Topic 8 - Ethics and Sustainability Flashcards
Information and advice for deciding on financial products should have following features:
Accurate Up to date Transparent Timely Sufficient but not too complex
Ethics definition
Moral principles that govern a person’s behaviour or the conducting of an activity
Obligations of the FCA
Protect consumers
Enhance integrity of financial system
Promote effective competition
Obligations of the PRA
Promote safety and soundness of firms
Protect insurance policyholders
Six treating customer fairly outcomes:
- Fair treatment of customers
- Products are designed to meet the needs of identified customer groups
- Consumers are provided with clear information before, during and after sale
- Advice is suitable
- Products and services perform as provider has led them to expect
- Consumers do not face unreasonable after-sales barriers to change product, switch provider, submit a claim or make a complaint.
What is executive pay?
Top directors in large banks receive huge salaries and performance-related bonuses.
What is the cap that EU has put on executive pay?
One years salary, two years salary if there is explicit approval from shareholders
Corporate social responsibility is also known as…
Citizenship or sustainable responsible business
What does corporate social responsibility refer to?
Any action or project in which a company goes beyond the interests of its shareholders and top management in order to benefit other stakeholder groups.
What are the criticisms of corporate social responsibility?
Can be seen as window-dressing - aims to create a good image in order to cover up other less ethical policies.
What are ethical investments?
Those made in companies that take into account the wider impact of their activities on society and the environment
Sustainable development definition
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Three ways that sustainability can be approached:
Economic development
Social equity
Environmental protection
What is environmental sustainability about?
Reducing negative human impact on the earth’s ecosystems.
What is economy sustainability about?
Reducing undesirable consequences of economic activity by maintaining consumption on a sustainable level rather than trying to achieve continual growth.
What is social sustainability about?
Creating communities that foster well-being, peace, security and justice for the people who live in them
What does the Ethical Investment Association do?
Helps its members to find out which companies have greener and more ethical policies and so more appropriate to invest in.
What are affinity accounts?
Accounts linked to a particular charity or good cause. Provider makes a cash payment, from its own funds, to this charity based on the average balances held in the affinity group accounts.
Two main rules of Sharia law in finance:
Person cannot make money from interest
Person must place their money only in investments that are ethical (permissible or halal)
What are the features of permissible or halal investments?
Free of interest
Made in permissible activities
Separately approved by an independent Sharia supervisory board
What happens if rules of Sharia law are not complied with?
The person must pay money to charity
Halal investment definition
One that avoids putting money into industries such as alcohol, tobacco, adult entertainment and weapons.
