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The common good

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The common good

Published: August 12, 2022

Making an impact through ethical lending

Commentary on ethical lending by Unity Trust Bank Chief Operating Officer, Mark Clayton.

Mark Clayton

The recent impact of COVID-19 on society, coupled with the climate crisis and rising social inequality have brought wider questions of ethics within business to the fore, not least with Mary Portas’ recent address to MPs on the proposed Better Business Act.

The Better Business Act campaign is calling on the government to amend section 127 of the Companies Act. It wants to ensure businesses are legally responsible for benefiting workers, customers, communities, and the environment, while delivering profit.

It is co-chaired by Mary Portas and spearheaded by a coalition of over 1,000 UK businesses, including Iceland, The Body Shop, Innocent Drinks and Anglian Water. The campaign argues that there has been a failure to align the interests of shareholders with those of wider society and the environment. These have contributed to a set of challenges that threaten people’s health, wealth, and the natural world. Their research highlights that three quarters of the UK public want businesses to be legally responsible for their impact.

The Better Business Act would bring significant changes to companies. If it does succeed, it would be integral for directors to have a succinct understanding of how to adjust. The amendments to section 127 CA 2006 would require directors to consider the interests of a broader range of stakeholders, rather than just shareholders, when making decisions. It would bring about more transparent reporting and directors would need to evidence a company’s performance on areas including sustainability and social equality.

Of course, many businesses have proactively taken the decision to prioritise their positive impact and are already reaping the benefits. There has been an independent study into the financial and operational performance of B Corporations in the UK, published in November 2020. It revealed that organisations that operate at the highest standards in their social and environmental duties perform better in a range of different areas including annual turnover, staff retention and innovation.

Spanning 83 countries and over 5,000 companies, the B Corp movement has a mission to make business a force for good, transforming the global economy to benefit all people, communities, and the planet. For those that are looking to improve their positive impact on society, or are considering their next steps, choosing to partner with an ethical bank is just one way that businesses and organisations of all sizes can make a tangible, positive impact to society.

Ethical lending and finance has been a topic of debate for many centuries. It would take until the 1970s before the first specialist ethical banks emerged. Three decades later, the global financial crisis of 2008 crucially focused attention on the importance of banking and ethics, which has continued to this day with the growth in sustainable banking practices.

Unity Trust Bank was born out of a vision by trade unions to create a bank that would embrace the philosophy of serving the common good. Having just celebrated our 38th birthday, these founding principles are still at the heart of everything we do. Our mission is to create a better society, not simply maximise profits.

We provide banking services for businesses that share our principles of acting with integrity. Unity Trust Bank only lend to organisations that share our values. We align every loan proposal against one or more of the UN SDGs to ensure that all of our funds are used to deliver quantifiable impact.

We also provide specialist sector knowledge and support that enables our customers to focus on their business and make a difference in their local communities. The growing movement towards doing ‘better business’ can only be a positive way forward for society as we all strive to ensure that we are building a sustainable future for generations to come.

Banks that recognise the importance of these changes can be valuable partners to help businesses develop their own practices, and support them in making a greater impact across the UK.

This article first appeared in the July/August edition of NACFB Commercial Broker Magazine to explain the benefits of ethical lending.