The origin of Ethic term
Although it is a foreign word, ethics has become completely domesticated in our country. In etymological terms, ethics originates from the Greek word "ēthos", which means: custom, behaviour, conduct, and "ēthikos", which means moral. Ethics has become an international word and term.
Ethics was advocated by the greatest Greek philosophers: Plato - Aristotle - Socrate
The creator of ethics as a study of morality was the Greek philosopher Socrates (470-399 BC), who used ethics to define the terms of human virtues. The most important personal values are: righteousness, courage, honesty, tolerance, goodness, sincerity and fairness. In the field of ethics, Socrates and the entire Hellenic world saw the issue of is a human characteristic and the greatest moral value. Socrates believed that virtue can be taught, i.e. that virtue is knowledge. A man must know what good is in order to do good. According to Socrates, knowing oneself is a prerequisite for happiness. Essentially, happiness is being good. Plato thought of happiness as an inner feeling. The disrespect of ethical principles leads to unhappiness. Thus, those who seek happiness must practise self-control and adjust their behaviour to ethical principles. A similar view is expressed by Plato in his "Republic", where he says that those who are happy are those who are just and those who live an honest life, while those who are unjust are also unhappy, and the tyrant of the state also becomes the greatest tyrant of his own happiness. A man should strive towards his own happiness, but he has an even greater aim of making his community happy. Similarly, Aristotle (384-322 BC) enumerates the basic principles that happiness can be divided into: wisdom, virtue and welfare. He sees happiness only as the subjective side of goodness. Contrary to the belief that we always want to do good held by Socrates and Plato, Aristotle thought that in order to do good, human impulses and instincts must always be governed by reason and may not be good in themselves. The Stoics and the Epicureans, Augustine, Aquinas, Spinoza, Kant and Hegel further contributed to the theory of ethics based on Aristotle's teaching. Ethics belongs to philosophy because it studies human behaviour from a certain moral aspect. The focus of ethics is the community, and moral good is seen as the universal welfare of the community. Since ethics and morality mean the same in etymological and semantic terms, they are often used as synonyms.
Morality, as a social norm of human behaviour, is a group of unwritten rules and customs governing interpersonal relationships. One of the characteristics of morality is its autonomy because moral norms are valid in themselves (the subject adopts them independently, and not under pressure from others). It is based on the principles that determine how a person should behave. Morality is the goal that we should strive towards. Since morality is a system of values, it serves to decide what is good and what is not, i.e. to differentiate between good and bad actions.
Ethical banking and investment evolution
In the 18th Century, the Quakers in the United Kingdom refrained from investing in industries they were morally opposed such as tobacco, alcohol, gambling and the slave trade. This was the first negative ethical screening of investments, later to become known as Social Responsible Investment (SRI). It continued into the 1920’s with the Methodist Church of North America screening out negative activities, or ‘sin stocks’ from their investment portfolios. In the 1960’s and 70’s the conviction that investment funds could be used to achieve social change give rise to the public demand for ethical investment vehicles such as the Pax World Fund. In the 1980’s investments supporting the South African apartheid regime were avoided, and Friends Provident (UK) was the first financial institution to launch an SRI fund. With its help, the Ethical Investment Research Service (EIRIS) was established to provide critical research and information on stocklisted companies social, environmental and ethical performance. In the United States, Amy Domini developed her ethical screening advice services and the first ethical stock market index. At the beginning of the 1990’s, a first attempt was made in The Netherlands to develop a positive ethical screening to be used alongside the original negative ones. This positive screening involves a best-in-class method, where company performances were compared with those of competitors. This type of screening has since further been developed and several ethical screening organisations have been established. Standards of screening have been developed and screening services are now being widely provided to banks, insurance companies, asset managers, private bankers, institutions and high net-worth individuals. Most stock-listed companies have had some form of ethical screening of their social and ecological behaviour so that ethical funds or asset managers can constitute diversified portfolios primarily based on combined negative and positive ethical criteria. The ethical investment fund market is developing quickly and many mainstream banks are offering such products.
Today there are more than 700 ethical investment funds worldwide and their number is constantly increasing. However the ethical quality of these products differs significantly in terms of quantity and content of positive and negative criteria applied. As a quality label the generic denomination ethical fund, indicating that some sort of ethical screening has been applied, is not appropriate.
As corporations have a tremendous impact on both people and planet, and as they are operating more globally than ever, their corporate responsibility needs to be engaged. Its making its way to the boardroom table as well as that of management and has begun to become integrated into internal structures. However high-quality corporate responsibility is still an exception. Whether responding to customers needs, preparing and positioning for the future, or as a result of enlightened leadership, this development is likely to grow and so will the number of ethical questions and dilemmas. By applying ethical screening to their investments, ethical funds, institutional investors, and pension funds are exercising influence on management, and gradually corporations are responding with improved transparency, reporting and accountability. In the best circumstances ethical screening and investor pressure is contributing to a process of intensified observation, questioning, reflection, measurement, ethically amended business principles and consequently adapted decision-making. Better reporting, external social and environmental auditing, the elaboration of social and environmental guidelines in corporate governance codes, feedback by the screening analysts and regulations could lead to a system of permanent upgrading of ethical conduct by corporations. Socially responsible investment is of a totally different nature than ethical banking since it relates to the ability to influence company behaviour through the provision of capital to stock-listed companies. Ethical banking, as described below essentially relates to direct financing and loans.