28.3.2019 HCP Team

Ethical investments – the trend and analysis, Part 1

One of our favorite banks is a B Corporation
Ethical investments – the trend and analysis, Part 2

Authors Ernst Grönblom and Jo Iwasaki

Today so-called ethical investments are very much in fashion. However, this trend comes with its own set of challenges. In this series of blogs, we explore some of them and present our responses.

Unfortunately, some of the most aggressive marketers of ethically labelled investments are the very same organisations that, year after year, are caught red-handed in scandals. Money-laundering, tax-evasion, structured products, closet-indexing – the list goes on.

This is unacceptable. Those organisations undermine public confidence in the topic but also in the financial industry.  Given that more than a decade has gone since the financial crisis, ethics in finance should have become the norm.

HCP aims to be a force of good in the financial industry. This is what motivated us in achieving the B Corp certificate in 2017. We have produced the annual Sustainability Report since 2014.

We can do more. We have many dialogues with our stakeholders to understand what ethics means, why it matters, and what they expect from HCP. Our primary stakeholders are clients and employees, but we engage more widely to be on top of the debate.

In this series of blogs, we set out our current thinking on ethics and the role of the financial industry. In doing so, we share our ideas and values. We also draw ideas from thought leaders and from our stakeholders.  In the first part of the series, we discuss why the financial industry exists in the first place.

The purpose of the financial industry

The financial industry functions as an intermediary that enables the efficient allocation of capital and risk. Imagine the economy as a whole is a farm. Then the financial industry is the drainage and irrigation system, collecting water from where there is a surplus and dispensing it where there is a shortage.

Critics of the financial industry like to point out that the financial industry has just a supporting function. It is neither the farm nor water. All production and wealth creation takes place in the fields (that can be said to represent physical industries); capital is the water that provides the resource. The drainage and irrigation system may look like just distributing water to the fields.

But can you imagine the farm without a drainage and irrigation system?

We can also compare the whole thing with the human body. If the economy is the physical body, then the financial industry is the circulatory system that distributes oxygen and other nutrients.

Just like the circulatory system reaches every part of the body, the financial industry connects all industries.

This connectedness leads to many things. Most importantly, what happens within the financial industry affects all other industries. In comparison, the health care industry does not affect the energy industry as much.

This is why responsibility in the financial industry is so important – and hence ethics in finance. If the circulatory system is contaminated, the whole body suffers. Likewise, if the financial industry is corrupt, the whole economy suffers. This is because the financial industry cannot be isolated from the rest of the economy.

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Good asset management is indisputable investment expertise, respect for customers and transparent pricing. This is not all for HCP. A healthier financial sector, better financial service, and support for individuals – this is what we believe in and work for.

One of our favorite banks is a B Corporation
Ethical investments – the trend and analysis, Part 2
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