Another reason for a focus on investors was the continued growth in so-called ethical investment. For example, in Australia, this industry may be opened to greater scrutiny if a proposal by the corporate regulator, the Australian Securities and Investments Commission (ASIC), to issue guidelines on the disclosure of investment practices, comes to fruition. In December, ASIC asked for comments on a discussion paper that suggested it should provide guidelines for financial institutions on how to disclose information on the role of social and environmental issues in decision-making. 1 Currently it is financial firms themselves that largely define practice in this area. The process of assessing, rating and recommending companies on social and environmental performance may have to become more transparent and credible. The scope, methodology and inclusiveness of research, as well as the skills, qualifications and independence of analysts need to be addressed. In time questions such as whether information obtained by ethical investment analysts from particular companies is proprietary and should be in the public domain, cannot be avoided.

Indicating growing interest in the field, in November, the sustainable management magazine Green Futures focused on financial issues. A main feature considered the London Sustainability Principles, developed by Forum for the Future and the Corporation of London. 2 These are seven principles, based on economic prosperity, environmental protection and social development. In Johannesburg these were recognised by the UN's Environment Programme to apply to all financial centres and markets, and the Corporation of London began introducing other financial centres to the principles, beginning in Geneva and then New York. Champions of the principles, such as Dame Judith Mayhew referred to them as global principles.

A closer look at the Principles suggests there was much more work to be done for them to encompass all dimensions of sustainable development and become truly global. The principles on social development said nothing significant about human rights, unequal trading structures, corporate accountability, anti-competitive business practices, corruption or political lobbying. Reflecting the environmental bias of the process, the term social development was even mentioned in inverted commas, despite its much longer history than the term 'sustainable development.' The methodology for developing the Principles, using case studies of best practice, and workshops of interested corporate responsibility professionals (mostly London-based) may explain why they do not deal with more systemic issues, nor views from different cultures. 3

Even when considering environmental issues, some may question whether mere exhortation could help change the way financial markets work. Some point to the systemic restrictions on fund managers, and in turn, the boards of companies they invest in, from acting in society's best interest. In the Green Futures issue, Nick Robins of Henderson Global Investors asserted that "today's financial markets are still institutionally programmed to deliver the short-term maximisation of financial returns alone. Not only does this mean that financial markets lag behind the steady integration of sustainability factors in the rest of economic life. It also means that the primary signals that companies receive are in tension with their longer-term purpose." 4 Not only is short-term profit a potential problem, but also the very nature of money in most capitalist economies. Since most of the money in circulation is created in the form of loans from banks, nearly all of it has to be paid back plus some more, thereby creating a growth imperative in the economy. This poses problems for a world of finite resources, and if resource-neutral growth is possible, not only would it require major state intervention but would increasingly impel the commodification of free public goods to create new markets. This would compound the social concerns arising from the concentration of power in the hands of those that control access to financial capital.

Such concerns occupied both theologians and other followers of Judaism, Christianity and Islam. Centuries ago, the dominant view in the former two religions became that charging interest is permissible. However, today many Islamic institutions confirm the original idea that usury, and thus interest, is wrong. This is because of a number of key principles in Shari'ah law. First, money should only be a medium of exchange, a way of defining the value of a thing; it has no value in itself, and therefore should not be allowed to give rise to more money. The human effort, initiative, and risk involved in a productive venture are more important than the money used to finance it. Second, a lender must share the risk with the borrower- the potential profits or losses - that arise out of the enterprise for which the money was lent. Third, transactions should be entered into honestly with the minimum of uncertainty, risk and speculation. Fourth, investments should not support practices or products that are incompatible with the core beliefs of Islam. As a result, the charging of interest, trading in futures, speculation on currencies, and investment in products like alcohol, are not permissible for many Islamic financial firms. The principle which thereby emerges is that Islam encourages investments in order that the community may benefit" noted the Nida'uk Islam magazine. 5 In practice Islamic banks usually work by taking an equity stake in the enterprises they help finance.

In November, the 9th annual World Islamic Banking Conference took place in Bahrain. The Conference was be convened under the patronage of H.H. Shaikh Khalifa Bin Salman Al Khalifa, the Prime Minister of the Kingdom of Bahrain. That the conference attracted delegates from most of the major Islamic financial centres of the world as well as international organisations such as the World Trade Organisation, indicates the growing importance of the sector. The Islamic banking sector is expanding at around 15% per year. There are now more than 200 Islamic financial institutions spread across the Middle East, with more in the Far East, controlling assets of around $200 billion. Major players, like HSBC and Citibank, have opened Islamic operations. There is even a Dow Jones Islamic index.

Environmental economist David Boyle suggested it was time to take a new interest in no interest:

"It isn't clear yet whether charging interest is overwhelmingly bad in all circumstances. But the issue is surely due for much wider debate - as environmentalists ask themselves if there isn't a basic flaw at the heart of the money system that powers unsustainability. Because if there is, something is going to have to be done about it - and it may be that the Islamic scholars have at least part of an answer." 6

The Islamic financial community was also beginning to explore the connections between their practices and sustainable development, as indicated by the University of Bahrain's plans to explore "Sustainable Development and Islamic Finance in Muslim Countries" at their 5th International Conference On Islamic Economics Aând Finance in April 2003. 7

Given doubts about the coherence of the London Principles, and the important progress being made with Islamic finance, it seems premature to consider the Principles as legitimate global standards, or even aspirations.

contents © jem bendell, 2002. site design by tim concannon. hosting by futureconsiderations.com.