One way to achieve this is to cut out the intermediaries that manage financial relationships on our behalf. Peer-to-peer and crowdfunding platforms enable people to have a more direct connection with the assets they invest in. By uncovering the relationships between the investor and the investee, they generate a stronger sense of identification between the two. This closer bond encourages investors to consider whether their investment decisions align with their wider beliefs—whether their money is contributing to the world they want to see.
This effect is particularly strong when a crowdfunding or peer-to-peer platform takes an explicit value position on the assets themselves. Abundance Generation, for example, facilitates investment in UK renewables in order to support the transition to a clean-energy future. Abundance styles its investments as ‘win win’: They don’t deny the importance of financial reward but argue that this can be achieved alongside other forms of return motivated by wider values (such as care for future generations).
Disintermediation is not a universal solution, though. Most people will not have the time or inclination to research and assess every potential investment themselves and will rely on financial institutions to make those decisions on their behalf. Is it possible to organise these financial institutions around a deeper understanding of human nature and interdependence, a recognition that money is essentially a social relationship, and an appreciation of non-financial values?
Definitely. I work for one such institution. Ecology Building Society is a community of people who share a commitment to sustainability, enacted through finance. Our savers invest to support building projects that have a positive impact on people and the environment, including residential eco-builds and community or co-operative businesses. In doing so, our members use money in a socially conscious way to achieve a goal that is rooted in concern for the well-being of present and future generations.
Rather than calculating, autonomous, abstract individuals, our members are passionate, generous and feel a common bond with each other. They refer to the Society as ‘ours’ and other members as ‘us’. They come together not to achieve maximum financial gain in a series of impersonal transactions, but to build shared value through a long-term relationship. Many have been with us 10 years or more; some have been with us since our beginning in 1981, when a group of Green Party activists came together to address the lack of support for the renovation of derelict buildings. Their use of money is embedded in a relationship of solidarity with each other, in pursuit of a shared goal: a world in which the needs of individuals, communities, future generations and the wider ecosystem are in balance.
The mutual model of governance is critical to our approach. Building societies aren’t well-known for their radicalism, yet the sector’s origins lie in a movement of citizens co-operating to extend the ownership of property and, by implication, the vote. Ecology exists for a different purpose, but our progressive mission and our member-owned status still go hand-in-hand. We can only put the environment first because our members—our owners—give us a mandate to do this.
Uniquely, this mandate means that our lending decisions are based on the ecological risk and reward of projects in addition to the financial aspects. This enables us to consider unconventional projects that other lenders reject, including homes built of innovative materials or alternative tenures such as housing co-operatives and co-housing. We price our mortgages according to climate risk, with interest rate discounts used to encourage homeowners to achieve the highest standard of energy efficiency possible.
Within the context of our ecological mission, the Society’s role is to facilitate the relationship between members, treating each as a valuable person in their own right, and seeking a bond that goes beyond individual transactions. It’s not unusual for us to form such a close relationship with our members that we receive photos, family updates and Christmas cards. We also seek to build that bond between our members themselves, connecting them via our newsletters, digital communications and annual members’ meet-ups. We try to show that financial services, like other global industries, need not inevitably cast people merely as objects or actors of consumption. They can be joint creators of positive change in the world.
Building our work on co-operation and embracing non-financial values can lead to accusations of well-meaning but ineffective (or even dangerous) idealism. The difficulties of the Co-operative Bank were used by some to disprove the viability of the co-operative governance model, despite the fact that the bank was not itself a co-operative. (This is a blatant case of double standards, given that the failure of banks such as Northern Rock didn’t seem to lead to a similar attack on the PLC model.) But is it more realistic to acknowledge and work with the messy reality of social relations, or to base your business model on a fictional concept of autonomous humanity? Every one of us relies on each other for care, companionship and the provision of goods and services (even the global banking elite, despite their consistently anti-social behaviour).
The economic and social relationships that constitute our financial system are characterised by significant imbalances of information and power. Ecology aims to replace these negative relationships with positive interdependencies where borrowers rely on savers to provide investment and savers rely on borrowers to provide returns, each having equal control over the organisation and an overall shared goal. Through transparent and active engagement with all members, we aim to build understanding of the workings of the Society and the wider system in which we operate.
Shared values do not mean that the interests of our members are always neatly aligned: that would be as unrealistic as the uniform motivations of Homo economicus. The Society has to balance those different interests, whether financial or non-financial. This could be the tension between keeping mortgage interest rates as low as possible and savings interest rates as high as possible, or the divergence of opinion between our members over whether or not we should lend to businesses that produce organic and high-welfare meat.
In the mythical marketplace full of perfectly knowledgeable, ‘rational’ individuals, economists can calculate the correct (fictional) answer to solvable (fictional) puzzles. In the messy, real world full of non-financial values, there are no easy answers to our dilemmas. So we’re open with our members about the challenges and the reasons behind our decisions. We explain the different factors that we take into account and we invite their opinions. This can be through the form of our ethics panel, a small group of active members who are consulted on key policy issues; member surveys and feedback requests in our newsletters; or our AGM, an important expression of the democratic basis of the Society.
We are very conscious that the mutual model is an enabler, not a guarantee, of democratic governance. We don’t claim perfection in any of these efforts, but we aim to show that the status quo is not inevitable. We are a community who are already doing social, democratic finance, with a track record of more than 30 years’ profit and positive environmental impact. We use our experience to agitate for change in the wider system and, by building the capacity of our members and partners to participate in that system, we help to create the conditions for more radical change.
That change is needed now more than ever. The dangers of market mythology are becoming increasingly apparent in a world of limited resources, where the unbounded pursuit of self-interest leads to irreversible environmental damage. In this sense, there really isn’t much ‘rationality’ whatsoever in market fundamentalism, even on its own terms. Those piles of cash generated through market exchange will be fairly useless when our ecosystem is no longer able to sustain human life.
Ignoring the dependence of the market on the natural world is, in E F Schumacher’s words, “the institutionalisation of individualism and non-responsibility.” The social relations that bind us to each other are not distractions from this ‘ideal’ market; they are the stuff of reality, without which the financial system could not exist. Depicting the system as self-determining and self-contained, populated by rootless utility-maximisers with no emotions or dependencies lays the foundations for an unsustainable economy.
Organisations like Ecology show that money can work differently: on the basis of co-operation and care, in pursuit of a common interest. This is no myth, but the shared experience of our savers and borrowers. Our experience is not isolated, but one part of a wider movement of people and financial providers who have the courage to think differently about money. Initiatives such as the Global Alliance for Banking on Values, the thriving alternative finance sector in the UK and the post-crash economics movement point to a radical change in our economy. That change begins with making Homo economicus an endangered species.
Anna Laycock joined sustainable finance pioneer Ecology Building Society in 2011 to lead its public and member engagement, after seven years working in campaigning and research on international development, environment and health.