Watch full interview here.

Daniel Sorrosal, Secretary General of FEBEA, was a speaker at the 28th International Course, organized and held at the Social Economy School in Osuna (Seville).

The program aims to train leaders of cooperatives and Social Economy organizations in managing their entities. Participants from across Ibero-America have taken part over the years.

Mr. Sorrosal was interviewed by the School during his stay there.

What is Ethical Finance?

Ethical Finance represents a collective effort by citizens who pool their money and use it for the common good. While it may seem like a simple concept in theory, its practical implementation is more complex.

This model involves financial entities such as banks or cooperatives where citizens themselves are owners and define financial policies. Essentially, Ethical Finance aims to restore the traditional banking model—one that historically focused on social development—while adapting to modern realities.

The key principle is that money is allocated to projects that benefit society. Unlike conventional banking, where the destination of funds is often unclear, ethical banking ensures transparency, allowing citizens to actively participate in investment decisions.

Furthermore, Ethical Finance follows strict exclusion criteria, avoiding activities such as gambling, tax evasion, corruption, and environmental harm. Unlike traditional banks that prioritize profit over ethics, ethical financial institutions refuse to invest in businesses that negatively impact society or the environment—even if it means sacrificing profitability.

However, Ethical Finance is not just about avoiding harmful investments; it actively promotes sectors such as education, healthcare, housing, entrepreneurship, and quality employment. 

Another key distinction is its internal management approach. Ethical banks do not engage in stock market speculation or complex financial products. Their primary mission is to channel citizens’ savings into projects that genuinely need funding.

Ultimately, ethical banking is not about maximizing profits for shareholders but about generating value for society. It treats money as a tool for positive impact rather than an end in itself.

The State of Ethical Finance in Spain and Europe

Ethical Finance has experienced remarkable growth in Spain in recent years and has great potential for further development. While traditional banking remains dominant, expanding Ethical Finance services requires continuous awareness and advocacy.

At the European level, we see two different approaches, often aligned with historical religious traditions. In Southern Europe, Ethical Finance tends to focus more on people and social impact, fostering collaborative models that differentiate themselves from conventional banking. This has led to significant growth in the past decade. In Northern Europe, the approach is more sustainability-driven, with Ethical Finance institutions focusing on green investments. However, when mainstream banks introduced similar sustainable products, it became harder for ethical banks to stand out, leading to more moderate growth.

A crucial aspect is Ethical Finance’s alignment with public sector priorities. Governments are increasingly seeking private investments to support social and environmental policies, providing a great opportunity for Ethical Finance.

Challenges in Financial Inclusion

One of the biggest challenges is ensuring financial inclusion, particularly for those traditionally excluded from the system, such as migrant communities. Ethical Finance has often grown within established social and economic networks, making it harder for newcomers to integrate.

Another challenge is engaging younger generations. Many young people struggle with saving due to high living costs and low wages. Ethical Finance must find ways to involve them beyond just savings, perhaps through decision-making roles or collaborative models.

Moreover, intergenerational renewal is crucial. General assemblies of
Ethical Finance institutions are often dominated by older members who have accumulated savings over their lifetimes. Ensuring younger participation is vital for the sector’s future.

Bringing Ethical Finance Principles to the Broader Economy

Financial activity is fundamentally about mediation—connecting savings with credit. But another essential aspect of Ethical Finance is citizen participation. Cooperative governance is key to creating sustainable, long-term solutions.

Today, many young people seek collaborative solutions through digital platforms without realizing that well-established legal structures, such as labor societies and cooperatives, have existed for over a century. These models need to be promoted and supported to counter the growing trend of individualistic entrepreneurship.

Technology also plays a role in strengthening Ethical Finance. While not a magic solution, it can optimize processes, reduce administrative burdens, and allow institutions to focus on real impact rather than bureaucracy.

Ethical Finance vs. Sustainable Finance

Ethical Finance and sustainable finance differ in their origins and objectives. Ethical Finance is a bottom-up movement driven by citizens with shared goals, including sustainability. It builds solid, long-term structures to address social and environmental challenges. 

In contrast, sustainable finance often originates from financial institutions looking to capitalize on sustainability trends. While they may offer green investment products, these are often disconnected from their overall corporate mission. Some institutions simultaneously fund sustainability projects while supporting industries that harm the environment.

At FEBEA, we believe that financial institutions committed to sustainability should integrate this principle across all their operations, rather than treating it as a marketing strategy.

The Role of Artificial Intelligence in Ethical Finance

Artificial intelligence (AI) is a crucial topic, but its role in Ethical Finance remains uncertain. So far, there is caution in fully integrating AI into processes. While AI can enhance efficiency, Ethical Finance institutions must evaluate whether its use aligns with their core mission.

For example, automating job recruitment could save time, but what would we do with that extra time? If it is reinvested in training employees and improving services, then it’s beneficial. However, if AI-driven efficiency leads to dehumanization, it contradicts the values of Ethical Finance.

Most importantly, credit decisions should never be left entirely to algorithms. Ethical Finance relies on human judgment, sometimes supporting projects that are not the most economically viable but have significant social impact. If AI takes over these decisions, ethical banking risks becoming indistinguishable from conventional banks, losing its unique value.

Interview by Escuela de Economía Social. Check out here in Spanish.