Financial Investments as if People and Planet Really Mattered
Ethics and finance may not be words you hear in the same sentence often, but Pauline Hinchion explores how Scotland is leading the way. She asks: looking to the future, what might a wellbeing economy look like?
Little did we realise as we ushered in the new millennium that a few years into the 21st century we would be in the midst of a climate crisis and a financial crisis. The 2008 subprime mortgage crash, like the Wall Street crash, has been felt hardest by ordinary people. The Wall Street crash ended in the Second World War, and more than ten years after the 2008 financial crash, the whole country remains in the midst of an austerity agenda and rising populism that never ends well.
Against this background, the climate crisis continues to advance. It was two Swedish scientists who recognised in the early 20th Century that fossil fuel combustion may result in enhanced global warming. So, we cannot say we didn’t see this coming.
What is crystal clear is that money lies at the root of both crises. While money has no intrinsic malignance, problems arise from the values with which it is aligned and how it is utilised.
However, increasingly we see that people want to imbue money with a different set of values: values that focus on the socially useful and can reshape our economy for the public good. Such an economic model has been called a new economy or a wellbeing economy. Whatever its name, there is a growing demand for an economy that is focused, not on the speculative spiv economy, but on the real economy, the one that most people rely upon and work within; an economy that prioritises the needs of the many over the few, and one that addresses the environmental challenges that will influence the lives of our children and grandchildren.
Sometimes, to go forward, it is instructive to look back. When it comes to the history of money, Scotland instigated many of the financial innovations that benefitted ordinary people. Concerns that the death of the breadwinner left families destitute caused two Scottish church ministers to found what became the life insurance industry. Aberdeen based, Shore Porters Society was one of the world’s first cooperatives and the Fenwick Weavers Society is recognised as the first retail cooperative, while across the country, building societies emerged from cooperative savings groups.
Latterly, Scotland is now recognised as a global leader in the development and advancement of social enterprises. Companies that offer a more modern, ethical, and sustainable model of doing business, with profits used to deliver a specific social or environmental mission. Social enterprises operate in nearly every community across Scotland and are active in every industry, including catering, transport, renewable energy, tourism and leisure.
Looking to the future, what might a wellbeing economy look like? In Scotland, we are again fortunate to have pockets of light that brighten the path and show how a new economic model is emerging from the ashes of the current dysfunctional one.
Scotland is seeing the emergence of citizen investors – ordinary people collectively investing small sums of money to address community issues. This money can be loaned to local shops (where there might not be a local bank) or to purchase a local building (often an eyesore that can be refurbished and used for community events). This is ordinary people recognising they can use their money locally – to purchase Community Bonds or Community Shares – to solve local issues. In return they get: their money back; interest; and a more vibrant local community.
In 2016, the Ethical Finance Hub was launched in Edinburgh with a vision to ‘realise a financial system where integration of environmental, social, governance and faith based values become the norm and not the niche’. It was the first Scottish financial body to endorse the United Nations Environment Finance Initiative Principles for Responsible Banking and is part of a wider agenda that aims to capitalise on Scotland’s growing profile as a leader in ethical finance. The Hub will also host the Global Ethical Finance Initiative during Ethical Finance Week from 7th- 12th October 2019.
In 2018, Scotland trialled another innovation and international first – the Edinburgh Ethical Finance Declaration. The Declaration seeks to develop and provide ethical financial solutions to all and is underpinned by values which suggest a new way of thinking about the role of money: impact investing; sustainability; and common good.A new Scottish Stock Exchange will open later this year. As the first Scottish stock exchange in nearly 50 years, it will focus on investments in firms that can demonstrate how they will deliver positive social and environmental goals. We are also anticipating the new Scottish National Investment Bank, scheduled to begin operating in 2020 with a remit to provide mission-led financing focused on the Scottish Government’s transformational change agenda i.e. providing patient long term money along with financing the transition to a low carbon economy.
You may ask, what difference will all this make to the lives of ordinary people? To begin with it puts the needs of people at the centre of a new economic system. It strives to ensure that money serves society and not that society serves money. It gives all of us options to do good with our money and offers us options to buy good with our money. It’s a vision that changes the function of money from a vehicle that can wreak havoc on us all, to something that can be used for all our mutual benefit.