Responsible investment pioneers have long dreamed that capital markets could be reinvented. Rather than hunt narrow monetary profit, they could seek the good of society. This would also bring returns, since what is good for people should also be profitable. But ethics would be restored as a legitimate, even essential, consideration, ending the exile into which postwar economics had consigned it.
This week, such a transformation looks more likely than ever.
Few admit, yet, that they pay attention to morals. Instead, they call them “impact” and “double materiality”. Both mean caring how your financial decisions affect others.
The European Commission declared on Tuesday that double materiality must be “consistently integrated across the financial system”, from pension funds to banks.
On Thursday, the European Central Bank laid down in stone that its primary mandate requires it to tackle climate change, because it will harm the economy and financial system.
The orthodox consensus that money is a neutral element, wielded by profit-maximising actors, looks gravely wounded.
Can this really be true? For centuries the profit motive has been an incredibly powerful and resilient force — one that can create and innovate as well as destroy. It may be naïve to think it could be tamed.
It seems regrettable, too, that this change is now being forced by regulators, rather than growing organically.
But society has changed immensely. We accept levels of collectivisation and control that were inconceivable even recently. In the age of Facebook, facial recognition software and furlough payments, a new finance that served society would not be surprising at all.