Canary Wharf is a surreal place. Part theme park, part Alcatraz, it sits on top of a subterranean network of luxury shops: conspicuous consumption underpinning the heart of our financial sector. If you haven’t been, I’d recommend it, if only to experience the lingering sense of removal from reality.
The Financial Conduct Authority (FCA) occupies 25 North Colonnade, a steel and concrete building 80 metres tall. Spread over 15 floors, the building is worth a little over £244m. It’s somewhat imposing. And so it should be: as an independent regulator accountable to the Treasury, the FCA is responsible for supervising 26,000 financial firms. It’s there to make sure financial markets work well and customers are protected from unfair treatment. It should feel like it has a bit of clout.
But 25 North Colonnade also represents a mindset firmly rooted in the world of plc banks, where the profit motive overrides all else. This is a huge obstacle for those of us who want to make finance work in the long-term interests of people and the planet. It means our conversations start from different places; our words mean different things. Ultimately, it means regulation can act as an obstacle to the growth of democratic, sustainable finance.
I’ve talked to lots of people who are working towards that goal. Some use established models, such as building societies and credit unions; others are at the forefront of alternative finance, including crowdfunding and online secondary markets. Their specific issues may be different, but a common theme emerges. We’re committed to good conduct, within and beyond the scope of the regulation. (Frankly, we’d be stupid not to be – most of our business models are founded on an ethical claim of some sort.) But we’re frustrated by the fragmented approach and lack of awareness we find at the FCA.
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Where are the gaps? First, we see insufficient understanding of the nature of sustainable finance organisations. We do not exist to maximise profit from our customers. We exist to work with them to build a better world, using money as a means to an end. This isn’t sloganeering: it’s a fundamental principle that permeates everything we do. We might not be able to produce the reams of documentation or reels of metrics that the big banks use to demonstrate their good conduct, but we have the one thing they don’t: a sense of mission.
Encouragingly, the FCA is starting to focus its attention on culture rather than checklists and tick-boxes, but we have a long way to go. The fundamental assumption that good conduct and business success are in tension, and that our behaviour is a risk to be controlled, appears to run through much of the regulator’s thinking.
The nature of sustainable finance products is also, it seems, much misunderstood. Because they are different from the norm, or perhaps because the assets they invest in are unusual, the FCA often judges them to be complex or risky – and may restrict their availability to ‘sophisticated’ or ‘high net-worth’ investors.
No one should be misled about the risks of an investment opportunity. But equally, no one should be barred from making an informed decision to place some of their personal capital at risk in order to seek a higher financial, social or environmental return. If I can buy shares in Rio Tinto, Imperial Tobacco and BAE Systems, why shouldn’t I invest in renewables or community shops?
Most importantly, we see a lack of understanding of the sustainable investor: someone who invests to make a positive difference in the world, as well as gaining a financial return. To invest in this way doesn’t represent irrationality or cognitive bias, as might be suggested by the FCA’s discussion paper on behavioural economics. In fact, it represents a connection with the real world impact of money – one which was so badly lost in the years preceding the financial crisis.
The sustainable investor tends to be highly educated and takes a considered approach to investment, balancing financial risk against potential positive impact. This is someone who should have the right to use their money as they choose, to invest in the world they want to create.
This world desperately needs more sustainable, democratic finance. It needs organisations that connect enlightened investors with the low carbon economy and that understand the true role of money is to service our needs, not serve its own. This is the world we all live in, not the glass-fronted artifice of Canary Wharf. Perhaps it’s time the FCA left 25 North Colonnade and joined us here.
Anna Laycock is communications and ethics manager at the Ecology Building Society. This blog is part of Friends of the Earth’s Transforming the Treasury project, and originally appeared on its website.