Ethical & Equity based finance

Today I went to an event organised by Ethos HumanCapital at the Cass Business School, as part of a series on ‘Ethical Business & Finance’, entitled Ethical & Equity based finance - Socially Responsible Investment, Islamic Finance & Private Equity: Contradiction or Common Ground?

The event brought together speakers (Vincent Neate, Head of KPMG UK's Sustainability practice; Farmida Bi, Partner in Islamic Finance at Norton Rose; and Chris Mills, Ethical Policy Manager, The Co-operative Bank) from the three core areas of Private Equity, Islamic Finance and Socially Responsible Investment to examine the theoretical commonalities and practical contradictions. The aim was to challenge current thinking and create debate leading to a better model.

Talking with another delegate before the session began brought back to mind statements made last week in my session on Transforming the Workplace by North Thames ordinands with experience of the Finance Sector. Each were emphasizing the difficulty of taking genuinely ethical stances within the sector.

As a result, it was then encouraging to hear the perspectives of these speakers who, although realistic about the challenges, were also more positive about the opportunities that exist and developments within the sector. Vincent Neate commented that, from his perspective as a consultant to major firms on issues of Climate Change, Ethics and Sustainability, there were two extremes when it came to the weight give to ethics in the sector; where people care about ethics they care deeply but where they don't, they don't care at all. Where ethics was taken seriously, the lead came from the top. Chris Mills gave an example of the business benefits that the Co-operative Bank has derived from its ethical policies as it is bucking current trends by expanding its market share at the expense of other banks with the overwhelming majority of its customers citing ethical policies as a significant reason for choosing to bank with the Co-op.

Mills argued that belief in unfettered capitalism has gone and Neate supported this view by stating that, not only is it currently not possible for the worst examples of asset-stripping to occur because there is insufficient liquidity in the markets, but he believed that private equity firms had seen the error of such actions. Bi was less optimistic, however, thinking that the sector is seeking to return to past unethical practices as soon as possible because the bottom line for many is delivering immediate profits. By contrast Ethos HumanCapital proposed a triple bottom line of people, planet and responsible profit.

Bi spoke about the specifics of Islamic Finance emphasising that it was more than simply a prohibition on interest. Other factors including prohibitions: on speculation; investment in specific goods/services such as gambling, pork, banks, arms etc.; and failures to understand the contract on either side. Such an approaches aligned well with non-Islamic approaches to ethical investment and financial services. More universal principles derived from Islamic Finance included, among others, working hard for a profit and using money earnt for social good. She felt that, despite initial optimism that Islamic Finance would emerge from the recession as a standard bearer for ethical practices, this was not occurring because Islamic Finance was a small segment of the sector which had been as affected by liquidity as other parts of the sector and because of a reluctance to go further in developing alternative models to existing financial practices. As a result, the opportunity to develop beyond the current stage achieved by Islamic Finance in the sector is being lost.


Ethos HumanCapital is a social enterprise business specialising in human capital consulting, including search & selection, as well as training & development and research with a focus on ethical finance, Charities/NGOs, Responsible media, Green & Responsible business spaces.


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