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B1 Ethical finance management

A) Point of departure and goal of the indicator

The financial system has special significance in regard to the Common Good. The profit mindset which is prevalent today, the assumption that “money can be made from money”, and the risk-taking investment behaviour which accompanies this do not only pose a threat to the stability of the financial system and public finance. They also contradict the values of justice, sustainability, human dignity and democracy.

Enterprises can help drive the transformation of financial markets in the direction of a Common-Good orientation. The change to a non-profit-oriented bank and use of ethically sustainable financial services (for ex. for pension reserves) promotes distribution equity as well as purposeful and sustainable use of financial resources. Moreover, financing options, which are not part of the global financial market, can be brought into focus: loans, donations, inheritance (in the sense of a democratic dowry), interest-free credit between enterprises via credit platforms and financing of enterprises by customers and regional investors to the extent that national laws allow this. Legislators can also be encouraged to change laws.

Essential elements of finance management oriented to the Common Good include partial or complete waiver of interest and dividends as well as investments in projects and enterprises with a Common-Good orientation.

Money should serve the earth and its inhabitants, not the other way around.

Differentiation from other indicators

In cases of financing via stakeholders, the following indicators sometimes overlap:

  • A1 Supplier loans
  • D1 Financing models involving customers
  • D2 Cooperation with other enterprises
  • E2 Cooperation through financial resources
  • E5 Transparent financial reporting
  • Equitable distribution of profit, private-equity firms, venture capital and Business Angels are described in E4.

B) Prompt questions

  • Which financial services are provided to your enterprise by which financial service provider(s) (company account, loans, investment of reserves, etc.)? Are social and ecological criteria explicitly taken into account in regard to investments and/or selection of financial service providers (application of exclusion criteria for investments, other criteria for sustainable investment, entrepreneurial policies etc.)? If you have interest earnings, what are they used for?
  • Does the enterprise initiate or participate in financing initiatives with stakeholders (employees, customers, suppliers, etc.)?
  • Which measures are taken to ensure financial stability (in particular in the event of stagnating or declining turnover)? Are potential social and ecological effects of economic crises evaluated through a pro-active approach early on and are attempts made to address them (for ex. regarding preservation of jobs)?
  • How is the enterprise financed (through equity capital financing, loans, etc.)? What legal form does the enterprise have? Does the chosen legal form promote the Common Good?
  • What role does ethical finance management play in your enterprise?

C) Evaluation table

Three different aspects of entrepreneurial finance management are rewarded:

—   Institutionalization; relevance: moderate

—   Common-Good-oriented investment (for ex. money market accounts, investments of reserves); relevance: high

—   Ethical-ecological quality of financial service providers; relevance: low / Common-Good-oriented financing of enterprises; relevance: low


First Steps

(1 to 10 %)


(11 to 30 %)


(31 to 60 %)


(61 to 100 %)



Relevance: moderate

Anchoring of ethical finance management in entrepreneurial mission statement

Implementation of ethical financial management in individual activities of the company [1]

Implementation of ethical financial management in a large number of activities of the company

Implementation of ethical financial management in all the activities of the company

Ethical-sustainable quality of financial services provider


Relevance: low

Conventional bank with ethical-sustainable financial products of its own (< 5 % of credit or savings volume)


No involvement in critical projects [2]

Conventional bank with a wide range of ethical financial products of its own (> 5 % of credit or savings volume)

Bank predominantly specialized in ethical-sustainable financial services

Exclusively ethical-sustainable financial services providers

Investments oriented to the Common Good [3]



Relevance: high

Partially investments in ethically sustainable projects but not according to best-in-class approach


Predominantly investments in ethically sustainable projects [4]


+ use of capital yields for social / ecological investments

Exclusively investment in ethically sustainable projects


+ partial waiver of interest and/or dividends on investments

Exclusively investment in ethically sustainable projects


Shareholder advocacy

+ complete waiver of interest and/or dividends on investments

Entrepreneurial financing oriented to the Common Good


No equity financing via financiers without employment in company [5]

Attempts to finance via stakeholders [6] or through loans from banks which do not distribute profits

Successful initiation of financing via stakeholders or through loans from banks which lead to partial waiver of interest

Interest-free financing mostly with the help of stakeholders or loans from banks which no longer lead to interest on savings


FAQs regarding evaluation

Which selection strategies for investments oriented to the Common Good exist?

As a rule, one distinguishes two different approaches for taking ethically sustainable/Common-Good oriented aspects of capital investments – pro future – into account.

The passive approaches comprises

-       Positive criteria (Best-in-Class approach): sometimes this also includes sectors which are problematic in ethical-sustainable terms (for ex. the “best” ethically sustainable operator of nuclear power plants in the sector). Companies do not obtain Common-Good points for this type of investment.

-       Negative criteria: these exclude ethically sustainable sectors from the investment portfolio completely. This type of investment is evaluated positively (categorized as advanced or experienced). [Bitte inhaltlich prüfen: Übers.]

-       Shareholder advocacy: constructive dialogue of shareholders with company management in the context of general assemblies. This type of investment qualifies for the highest category of Common-Good points (exemplary).

Currently no offers for the financial services required by my company exist. Why am I penalized in my evaluation for the lack of such offers?

The Economy for the Common Good does not ‘penalize’ anyone. In cases where no offers exist, in particular in Austria, one should expect no more than a subtraction of points and in the case of a negative criterion, negative points.

The indicator “Ethical financial management” should primarily serve to raise awareness for the fact that the financial services used by companies sometimes have disastrous effects on the environment, financial markets and ultimately a direct or indirect impact on the quality of life of those affected. Moreover, this indicator is to be viewed as an incentive for committing oneself to ethical and sustainable banking by creating a demand for ethical-sustainable financial products, which should be provided by one’s principal bank. Through such initiatives, the spectrum of ethical financial services can constantly grow.

Many companies prefer financing their companies via other companies rather than via ethical banks. Is this form of financing purposeful and/or realistic? How is it evaluated?

At present, both forms of financing a company are marginal phenomena. Companies which are financed via other companies require a foundation of trust, so this practice is primarily employed among companies which are on friendly terms. It is also difficult to finance a company via an ethical bank because in Austria there are not enough possibilities for doing so. A foreign ethical bank will have difficulties granting a loan to an Austrian company too. (key word: creditor protection; foreign banks usually have no possibility to make entries in a land or commercial register). Moreover, the paid-out credit sum will be smaller since an increased risk of payment default is assumed and the credit costs for the company will be higher than they would be if an Austrian bank were used.

The objective of the Economy for the Common Good presupposes that financing a company via other companies will be given a higher evaluation than financing one via ethical banks because the former form of financing corresponds more closely to the basic idea of the Economy for the Common Good – namely to engage in cooperation. This is no less realistic than the probability that the Economy for the Common Good will become a reality some day.

Which other possibilities for alternative company financing exist?

Another possibility for financing a company is an (atypical) loan contract.

A company is provided with a certain sum of money which it is to pay back in the form of real values, for example foodstuffs or consumer goods.

Participation certificates can also be employed. Participation right is a form of participation in a company. This entails participation for a limited period of time (usually 7 to 10 years) involving a small sum (usually 500 to 2,000 €). Companies sell participation certificates to customers. Conventional participation certificates are interest-bearing. Interest is paid once annually in the form of a goods voucher from the company in question. At the end of the term-time the investor’s capital is paid back in full.

What is crowd funding?

The term crowd funding refers to financing of a business idea or a project by a large number of (usually) anonymous donors. Crowd funding is usually transacted via the Internet.

To date, crowd funding has been predominantly employed for financing artistic and civic projects and in the area of Social Business.[8]

How are cooperatives evaluated in terms of Common-Good-oriented company financing?

Cooperatives are rooted in the idea of self-help. Economically weak parties join together to fulfil a certain purpose. The model of the Common-Good economy welcomes this form of direct company financing. As long as a company’s charter does not state otherwise, all members of a cooperative have equal rights. They have a vote independent of how large their share in the company is.

A glance at the corporate landscape shows that in Austria a mere 0.2 % of companies are organized in the legal form of a cooperative. The largest proportion by far is sole proprietorship (72 %) and the rest are companies with limited liability (GmbHs; 19 %).[9]

In contrast to limited liability companies and public limited liability companies, cooperatives have no share capital regulations. Capital is raised through shares in the company being acquired by members of the cooperative. Divestiture of such shares is not possible. Membership terminates through withdrawal from the cooperative and reimbursement of the share. The fact that shares in cooperatives cannot be transacted is evaluated as a positive factor because a personalistic (rather than a capitalistic) element comes to the fore.

A further – social – feature of cooperatives is their development mandate. From this one can infer that cooperatives are not primarily oriented towards making profits. Their main purpose is not profit gain; this constitutes an important secondary aim. All in all there should be a good balance between making profits and supporting the cooperative’s members. Surpluses can be reimbursed to members annually.

The legal form which a company has is not decisive for the number of Common-Good points it earns, but certain legal forms tend to elicit a positive evaluation.

Can a cooperative increase its equity capital through customers/employees?

To begin with, cooperatives have no legally prescribed share capital. Hence, there are no legal stipulations on increasing capital; the regulations laid down in the company’s charter apply. They must provide for reserve liability.

Furthermore, any cooperative can sell shares to customers and employees, increasing their share capital quota in this way. The more trustworthy a company is and the more meaningful its products and services are (see E2), the higher the probability will be that customers and employees take over shares in the cooperative and participate actively in it.

Examples are the TAZ Berlin[10], the GLS-Bank[11], the Sparda Bank Munich[12] and others.

How can equity capital endowment be evaluated?

A company’s equity capital quota is evaluated positively under the sub-indicator Financing. It reflects the amount of equity capital in proportion to borrowed capital. Thus it is one of the key balance sheet figures and it gives some indication of a company’s stability and its ability to withstand crisis [13]. Matrix 4.1. takes equity capital endowment into consideration and evaluates it for the first time. The size of the company and sector comparison in terms of equity capital endowment will be incorporated into future versions of the matrix.



First Steps

(1 to 10 %)


(11 to 30 %)


(31 to 60 %)


(61 to 100 %)

Supplementary aspect of company financing

Equity capital quota up to 50% higher for companies of similar size in the sector

Equity capital quota between 50% and 100% higher than for other companies of similar size in the sector

Equity capital quota 100% to 200% higher than for other companies of similar size in the sector

Equity capital quota 200% to 400% higher than for other companies of similar size in the sector

According to the Wirtschaftsblatt Wien, in 2012 small companies had 19.5 % equity capital on average, and medium-sized companies had 32 %.[14] For the years 2003/04, a very detailed breakdown of equity capital quota for each sector in Austria exists. What is striking is that equity capital quotas tend to correlate with the volume of turnover, which is to say, the higher the turnover, the higher the equity capital quota is.[15]

According to Wirtschaftswoche the average equity capital quota of medium-sized German companies rose from 15.1 to 18.3 % between 2010 and 2011.[16]

Can I utilize tax-free profit allowance in a Common-Good-oriented way?

Yes. Your company is free to decide this. Tax-free profit allowances are usually invested in security papers. Investments in the company as such, for example for the purchase of sustainably produced office furniture, is evaluated positively.

Can I invest the profits earned in a Common-Good-oriented way? [17]

See the elucidations pertaining to Indicator E 4.

What is the relationship between public limited liability companies and Common-Good orientation?

The law text of the Austrian Companies Act uses the concept “public interest”; this refers to the Common Good in the sense of the economic interest of the general public. This regulation does not imply that board members can be made liable for conduct which is detrimental to the Common Good, however.

The Austrian Companies Act and the Labour Constitution Act, like German law, employ the concept of employee participation. In Austria, the Board is obligated by law to take the interests of the employees into consideration. Both legal orders provide for delegation of employee representatives to the Supervisory Board to safeguard their interests.[18]

Can shareholders waive the right to profits (dividends) to promote the Common Good?

Concerning this point, see the elucidations on Indicator E 4.

Which sub-indicator are employee provision funds (pension funds, insurance policies) assigned to and how are they evaluated?

Selection of an employee provision fund and other investment-relevant forms of insurance are taken into account under the sub-indicator Investment.

One of the central problem areas which arise in connection with employee provision funds is the question as to who carries the risk for company pension schemes. Potential risk bearers can be employers, employees or the provision fund itself. Relevant risks are the capital market, inflation and “longevity risks.”

The volatility of financial markets has effects on investments made through pension contributions. In 2008 (the year of the financial crisis) many drawers on pensions from pension funds faced reductions of over 20 %.

In Austria, the state has no explicit obligation, for example in the form of a default liability, if losses in company pension schemes occur. Employers have no legal responsibility either, for example in the form of taking financial responsibility in cases of underfunding. Thus, the risks connected to capital investments and insurance-related risks are solely borne by the person with the accrued rights or the person entitled to the pension him- or herself.

Cases in which full or partial responsibility is taken for covering pension funds in cases of underfunding, investments are restricted to ethically sustainable and low-risk financial stocks and pension funds are selected whose investments are predominantly ethically sustainable all result in a positive evaluation in this category. [19] Employee representatives can be involved in selecting a pension fund (see C5, In-company employee participation, as well).

How is participation in local exchange systems evaluated?

Historically speaking, purchase contracts evolved out of exchange contracts. These in turn originate from donations. Exchange contracts and mixed contracts containing elements of purchase and exchange are both evaluated positively, as are donations.

Why is total waiving of interest viewed as exemplary; shouldn’t interest be viewed as inflation compensation?

Concerning this point see the elucidations on Indicator E 4.

G) Best practices

To begin with, ethically sustainable banks in several European countries will be named which are viewed as exemplary financial services providers and evaluated as advanced in terms of investments.

Then several innovative projects and ideals will be introduced.

Ethically-sustainably oriented banks






Positive and negative criteria for ethically oriented investment/financing

H) Bibliography/Links/Experts

Examples of alternative banks:

Background information on the financial system

Overview on forms of investment


  • Aßländer (ed.), Handbuch Wirtschaftsethik, Metzler, Stuttgart, 2011.
  • Bernau, Wir gründen eine Bank – Das Salzburger Modell. Dokumentation zur Urauführung am Salzburger Landestheater, 2012.
  • Dohmen, Good Bank – Das Modell der GLS Bank, Orange Press, Freiburg, 2011.
  • Felber, Neue Werte für die Wirtschaft: Eine Alternative zu Kommunismus und Kapitalismus, Deuticke, Vienna, 2008. (in particular Chap. 9: pp. 242/243; 266–270).
  • Felber, Retten wir den Euro!, Deuticke, Vienna, 2012.
  • Gabriel, Nachhaltigkeit am Finanzmarkt. Mit ökologisch und sozial veranswerlichen Geldanlagen die Wirtschaft gestalten, Munich, 2007.
  • Holzinger, Neuer Wohlstand: Leben und Wirtschaften auf einem begrenzten Planeten, JBZ, Salzburg, 2012.
  • Huber, Welche Bedeutung hat die Rechtsform der Unternehmen für die Transferzeit zwischen Veränderungen gesellschaftlicher Wertvorstellungen und der Änderung unternehmerischer Ziele, Duncker, Berlin, 1975.
  • Koslowski, Ethik der Banken und der Börse, Mohr Siebeck, Tübingen,1997.
  • Reifer/Ford, Banking for People, de Gruyter, Berlin, 1992.
  • Schumacher, Die Rückkehr zum menschlichen Maß: Alternativen für Wirtschaft und Technik, Rowohlt, Hamburg, 1977.


  • Brien, Reconsidering the Common Good in a Business Context, in Journal for Business Ethics, 2009.
  • Emunds, Renditedruck der Finanzmärkte, in zfwu, Heft 2, 2011.
  • Heindl, Wenn Gewinn Sinn und Leben stiftet, in ypsilon, Heft 6, 2012.
  • JannsenUnternehmertum statt Ehrenamt, in Brand eins, Heft 7, 2010. (alternative forms of financing for social enterprises).
  • Pennekamp, Der Utopist, in Brand eins, Heft 8, 2011. (portrait of the Chairman of the Board of the Sparda Bank Munich).
  • PfeifferStart Kapital, in Brand eins, Heft, 2002. (article on risk-capital firms and young enterprises).
  • Walcher, Interview mit Gerd Walger: Kapital gegen Unternehmer, in Brand eins, Heft 1, 2010.
  • Willenbrock, Bauern, schlau! Genussgemeinschaften, in Brand eins, Heft 12, 2012. (alternative forms of company financing; when farmers lack capital and city-dwellers lack land, exchange cooperatives benefit both).


Editor: Gisela Heindl:; collaboration: Christian Felber, Christian Loy, Christian Rüther


[1]  For ex. ethics training in financial controlling for employees; topic-related information events for employees etc.

[2]  Among others, Banktrack ( can serve as a source of research on large financial institutes.

[3]  For ex. through more transparent financing policies on the part of banks; definition of clear exclusion criteria, for example on the basis of the Frankfurt-Hohenheimer Leitfaden, other enterprises, customers, suppliers; no use of speculative financial derivatives etc.

[4]  For ex. loans for ethical-ecological projects, investments in renewable energies, thermal refurbishment, Common-Good-oriented research and development,

[5] For ex. negotiation of tradable shares, participation of silent partners with the intention of preparing share issues.

[6]  Employee and civic participation (for ex. local civic participation in the area of sustainable energy).

[7] It is not possible to delve into the concept of capital contribution used in the Austrian Banking Act in this context.

[8] See the article by Johannes Dieterich in Brand eins, 07/2009: Geschäfte statt Geschenke


[10] For information on the Taz cooperative go to:; cf. the Taz-Panter-Stiftung, which is also financed by money from stakeholders:

[11] See critical information on silent partners of the GLS Bank: and a critical look at dividend payout to associates:!83829/. In contrast, see positive reporting by Brand eins:


[13] See the excursus on economic resilience as well.

[14] (Jan. 26th, 2013)

[15] Cf.


[17] Heindl, Wenn Gewinn Sinn und Leben stiftet, in ypsilon, 6/2012, pg. 14f.

[18] Similar material: draft bill of the European Commission from November 2012 for female quotas on supervisory boards.

[19] Problematic: according to the EU Pension Fund Directive, the national legislator must allow up to 70% shareholding.