Topic 8 - Ethics and Sustainability Flashcards
What features should financial information and advice obtain? 5
- accurate
- up to date
- transparent
- timely
- sufficient but not too complex
What factors influence financial choices? 6
- the original want or aspiration
- feasibility of access to a financial product to fulfil the want or aspiration
- information sources
- personality
- price and product features
- reputation of the provider
what are ethics defined as?
the moral principles that govern a persons behaviour
Why are ethics important in the financial sectors?
money and finance depends om trust
- providers act in a way that increases there own profit while bearing legitimate morals for the benefits of stakeholders, not just shareholders
What does FCA stand for?
financial conduct authority
What are the objectives of the FCA?3
- to protect consumers
- enhance the integrity of the financial system
- promote effective competition
What does PRA stand for?
prudential regulation authority
What are the statutory obligations of the PRA? 2
- to promote the safety and soundness of firms
- to protect insurance policyholders
other than compliance to legal aspects, how might a provider behave unethically? 2
- behaving unfairly to a group of customers but not breaking rules while doing so
- financial transactions have implications beyond the interest of banks customers as they affect the interests of other stakeholder groups
How are high levels of executive pay justified?3
- by saying large profits are made under the ,management of their top executives
- bank managers have a high level of expertise
- individuals of this level are of short supply
What is the problem with executive remuneration?
general public feel resentment when they see such high salaries and bonuses whilst banks needed bailing out in the credit crunch
Who are the stakeholders for a particular financial provider?6
- customers
- employees
- environment
- local communities
- disadvantaged groups home and abroad
- suppliers
What does CSR stand for?
Corporate social responsibility
What is a CSR?
an organisation that considers all their stakeholders not just the shareholders
What are stakeholders?
group of people with an interest in the business
What are examples of stakeholders?4
- customers
- producers
- suppliers
- local community
What is the argument for CSR?3
- good for large corporations to give something back to the community of which it is part
- tries to create a favourable impression to cover up unethical practices
- critics argue that it can distract a financial provider from its main activities
What does EIA stand for?
Ethical investment association
What is the EIA?
- its role is to help members find out which companies have greener and more ethical policies
What is an ethical investment?
investment made in companies that take into account the wider impact of their activities on society and on the environment, specifically environmental, social and governance factors
How can financial service providers support a range of charities?3
- donations
- forming partnerships
- sponsor fundraising or sporting events
What is meant by sustainability in life?
the standard of living of future generations are maintained
What are the 3 main types of sustainability?
- environmental sustainability
- economic sustainability
- social sustainability
What is environmental sustainability?
reducing the negative human impact on the earths ecosystems by reducing atmospheric pollution, managing water and land responsibly and limiting human consumption of the earths resources
What is economic sustainability?
reducing undesirable consequences of economic activity by ,maintaining consumption on a sustainable scale rather than trying to achieve continual growth and by regulating markets to reduce inequalities
What is social sustainability?
creation of communities that foster well-being, peace, security and justice for the people who live in them, by making education available to everyone and by reducing the gap between the rich and the poor, thus creating fairer societies that are more likely to last into the long term
What are the 3 types of sustainability in the financial sector
- sustainability of an individual financial services provider
- sustainability of the customer of the customers of said providers
- sustainability of the financial systems
What makes a financial service provider sustainable?3
- survive over a long time
- operates in a way that can be maintained
- products well designed and meet long term needs of customers
What makes a customer sustainable? 3
- managing finances so that they can afford to live without becoming over-indebted and face bankruptcy
- able to achieve a balance between consumption and saving
- secure funding for them or children for the future
What makes financial systems sustainable? 3
- safe, not going to crash
- prepared for any circumstances
- ensuring that customers and providers would be protected if something were to occur
What are the 3 ethical sustainable and economical factors consumers should consider when deciding what provider to use?
- environmental
- social
- governance
What environmental factors should be considered when determining what financial service provider to use? 3
- impact on climate change
- through carbon emissions that damage the atmosphere
- participation in the conservation efforts
- to preserve the natural world and its resources
What social factors should be considered when determining what financial service provider to use? 4
- treating people fairly
- including customers, staff and shareholders
- considering relationships with these stakeholders and what benefits them and the business
- customer satisfaction
- informs how well the business protects the data it collects from customers
What governance factors should be considered when determining what financial service provider to use? 3
- how business’s standards reflect its responsibilities to and from shareholders to society at a large
- concerns how a company is run from the top down
- ethical priorities in decision making
- good communication of ethical standards to all stuff
- through policies and procedure?
What does EIA stand for?
Ethical investment association
What is the EIA?
- helps its members to find out which companies have a greener and more ethical policies thus most appropriate to invest in
What is an affinity savings account?3
- savings account linked to a charity or a good cause
- the provider makes a cash payment, from its own funds to this charity.
- based on the average balances held in the affinity group accounts.
