Answer to Question #206665 in Economics for lacchey

Question

1.    Define what sustainable and ethical banking means? Explain the importance of the concept in the financial industry.

Answer 1

An ethical bank, also known as a social, alternative, civic, or sustainable bank, is a bank that deals with the social and environmental impact of its investments and loans. The ethical banking movement includes: ethical investment, impact investment, socially responsible investment, corporate social responsibility, and is also associated with movements such as the fair trade movement, ethical consumerism, and social entrepreneurship.

Other areas of ethical consumerism, such as fair trade labeling, have comprehensive codes and regulations that must be followed in order to be certified. Ethical banking has yet to evolve; this makes it difficult to create a specific definition that differentiates ethical banks from conventional banks. Ethical banks are regulated by the same authorities as traditional banks and must follow the same rules. While there are differences between ethical banks, they share a commitment to upholding principles in the projects they finance, the most common of which include transparency and social and/or environmental values. Ethical banks sometimes operate at a narrower rate of return than traditional banks and therefore may have fewer offices and operate primarily by telephone, Internet, or mail. Ethical banking is considered one of several forms of alternative banking.