CEFS Unit 2 - Topic 8

Ethics & Sustainability

Ethics Definition

Moral principles that govern a person’s behaviour or the conducting of any activity

Features of information and advice

* Accurate
* Up to date
* Transparent
* Timely
* Sufficient but not too complex

Factors that influence financial choices

* Original want or aspiration
* Feasibility of access to a financial product to fulfil the want or aspiration
* Information sources
* Personality
* Price and product features
* Reputation of the provider

Role of the FCA

Protect customers, enhance the integrity of the financial system and promote effective competition

Role of the PRA

Promote safety of firms and protect policy holders

Six ‘Treating customers fairly’ outcomes

* Fair treatment of customers


* Products are designed to meet the needs of identified customer groups
* Consumers are provided with clear information before, during and after sale
* Advice is suitable
* Products and services perform as provider has led them to expect
* Consumers do not face unreasonable after-sales barriers to change product, switch provider, submit a claim or make a complaint.

Executive Pay definition

Top directors in large banks receive large salaries and performance-related bonuses

What is the cap that the EU has put on executive pay?

One years salary (two years salary if there is explicit approval from shareholders)

Corporate social responsibility is also known as…

Citizenship or Sustainable responsible business

Corporate Social Responsibility definition

Any action or project in which a company goes beyond the interests of its shareholders and top management in order to benefit other stakeholder groups

Criticisms of corporate social responsibility

❌Can be seen as window-dressing

❌Covers up other less ethical policies

Ethical Investments definition

Those made in companies that make into account the wider impact of their activities on society and the environment

Sustainable Development definition

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

Three ways that sustainability can be approached

* Economic development
* Social Equity
* Environmental Protection

Environmental Sustainability objective

Reducing negative human impact on the earth’s ecosystem

Economic Sustainability objective

Reducing undesirable consequences of economic activity by maintaining consumption on a sustainable level rather than trying to achieve continual growth

Social Sustainability objective

Creating communities that foster well-being, peace, security and justice for the people who live in them

Role of the Ethical Investment Association

Give support to financial advisers who want to promote ethical investments

What are affinity accounts?

An account linked to a particular charity or good cause

Two main rules of Sharia Law

Features of Permissible or Halal investments