step is to use criteria based upon the sustainable development goals to ensure they are finding ways to invest their people, capital and resources to create positive impact.

Banks belonging to the GABV (www.gabv.org) have been successfully and profitably practicing this kind of banking for decades.

Why isn’t all banking done this way?

If the banking industry shifted even some of their activities to support the UN’s sustainable development goals in the way described above, trillions of USD would be invested in organisations and initiatives all over the world in a way that would also gently push borrowers/investors to act in a way more aligned to the UN’s Sustainable Development Agenda.

This would really make a change, this is worthwhile. So, what are you waiting for?

GABV partners with GEFF2015 event to grow values-based banking

The Global Alliance for Banking on Values (GABV) is proud to have participated as an associated partner at the Global Ethical Finance Forum (GEFF2015) in Edinburgh, Scotland at the beginning of September. I also had the personal pleasure of participating as a speaker in the inaugural plenary session on Making the Case for Values in a Post-Financial Crisis World.

It’s always great to see appetite and activity building around the concept of values-based banking (also known as ethical, regenerative, or sustainable banking), and the GEFF2015  event really highlighted this trend.  

Hosted by the Scottish government and organized by Middle East Global Advisors with the cooperation of Thomson Reuters; the event focused on Convergence and Collaboration by calling for the harmonization of approaches to ethical and responsible finance across the world. More than 65 global leaders and 250 participants including bankers, asset managers, central bankers, pioneers in standards, issuers of green bonds and global networks; participated in ground-breaking dialogue on the future of the ethical finance industry, with a more in-depth look at ethical Islamic finance.

The main conclusions of the event are very much in line with the work and aspirations of the GABV.  Two of which are important to highlight:

-       The need to build on the opportunity of convergence between the variety of approaches in ethical finance e.g. Socially Responsible Investing (SRI); values-based or ethical banking; environmental, social and governance sectors; and the faith-based finance sectors. By building a harmonized approach we will increase collaboration, awareness and appetite for this type of financing.

-       The need to develop common standards and principles for the industry that will support this harmonization.

The GABV is already playing a role in the convergence of approaches to responsible finance and in setting the standards for the industry. For example we have built and promote a common set of guidelines for values-based banking members through the Six Principles of Sustainable banking, and in developing a banking Scorecard that we anticipate will become the common standard for all banks reporting on banking operations based on the above principles.

No less important is the work of the GABV in other fields: initiating the SFRE Fund to  deploy much needed growth capital to values-based banking institutions across the world, which helps GABV members and non-member financial institutions create more economic, social and environmental impact; and initiatives like the Leadership Academy that’s training the next generation of values based banking leaders.

Singing Our Way to Positive GDP

Just a few weeks ago I attended ​​a concert by a seniors choral society in my hometown of Badalona, Barcelona. The concert was held in a local church and was a real success. An audience of 400 spectators with 100 performers and contributors enjoyed nearly two hours of music within those ancient walls.  

It was a wonderful night. I was accompanied by my family and I also met some long-lost childhood friends. I must admit I was surprised by the quality of the concert; the energy of the room and how the mystery of the music made my mind create, imagine and dream.

So how does this relate to GDP?

Well, I’m a typical economist! Although the concert was a great experience, that brought happiness to many and a feel good factor to the community; I could not help wondering whether it actually contributed anything to the wealth of the country.

My mind was restless. Part of my brain told me that the concert did not create something new and therefore didn’t add to gross domestic product (GDP). So from a classic economics point of view, it was not adding anything to our collective national wealth.

But did that matter?

Then I thought a bit more. On the one hand the concert was free, no entrance was paid, so no income was generated. On the other hand, there was no waste (good for the environment!) and there was no net increase in economic consumption.

So what was the economic, social or environmental impact of such a lovely experience?

The conventional definition of GDP is that it improves only when there is an increase in consumption, in investment, or in government spending, or when exports show a higher performance than imports. The concert experience made me think; how important is GDP? Is it a true measure of the wealth of a community or indeed the wealth of a nation?

No consumption, investment, imports or exports occurred during that magical event but the connectivity, relationship building, and let’s face it, happiness, we felt as an audience, will probably last much longer and create a more powerful experience then buying a new smartphone or by going to dinner. And isn’t that the real point here?

We’ve evolved as a society to base prosperity and wealth on economic consumption. This is a mistake of huge proportions and it’s intrinsically tied to over consumption. So how do we rectify this, and as economists how can we be part of the solution? I suggest we need to take a closer look at what gets measured and monitored in terms of GDP, and find ways of adjusting the approach to be more holistic. As economists we desperately need to understand that the economy must serve communities and must evolve to help society achieve holistic wealth through balanced economic, social and environmental prosperity. We need to defend that and build upon it.

The concert did not probably add much to GDP but, believe me, it added a lot to happiness and community cohesion.

Maybe if we knew how to measure happiness through an evolved definition of prosperity, we could guide consumers, individuals, organisations and governments, to make better decisions on where to invest, save and spend. 

Values-based Banking for a Better World

I predict a quiet but powerful revolution in the banking sector that will return banks to their people-centred roots. I believe the strongest banks will not be the biggest banks, as we currently understand them, but those recognising their true value to society – acting as financial intermediaries; and acting as servants of the people, organisations and the communities that make them possible. I dream that in the future, the most successful banks will be those investing consistently in social, economic and environmental change.

A different kind of banking

The Global Alliance for Banking on Values (GABV) comprises banks and banking cooperatives across Asia, Africa, Australia, Latin America, North America and Europe; serving 20 million customers; holding up to $100 billion of combined assets under management; and powered by a network of 30,000 co-workers. Alliance members have different operating models but collectively they share a common mission to use finance to find global solutions to international problems—and to promote a positive, viable alternative to the current financial system.

A challenge to change perceptions

In values-based banking, profit is a consequence of serving real needs in a real economy – not an end goal. This is different to the current ‘’mainstream’’ banking system and shifting this perception among bankers, policy makers and the public is a challenge for the GABV. A second challenge is to find, connect, learn from and work with new Alliance members. The more we grow as a network of profitable values-based banks, the stronger we become in connecting and learning from each other, advocating for change, and assisting mainstream banks to shift their banking models.

An opportunity to partner in Middle East, North Africa, and South Asia (MENASA)

We’re uncovering a growing number of banks in the MENASA region whose principles have close ties with those of GABV members, and we’d like to connect them to our members, so that they can collaborate and grow. A new fund initiated by the GABV in March, called SFRE, is also available as a very practical support vehicle to potential members. SFRE is the first global open-ended investment umbrella fund, with a $1 billion ambition, developed to deploy substantial amounts of long term capital to banks with a proven track record of serving the real economy by meeting the needs of individuals, enterprises and communities they serve, whilst also delivering robust and stable financial returns.

A growing movement

This is what we call values-based banking, and it is a growing, global movement. Behind the movement is GABV, a not-for-profit foundation that advocates and convenes the best examples of values-based banking from around the world. Together we can change the world!

La coral y el producto interior bruto

Hace tan sólo unas semanas asistí en mi ciudad natal, Badalona, a un concierto interpretado por una coral de algo más de un centenar de personas mayores acompañadas por algunos músicos aficionados y dirigidas por profesores de música voluntarios. El concierto se celebró en una parroquia de la localidad y fue un verdadero éxito. Habría en la parroquia más de cuatrocientas espectadores que, sumadas al centenar largo entre cantantes y músicos, sumaban más de quinientas almas disfrutando de casi dos horas de música entre aquellas antiguas paredes.

Asistí acompañado de mi esposa, de mi padre, de mi hermano y de su mujer, de una de mis primas, de algunos de mis sobrinos,. Vamos: una amplia representación de mi familia que acudimos en masa a escuchar a la coral en la que cantaba mi madre, una de las muchas entusiastas cantantes amateurs que componían el grupo.  Allí coincidí también aquella noche con algunos amigos de la infancia, personas que no veía desde hacía mucho tiempo y con otros conocidos.

Debo reconocer que me sorprendió la calidad del concierto, con algunas piezas de ópera, de zarzuela española y de canción popular. Muchas, piezas conocidas desde que era niño, y que me trasladaban flotando a otros lugares a otros tiempos. Fue una velada entrañable y mágica para todos los allí presentes, familiares, amigos, vecinos y, sobre todo para los músicos y para los esforzados cantantes, que habian dedicado muchísimas horas de su tiempo a ensayar para hacer posible aquel gran momento de felicidad para más de quinientas almas reunidas en una antigua iglesia.

Yo me sentía feliz, y la felicidad que me proporcionó aquel concierto me acompañó durante días. Y, me consta que no fuí el único que se había sentido feliz. Me atrevería a decir que las más de quinientas personas que compartimos aquellas horas  salimos de la iglesia aquella noche henchidas de gozo, habiendo compartido cultura en forma de música popular, sintiéndonos mejores personas y sintiéndonos parte de una comunidad. Los cantantes porque daban rienda suelta a su aficción delante de sus vecinos y amigos, los músicos porque colaboraban en hacer posible aquella velada y el público porque los arropábamos a todos ellos y porque disfrutábamos con su arte.

Pero mi mente de economista iconoclasta no descansaba ni en esos momentos de felicidad y, uno de los canales libres de mi cerebro se encargó de recordarme que  el acto al que asistía no computaba para el producto interior bruto (PIB) de mi país y, por lo tanto, desde el paradigma clásico de la economía, no estaba añadiendo nada a la riqueza nacional. Claro, era un concierto gratuito, nadie pagaba entrada, luego no había consumo. Los cantantes y músicos eran aficionados y por tanto no cobraban por su actuación,  no percibían ingresos,  y la parroquia había cedido la utilización de la iglesia gratuitamente, luego tampoco había consumo en términos de alquileres.

De manera simplificada, para que el producto interior bruto de un país se vea afectado en positivo, tiene que incfrementarse o el consumo, o la inversión, o el gasto público, o mostrar un mejor comportamiento las exportaciones que las importanciones.  Nada de aquello había ocurrido durante el concierto de la coral y, sin embargo, la felicidad que me produjo aquel acto fue seguramente mucho mayor y duradera que el placer que me pudiera haber producido el comprarme un nuevo smartphone o el acudir a cenar a un restaurante de lujo. Tal vez eso ocurra porque confundir felicidad con placer es un error de dimensiones incalculables e intrínsecamente ligado al consumismo.  Sin embargo, si me hubiera comprado un nuevo smartphone o hubiera acudido a cenar a un restaurante, con independencia del lujo del mismo, eso sí hubiera afectado en positivo al producto interior bruto.

¿Podemos valorar en dinero la felicidad directa que produjo aquel concierto de voluntarios entre las quinientas almas que se juntaron en aquella iglesia? ¿Podemos medir en dinero la felicidad que esas quinientas personas transmitieron durante días a sus seres queridos al sentirse ellos a su vez felices?

Es bueno medir el PIB pero lógicamente eso no quiere decir que debamos santificarlo como la medida por antonomasia de los objetivos que debe asumir una sociedad.  Los economistas necesitamos desesperadamente entender que la economía debe estar al servicio de la felicidad de las comunidades,  respetando las diferencias de valor en las aportaciones de sus miembros. Necesitamos defender que lo que está en juego es la felicidad de las gentes y no que tengamos más o menos cosas, muchas de ellas cosas que no necesitamos y que nunca llegamos a disfrutar.

Tal vez si hubiéramos sabido medir la felicidad, el termometro de felicidad de aquel maravilloso concierto, hecho por aficionados y por voluntarios, se hubiera disparado hasta niveles insospechados. Tal vez si supiéramos medir la felicidad y prestáramos importancia a esas medidas, las decisiones de los consumidores, de los individuos en general, de las empresas y de los gobiernos, serían distintas y habrían cosas que ocurren hoy que no pasarían nunca.

Tal vez, sólo tal vez, algún día eso será posible.