Solidarity-based Finance
Ethical finance legislation
Judging by the findings of the questionnaire, ethical finance initiatives (1) are available in about 40% of the member states of the Council of Europe(2). By contrast, legislation supporting ethical finance exists in about 20% of member states.

The majority of the legal initiatives which can be observed in western European countries (3) take place at national level. Exceptionally, legal initiatives are regional and local. Throughout the European Union three legal initiatives have been set up but they have not been finally approved.

Concerning the quality of commitment, the existing ethical finance legislation can be divided into the three main classes developed hereunder:  

a. Initiatives which recognise the ethical finance sector

In this class different communications can be found that pick out ethical finance as a central theme, sometimes in declarations of national governments, parliamentary organs (4) or national parliamentary initiatives (5), even if they have not finally been adopted. Often in these documents support is requested for the ethical finance sector and recommendations are given on how to achieve this. The most advanced national example in this category can be found in Italy where in July 2003 the national parliament adopted a resolution which expresses the strong intention to support the ethical finance sector by a law which would give it tax advantages (6). It further demands the commitment of the government to favour the diffusion of ethical finance as a possible additional means of development, to recognise the importance of ethical finance initiatives in the political frame of social and economic inclusion, to encourage the actions of operators of ethical finance and to raise awareness among the public on the experiences of ethical finance as a means to fight poverty.

At European Union level, the European Commission recommended (7) the disclosure of environmental issues in annual reports of companies and the Committee on Employment and Social Affairs of the European Parliament proposed that a directive be passed requiring companies to undertake annual social and environmental reports as well as requiring all European private pension funds to state their ethical policy. However, the attempt to introduce pension disclosure regulations (8) through different parliamentary initiatives has been without success. Disclosure regulations support the ethical finance sector indirectly as they facilitate transparency and help therefore to choose “ethical” actors.

b. Regulations which provide legal support for the ethical finance sector

At this level of legislation states have decided to actively support the sector by providing different favourable legal frameworks. Until now regulations can only be found at national level, not at regional or local level, nor throughout the European Union. Legal support is given indirectly, for example through disclosure regulations for pension funds, life assurance and companies (9) or directly through the provision of tax advantages, “microcredits”(10) or through public labels for green funds (11).

Regulations concerning tax advantages vary with regard to the different kinds of taxes concerned, the amount of tax reduction given, the persons and institutions privileged by the tax incentive and the kinds of investments favoured, for example environmental, social-ethical or cultural. Other criteria include the money’s destination: social enterprises via funds for the social and sustainable economy; different ethical projects or companies (12). The Netherlands – where large pension funds (ABP, PGGM), trade unions (FNV, CNV), rating agencies, research institutes, NGOs and government agencies are the ethical financing driving forces – can be mentioned as the most advanced country in this class. The Netherlands Green Investment Directive,(13) established in 1995, promotes access to finance for environmentally sound or worthwhile projects, for example wind and solar energy, organic farming, environmental projects and sustainable building projects and it frees returns on such investments from income and dividend taxes up to a certain threshold. In 2002 the tax advantage scheme was extended to projects in developing countries (14) and in central and eastern Europe. Since 2004 tax credits have also been given for investments in the social-ethical area and for investments in cultural projects (15).

So far the European Union has not provided any legal support for the ethical finance sector.

c. Commitment of public authorities to the ethical finance sector

The last class comprises local, regional and national regulations, through which public authorities show that they themselves are engaged in the ethical finance sector. Regulations concern decisions of public authorities to review certain public investments with regard to ethics. Examples include:

a regional Flemish public authority which screens pension funds for civil servants (Belgium);
certain local authorities (e.g. Ghent, Belgium) which screen some public investments;
the Norwegian Parliament, which invests the Environmental Fund (formerly the Petroleum Fund) only in companies with high environmental standards;
the Swedish Government, which has awarded mandates to two hedge funds under the condition that they do not invest the money of the state pension fund in companies that have broken certain United Nation conventions. The national initiatives in Norway and Sweden can be seen as an advanced paradigm, particularly because of the high amounts which are invested in a responsible way.

Further examples in this class would be certain local authorities in Germany. Neuss is the first local authority in the world to support the ethical finance sector by being a member of an ethical finance institution. (16) The town pays 1 cent per inhabitant (in total € 1500) and aims to activate the population of Neuss to also invest in ethical finance institutions. The Council of Munich has, after having considered creating an ethical-ecological Munich fund,(17) published a manual (18) which enables the inhabitants to familiarise themselves with the spectrum of ethical-ecological investment facilities in Munich.

Initiatives of commitment in the ethical finance sector at European Union level are not known.

From Esther Petridis, Trends in Social Cohesion n°12, "Ethical, solidarity-based citizen involvement in the economy : a prerequisite for social cohesion", Council of Europe publishing, 2004, pp. 90/94

Categories of available information
Ethical and solidarity-based finance
Fair Trade
Responsible consumption

1) They include, for example, activities of ethical banks offering different ethical financial products, platforms or round tables concerning ethical and ecological funds or microcredits, development of sustainability indexes, sustainable investments of private or institutional investors, labels or certifications for sustainable funds, networking activities, creation of funds to be invested in an ethical way, publications and conferences concerning ethical and ecological investments, church/bank/assurances/pension funds guidelines and codes for ethical financing, position papers concerning standards for ethical investments, (micro)credits with an advantageous rate for certain projects (e.g. creation of small enterprises, agriculture projects, financial assistance for housing, credits for unemployed persons or enterprises with a social purpose), activities of rating agencies and finance monitoring organisations.
2) With regard to all the statistics in this document it should be noted that member states of the Council of Europe which did not complete the questionnaires have been considered to have neither initiatives nor legislation (except where other information was available).
3) Although different ethical finance activities can also be found, for example, in Poland. See following websites:,,,,
4) Strategy for sustainable development and its working programme in Austria (2003); Final Report: Enquete Commission of the Bundestag in Germany, available at:

5) Law Proposal of the Parliamentary Group Dei Greing (No. 4864) in Luxembourg (2001); Interpellation No. 01.3057 concerning company pension plans in Switzerland.
6) Resolution concerning ethical finance (7-00275), presented by Alfredo Grandi on 3 July 2003 in the session No. 334.
7) Recommendation of the European Commission (31.5.2001); Working document of the Committee on Employment and Social Affairs of the European Parliament (5.2.2002).
8) Proposal of amendments for the Pension Fund Law in the Committee/Plenum (2003) and for the Transparency Directive in the Committee (February 2004)/Plenum (March 2004).
9) Such disclosure regulations exist, e.g. in Belgium (law for pension funds – 13.3.2003), Denmark, France (Law No. 152 – 19.2.2001; Law No. 624 – 17.7.2001; Law No. 420 – 15.5.2001; Law No. 769 – 12.7.1977; Decree No. 221 – 20.2.2002); Germany (law on private pensions; law on company pension schemes), the Netherlands, Norway (Accounting Act 1999), Spain (under discussion), Sweden (Annual Accounts Act 1999) or in the United Kingdom (Occupational Pension Scheme; Guidelines on corporate environmental reporting). They differ with regard to the question, who has to disclose what, when and how often to whom.
10) Spain has established a Microcredit Concession Fund for basic social development projects in the country and abroad.
11) Ethical funds in Austria can, for example, receive the Austrian “Umweltzeichen” label from the Ministry of Environment, if they fulfil the criteria of the “Guidelines for green funds”.
12) Regulations with tax advantages for the ethical finance sector can be found in Belgium (Law of 8.3.2003), France (Law No. 152 – 19.2.2001; Law No. 709 – 1.8.2003; Law No. 721 – 1.8.2003), the Netherlands and the United Kingdom (Community Investment Tax Relief). Denmark is said to have offered tax credits for certain projects e.g. wind plants, in the past.
13) DGM/SB/2001137297 (2002).
14) DGM/SB2001137299 (2 janvier 2002).
15) See Regeling sociaal-ethische projecten, Staatscourant No. 44 DJZ/BR/0163-04 (March 2004): investments in authorised social and ethical funds will benefit from a tax reduction of 2,5%, dividends from investments in these microcredit funds will be tax free; Regeling cultuurprojecten (2004): dividends from investments in funds participating in cultural projects will be tax free. In Belgium plans for fiscal regulations on green investments like in the Netherlands are under discussion.
16) The ethical finance institution “Ökocredit Westdeutscher Förderkreis” gives “fair credits” for companies and cooperatives in poor countries.
17) This initiative was finally not put into practice, because a multitude of investment facilities already exist in Munich.
18) "Geld ethisch-ökologisch anlegen – Vorschläge und Materialien aus der Münchner Agenda 21 "Eine Welt"..