Fundación Finanzas Éticas, Fondazione Finanza Etica and FEBEA have presented the 8th Report on Ethical Finance in Europe, Capital for the Common Good: Ethical Banks and the Social Economy for the Future of Europe, which analyses the performance of European ethical banks on two levels: their financial soundness and their social and environmental impact, while placing these results within the broader context of the social economy.
The report was presented on 1 December in Brussels, at an event organised by the Social Economy Intergroup of the European Parliament, bringing together policymakers, financial sector experts and key representatives of the European social economy. The presentation of the report within the premises of the European Parliament underscores the growing recognition of ethical finance as a viable and robust financial model, and reinforces its role as a strategic ally of the European Union.
The report analyses three perspectives that provide an overall view. The first examines the soundness, credit quality and social impact of European ethical banks; the second compares these results with those of the traditional banking system; and the third focuses on the social economy, the main interlocutor and preferred destination of ethical finance.
The financial analysis in the report shows that ethical banking operates with safety levels similar to those of major European banking institutions, using the CAMEL model, a tool that assesses a bank’s strength across five dimensions: capital adequacy, asset quality, management, earnings and liquidity. In terms of capital, ethical banks are virtually on a par with large European banks, with a Tier 1 capital ratio of 17.86 %, almost identical to that of significant banks supervised by the European Central Bank, which stands at 17.25 %.
This is particularly significant in a sector whose model is based on granting loans to cooperatives, micro-enterprises and social organisations—activities that traditional banking considers riskier. The report explains this robustness as the result of a risk assessment based on direct knowledge of projects and long-term relationships of trust.
In terms of credit quality, ethical finance also performs better, with a non-performing loan ratio of 1.61 %, below the 1.89 % recorded by traditional banking. This is explained by the close relationship with financed entities, which makes it possible to anticipate difficulties and reduce defaults.
With regard to management, ethical banks assume higher costs linked to their commitment to social and environmental impact; however, this does not penalise their performance. In fact, the report notes that they generate more profit per euro managed than large banks (the ROA – return on assets – of ethical banks stands at 0.75 %, compared with 0.64 % for traditional banking), a relevant efficiency indicator for institutions that deliberately forgo more speculative activities.
Finally, their liquidity position is prudent, as loans are financed mainly through customer deposits, reducing dependence on volatile markets.
The social economy: the natural territory of ethical credit
The report devotes a special section to the social economy in Europe. Ethical banking allocates more than 70 % of its loan portfolio to this area, compared with 19 % for traditional banking. This affinity is not circumstantial: both share a value creation model based on social cohesion, economic democracy and sustainability.
However, the report warns that this architecture—ethical finance, the social economy, and climate and social objectives—is currently under threat. The publication of the ReArm Europe plan, which enables up to €800 billion for rearmament through debt outside the limits of the Stability Pact, reveals a profound reorientation of European priorities. The document cautions that this dynamic could reduce the financial space available for climate, social and territorial policies, which are the pillars of ethical finance.
Strengthening the narrative
In the conclusions, Pedro M. Sasia states: “The ethical finance model is possible and already working.” But he adds a crucial message: in a European context that increasingly links sustainability with military security, ethical finance has a responsibility to redefine what security means.
The report argues that the security European societies need—and that ethical institutions finance—is human security: clean energy, affordable housing, decent jobs, community networks and territorial resilience. “It is this social infrastructure, not militarisation, that guarantees democratic stability and the ecological transition.”
All in all, for Peru Sasia the challenge facing ethical finance is not only financial, but also narrative. Strengthening the narrative means affirming, through data and practice, that peace, social cohesion and sustainability are part of a single agenda, and that ethical finance demonstrates every day that it is possible to mobilise capital in the service of the common good.
