Picture from www.megachip.info/   In the research, imposed by the international financial crisis, of new strategies of investment based on criterion different from those habitual ones of maximization of profit, both the “ethic finance” and the finance according to the Islamic Law – the Shari’ah (or Islamic finance) have emerged. These two approaches apply criteria which are not economically rational in the selection of the investments, and originate from a desire of investors to transfer values and principles (religious, ideological and social) into the common financial practices. In the delineated context, the role of the State economic-financing Intelligence is that of verifying that the choices of investments effected from “socially responsible” funds are coherent with the trust that the saver places in the ethical institutions, in their implications for the security of the State. A modality application if recycling of monies deriving from illicit activities through financing of the patrimonies used by the ethical funds could cause serious repercussions in terms of credibility, precisely on the intangible goods at the base of the ethical financial instrument, that is, the trust. Such backlash would be much superior (given the specific target) to those caused by the traditional finance, in the present international crisis.

The problem of ethics in the financial crisis

To stem the devastating effects of the present International crisis, the financial operators have sought to consolidate or look for new strategies of investment which could be based on criteria different from those habitually based on the maximization of profit, in this way bringing to the system a certain level of resilience in face of the collapse of the traditional investment categories.
A good mixture between innovation and yield (in the above contra-cyclical sense) has shown to be both the so-called “socially responsible investment” SRI and the finance according to the Islamic Law, the Shari’ah “Islamic Finance”.
These two approaches present, at least, two analogous aspects (1) insofar as both:
- apply criteria which are not economically rational (2) in the selection of the investments;
- originate from the desire of the investors, individual and institutional, to neglect values and principles (religious, ideological, social) in the common financial practices.

These approaches, if utilized in the present structural crisis of the financial and real markets, are susceptible to many repercussions. The present situation, in fact, finds its origin in the very absence of ethics in the conduct which many managers, analysts and financial operators have displayed in the last decade.

Even though many responsibilities for the critical state of the economy and markets have been attributed to the excessive use of quantitative instruments (mathematical and statistical) in the finance, in reality, any instruments of help to the decisions produces damage if man uses it improperly, frequently instrumental in justifying choices which are favourable and profitable to him (3) .
For this, the overcoming of the present state of the financial and real crisis, but also political and social passes through the recuperation of the credibility and reputation of the institutions and operators, insomuch as it is in the quality of the people that the market can find its reason for recovery. And in this sense, the SRI and the Islamic Finance have important foundations to contribute to the imposition of the inclusion of the “ethics” component, in the function of choice of investments.

History and characteristics of the ethical finance

The present movement of ethical finance recalls a history of the application of religious principles to the financial choices.
Already in 1760, John Wesley, founder of the Methodist Church, strongly supported the need to tie ethics to finance, maintaining that the investors should not act as proprietors, but as custodians of the goods of their property, without creating wealth at their expense. But only in 1928, the United States Federal Council of Churches launched the Pioneer Fund,the first fund of socially responsible investments.
Its policy of investment excluded the financing of economic activities made in the sectors of production of alcohol, tobacco and in the pornography sector. The investments in the Fund were restricted to only supporters of the movement. It was the Pax World Fund that introduced, in 1971, the possibility of making the subscription available also to individual investors who were not necessarily proponents of “ethical” motives at the base of the constitution of the Fund (4).
In Europe, the first vehicle of ethical investment was launched by the Swedish Temperance Society, and named Ansvar. Like the Pioneer Fund, the investments in the Fund were limited to the supporters of the ethical thought at the base of the organization.

In the United Kingdom, from 1948, the Anglican Church began to practice exclusion in terms of ethics as part of its own regulations of investment. In 1983, Friends Provident, Provident Friends, an insurance society, founded by the Quaker Community,instituted the first ethics fund with criteria of investment established by an external Committee. The enterprise led to the launching of the Stewardship Unit Trust, of the Stewardship Life Fundand, one year later, the Stewardship Individual Pension Fund.
In France, the first two ethics funds were addressed to the investors of the Christian religion. In 1983, the investment society Meeschaert and the non-profit organization Éthique et Investissement (founded by a group of monks, general treasurers of their congregation) launched the Nouvelle Stratégie 50 fund. Also the second fund (Hymnos), launched by Crédit Lyonnais in 1989, was dedicated to the specific needs of the religious congregations.

As one can see, therefore, from this first historical excursus,, the push towards the diffusion of the ethical finance originated from motivations tied to the Catholic and Christian principles and the investments in the funds were, to the greater extent, reserved to those who shared the ethical and moral motivations of the organizations of the fund collectors.

Today, the situation is very different. The values of theassetrelated to legal entities of ethical investment, controlled by religious and Church movements, are marginal if related to those held by institutional investors, such as insurance societies or pension funds, which do not necessarily share the political, social, environmental or religious convictions placed at the base of the socially responsible investment.
The most notable example of a socially responsible investment fund is represented by the Norwegian sovereign fund, the Government Pension Fund Global (GPF). The GPF – the responsibility of which rests with the Norwegian Minister of Finance, while the delegate administrator is the Norges Bank Investment Management (NBIM), department of the Central Bank – has a capital financed by the revenue of the energy balance of the Country. The investments are realized in 42 share markets (both developed and emerging) and in instruments at fixed income denominated in 31 currencies. At the end of 2008, its assets covered 0,77% of the global securities (5) .
Among the recent “socially responsible” choices of the Fund, of importance is the exclusion of its own portfolio of investments, in March, 2009, of the Chinese automotive group, Dongfeng because considered among the suppliers of the Burmese military regime. In the meanwhile, the Fund had also placed the German Siemens Group under observation on the grounds of non-compliance with ethical values.
The scarce importance of the religious movements in the actuality of ethical finance is due to the fact that the Christian origins of the socially responsible investment have never been expressed in a structured regulations system, but are limited to application – each actor in a subjective manner – of the principles and values of the ethics in the typologies of investment of interest. The absence of a sole system of reference represents one of the major differences between ethical finance and Islamic finance. In the ambit of the latter, in fact, the system of rules is completely codified and based on the application of the Shari’ah, the Islamic Law (6) .


The challenge of the Islamic finance to the ethics in finance

In general, a “socially responsible” portfolio is realized selecting activities on the basis of the criteria of ethics (of the businesses, religious, social or environmental) placing the accent on the maximization of the profits in a successive phase.
In June, 2008, in this Review (7) it was affirmed how among the asset allocation that contemplate – between the variables of choice – the offer of ethical financial services, also the finance according to the Islamic Law, the Shari’ah, should be considered as predominant.
Referring, once again, to the above mentioned article in this Review, for an analysis of the principal characteristics of Islamic finance, it should be said that it represents a great innovation in the contemporary panorama, having proposed a scheme of financial-economic conduct which is profoundly different from the traditional one. One of the imported elements of the Islamic finance is, in fact, ascribable to the ethics in behaviour, a characteristic which finds its normative reference in the Islamic religion.
Islamic finance and ethical finance represent, therefore, alternatives available to the investors in a hypothetical “arbitrage based on ethics”, as well as valid options different from the traditional finance. This availability of choice applies, obviously, to operators of both the legal and illegal compartments of the economy and of the finance.
It becomes important to compare the characteristics of the investment made by ethical funds and Islamic funds. In the first case:
the ethical investment implies a double valuation: of budget and of behaviour;
1. the ethical investments are made principally through administrative managements (like the trusts), which operate with the same modalities of the conventional trusts in the purchase of baskets of securities in selected sectors. The decision to invest in the socially responsible manner in a determinate compartment of the economy requires a valuation, of the ethical screening type, of the societies of greater potential of profitability. Given a selected “ethical” basket, the portfolios of the societies of interest are submitted to a valuation of the financial screening type. The final choice fare made on the societies which result potentially more profitable, conditional on the guarantee of the existence of determinate ethical criteria.
2. The objective of the “ethical” investment is the maximization of the profitability given a bond of religious or social responsibility.
The objective of the “ethical” investment is to maximize the performance in respect of the ethics in the assets allocation. Important ethical funds (such as the M&G Charifund Income Units, the Central Board of Finance of the Church of England, the Charities Official Investments Fund and the Buckmaster&Moore Funds of Credit Suisse) have all realized competitive yields with respect to the indices of world significance (as, for example, the indices of the Financial Times)as well as with respect to important investment funds.
3. The valuation of the ethics in the investment is internal to the governance. In an ethical fund, the decision on the ethicality of a particular investment is taken by the managers of the fund, also on the basis of the information acquired from external professional bodies.
These three aspects assume extremely different connotations in the case of funds of Islamic investment:
1. the Islamic investment submits the verification of conduct of the fund to the regulations of the Shari’ah financial valuation.
The Islamic funds deal with financial products based on rates of interest and prohibit, in the transaction, the presence of any form of yield based on interest (8) ;
2.the objective of the Islamic investment is the maximization of the yield utilizing the instruments provided for by the Islamic contracts;
Through the modalities of investment provided for by the Shari’ah (among which the Mudarabah, Murabahah, Musharakah, Ijarah and Ijara wa iqtina (9) ),the funds of the Islamic investment cover the entire spectrum of the relative choices available to the funds of the conventional investment (ethical and not) ;
3. the valuation of the ethics in the investment is external to the governance.
The final approval of any Islamic investment is attributed to the Shari’ah Board, composed of eminent scholars of the Islamic religion), who have the task of furnishing interpretations (binding for the management) on the respect for the religion for each transaction that the society intends to realize. For this reason, the relation between the Shari’ah Board and the management of the Fund is of great importance, insomuch as the Shari’ah Board must be involved in the preparation and in the revision of all the financial and legal documentation of each transaction.
The supervision by the Council of the Shari’ah is of primary importance and is considered as protection for the investor, to whom is guaranteed, in this way, the “purity” of the employment of his funds. To avoid conflicts of interest, the Committees of the Shari’ah are independent of the trustees or of the managers of the portfolio of the fund.
With regard to the ethical funds, which see in the risk of share investment (10) their principal unknown factor, the Islamic funds join a typical risk to the latter generic risk (11) , i.e. the risk of non-compliance with respect to the Shari’ah (so-called Shari’ah-Compliant Risk).
This second typology refers to the possibility that securities initially considered to be Shari’ah compliant, and for this reason would be present in a portfolio of an investment fund based on the Shari’ah, could have to be reclassified as Shari’ah non-compliant in the periodical revision made by the Shari’ah Committee. In this case, the non-assumption of the modifications requested by the Shari’ah Boardor the delay in the adoption of same) could negatively influence the overall value of the fund (12) .
One of the principal functions of the Shari’ah Board is, therefore, the examination of administered assets, necessary, for example, when an Islamic investment fund is include in a specific index. This characteristic allows us to introduce the “ethical screening” approach of one of the most important Islamic financial indices Dow Jones Islamic Market (DJIM). This procedure is sub-divided in three levels:
1. verification of the presence of prohibited economic activities (haram) in the portfolio of the society to include in the indices of the DJIM.
The first level of screening by the Committee of the Shari’ah del DJIM concerns the object of the investment:
a. the society must not have undersigned fixed income securities or other financial instruments in which is established, in a predetermined way, a rate of return, guaranteeing the initial capital. Such distinctive elements would be in conflict with the prohibition of the riba (usury) on loans based on rates of interest. This applies even if the primary business of the society (issuer of securities or shares) is permitted (halal);
b. the society must not have shares in societies whose primary business is haram, included (but not limited to) alcohol, tobacco, food products based on pork meat, conventional financial services, defense, entertainment (such as gambling games, and pornography) (13) .
2. Analysis of the sources of income through financial filters.
Once the valuation of the primary business has eliminated the “forbidden” sectors, the Shari’ah Board of the DJIM examines the income capacity of the society, both of its components (including all its divisions and subsidiaries) and the position of both factors with respect to the Shari’ah. The filters used in the analysis seek the existence of “non-acceptable” debit levels and of incomes from “impure” interest. The screening of the DJIM excludes the society if the ratio:
a. Debit total/capitalization of market is superior to 33% (14) ;
b. Liquid assets +interest bearing securities/capitalization of market is superior to 33%;
c. Loans/total assets is superior to 45% (15) .
3. (Non-Operating Interest Income, NOII).

The third phase of the screening of the DJIM is dedicated to the valuation of the level of the so-called (Non-Operating Interest Income, NOII) compared to total income (R).
In the cash management, many societies temporarily place the cash flows in deposits or in interest bearing accounts; or purchase fixed income Securities or certificates of deposit at different maturities, or make investments in financial instruments at guaranteed capital at a predetermined rate of interest. Such monetary investments generate incomes which, inasmuch as they are based on the rate of interest, are considered haram. The absence of a speculative intention does not make such forms of income prohibited, but only “impure”. For this the Shari’ah permits the maintaining of said forms, but at a minimum level within defined thresholds of the different Shari’ah Board which oscillate between 5% and 15%.
It is possible to recapitulate what has been said in the following table tabella:

Table

The ethical finance in Italy

The objective of the ethical finance instruments or, according to Anglo-Saxon terminology, of the instruments of Socially Responsible Investing (SRI) is that of placing alongside of the traditional canons of investment selection, considerations of a social, environmental and ethical character, also for the purpose of tapping, in terms of performance, eventual competitive advantages deriving from the investment in securities of the socially responsible issuers.
In the last ten years, the European market of ethical funds has registered a constant trend of growth, both in quantity (the number of existing funds has passed from 159, in 1999, to 537, in 2008), and in dimension (the entity of the assets managed has passed from 11,074 billion euro, in 1999, to 48,720 billion euro, in 2008). (16) .
In the decade under consideration, it is interesting to notice how, in the period of the credit crunch and the subprime mortgages, and in a moment of extreme difficulty of the industry of the asset management, the masses managed according to ethical criteria remained substantially stable. According to EUROSIF (European Social Investment Forum) (17) , the European market of the “socially responsible investments”, inclusive of the ethical funds and other categories of financial instruments with ethical connotation, has grown by 102% in the last two years (18) .
In Italy, on the basis of the most recent data published by Avanzi SRI Research of June, 2008, the quota of “ethical” assets managed by Italian asset managers was circa 2, 6 billion euro, equal to 5% of the European total. Notwithstanding the constant growth trend starting from the first years of the 90’s until today, of the compartment of Italian ethical finance, (from June, 2003, to June, 2008, almost tripled, passing from 1.07 billion euro to 2.6 billion euro (19) ), its dimensions remain more contained compared to the European market.
Such circumstances are ascribed by Eurosif to three principal factors:
1. the presence of masses of savings managed in ethical investments which are still too small (also for the scarce presence of the institutional investment in the ethical finance compartment);
2. the scarce inclination of the ethical sector to the innovation of product and process;
3. the prejudices and the limited knowledge of the instruments available.
The composition of the sector is optimally represented in the Second Report on the Ethical Funds in Italy, realized by the ethical finance Observatory, first portal in Italy entirely dedicated to the socially responsible investment.
According to the investigation, 94.8% of the ethical funds available to the Italian saver do not invest in the compartment relative to the production of arms, 52% exclude the tobacco industry, while 33.3% and 41% respectively, exclude the sectors of alcohol and pornography from the referred investible universe. Compared to the 2008 edition, the number of funds have doubled, which exclude the securities of public debt of Countries in which the death penalty is applied (from 3 to 7) or which violate political freedom and civil rights (from 12 to 28).
The system of ethical rating adopted by the ethical finance Observatory includes factors such as the adoption of criteria of inclusion (20) , the transparency in the procedure adopted by the manager, the presence of an independent ethical advisor and the adoption of policies of active shareholders against the societies that violate the criteria of social and environmental responsibility (so-called shareholder activism).On the basis of this articulated valuation system, according to the ethical finance Observatory, the best shareholder ethical fund in Italy is managed by Etica SGR. They follow the equity funds of Dexia, Pioneer Investments, Monte Paschi Assets Management, Aviva Investors and BNY Mellon Assets Management.



Socially responsible investment funds: regulations of reference in Italy

Relative to the socially responsible investment funds, the CONSOB (National Commission for the Companies and Stock Exchange) has introduced important elements of transparency, objectively controllable, both to verify the actual degree of ethicality of the fund, and to exercise a quality control, even in the awareness of the difficulty of arriving at an unambiguous concept of a socially responsible investment, given the different significances attributed to it in relation to the various contexts of affiliation (21)
The intervention of the Commission has been set in the framework of legal provisions introduced by the so-called Savings Law (22) , with which the Italian Legislator has included in the Unified Code on the financial intermediation (TUF (23) an article (24) which delegates CONSOB to issue regulations on the subject of informative obligations and financial statements which concern all subjects that promote ethical or socially responsible financial products.
With the successive acknowledgment, in Italy, of the Directive MiFID (Market in Financial Instruments Directive, 2004/39/CE) through the Legislative Decree, N° 164 of the 17th September, 2007, CONSOB exercised the above mentioned delegation, modifying the parts of the Intermediary Regulation (adopted with Resolution N°, 11522/1998, now renumbered 16190, affected by the new provisions. The CONSOB provision has led to the inclusion in the III Book (“Provision of services of investment and of the service of collective management”) part II (“Discipline of the provision of the services and accessories and of the service of collective management of the savings”) of the Intermediary Regulation, of a new title, the II-bis (“Provisions in matters of ethical and socially responsible finance”), composed of the Articles, 55-bis (“Informative Obligations”) and 55-ter (“Obligations of financial statements”). Following the acknowledgement of the MiFID, CONSOB modified the Title II-bis in Book VII (“Provisions in matters in ethical and socially responsible finance”), re-numbering the above mentioned Articles (from 55-bis to 89, “Informative Obligations” and 55-ter to 90, “Obligations of compilation and presentation of financial statements”).
Today, according to the CONSOB definition, the ambit of the ethical finance is defined as a “process of investment founded on criteria of selection of securities which do not pose, as an exclusive purpose, the maximization of the yields (given a certain degree of risk), but also the safeguard of the universal values of social equity, protection of the environment and health, carrying out of economic activities in respect of all the stakeholders and, more in general, of the citizen” (25) .
The Commission, analogous with the conduct of the Legislator, has not, therefore, supplied a precise indication of the characteristics which the ethical financial products (or socially responsible) must possess to be able to qualified as such, limiting himself to prescribe - for the intermediaries who create and distribute such instruments – a double obligation of transparency, ex ante and continually..
CONSOB has motivated its choices evidencing how from the primary normative only, a authorization emerges, to individuate specific obligations of information and of financial statements for the products and services qualified as ethical or socially responsible, without having to determine the characteristics which a product must possess to be qualified as such (26) .
In this way, CONSOB has not expressed itself relative to a valuation in merit of the approach followed by each subject for the ethical qualification of the products and services, in the awareness that it is extremely difficult, if not impossible, to define a priori a concept of ethics which has the same significance for all the stakeholders. As far as the obligations of transparency ex ante,are concerned, it is provided that, in the prospectus and in the contracts relative to products and services qualified as “ethical” or “socially responsible”, the qualified subjects furnish the following information:
- objectives and characteristics that qualify the product or service as ethical or socially responsible;- general criteria of selection of the financial instruments, in compliance with the objectives and the delineated characteristics;
- policies and objectives of active share holding pursued;- destination of the proceeds for initiatives of a social or environmental character;
- size of the proceeds intended for initiatives of a social or environmental character;- procedure adopted to ensure the pursuit of the declared objectives (such as the institution of
specialized internal bodies and the attribution of specific functions);
- adhesion to codes of self-regularization, promoted by specialized entities.
In relation to the obligations of continual transparency, these are substantiated in obligations of financial statements to be fulfilled at the time of preparation of the periodical presentation of financial statements, provided for by the regulations. In particular, the obligation must be respected through the indication of information relative to (27) :
- illustration of the activities of management in relation to the general criteria of selection of the
financial instruments held in the portfolio;
- exercise of the activity of active share holding;- devolution of the proceeds to initiatives of social and environmental character and the relative size.
Also the definition of ASSOGESTIONI (28) is centered on the “ethicality” of the investment, qualifying as “ethical” a fund which 1) has a policy of investment that forbids the purchase of a group of securities and/or privileges the purchase of securities on the basis of criteria different from the maximization of the yield expected and/or 2) adheres to a process of investment according to principles different from the maximization of the yield expected (corporate governance of the fund). Such definition is independent of the specific modality of application of the criteria of exclusion/inclusion (internal “ethics” committee, consultancy society, external selection, and benchmark)”.
The procedure of control on the ethicality of the placed investment is based on an ethics Committee which, with advisory and steering functions, defines criteria of ethicality and guide lines which a Society of savings management (SGR) must adopt in administering one or more funds of ethical investment, or to the intervention of an external advisor in the management process. Further elements characterizing the ethicality of a fund are found in the adhesion to guide lines issued by subjects committed to the diffusion and support to the development of the socially responsible investments, like Eurosif and the obtaining of certifications by bodies committed in the sector, like Ethibel. While both the Legislator and CONSOB have turned their attention particularly to the ethical financial compartment, the sensitivity towards a modification of the regulations to allow the introduction of forms of finance according to the Shari’ah has been, to date, characterized by a reasonable prudence (29) .
The Seminar on Islamic Financeorganized by the Bank of Italy, 11th November, 2009, was an important moment in the matter, as it had as its principal scope a first analysis of the complex mechanism of the Islamic financial intermediation, with the purpose of beginning to understand the peculiarities of a phenomenon that can no longer be disregarded. The organization of the conference by the National Monitoring Authority is indicative of how also Italy is reflecting on the introduction of suitable legislative modifications to facilitate the use or the financial instruments according to the Shari’ah.
In this respect, the position expressed by the Italian CO.RE.IS (Islamic Religious Community) (30) is interesting, according to which, rather than implement parts of the Shari’ah within the economic order “the national legislator should consider the contribution that economists, technicians and sages of Islam can give for a broader vision of the problems connected to the process of globalization and of its governance”. According to the COREIS, “the real integration of the Islamic finance with a national internal juridical system is not realized by including Islamic regulation in a world that can never been Islamic in its entirety, but rather with the benefit of the wisdom enclosed in the Islamic perspective on the economy”.
The COREIS hopes, in the cited document, for a new ethical economy which takes into account the needs of the many social subjects who are part of it. Islam, apart from any fundamentalist mystification, can offer a vision founded on principles of fairness and a search for the good of all humanity which goes beyond the simple material level.


Ethics and religion as a support to the crisis: the role of the Intelligence

In the delineated context, the role of the economic-financial State Intelligence is that of verifying that the choices of investments made by “socially responsible” funds are coherent with the trust that the saver places in the ethical institutions, in their implications for the security of the State (without entering into the responsibilities of protection of the savings exercised by the bank-lending regulator.
Trust is an intangible and non-financial element, fundamental to guarantee the growth of the economic system. The growth of trust, in a community towards the ethics compartment, is not a function of policies or regulations, but the perception of integrity and coherence in the choices of financing and investment by the socially responsible investments funds. The close attention and the ever widening concurrence that the ethical finance is receiving induces, therefore, the heightening of attention with regards to the phenomenon, for the purpose of verifying the margins of instrumental uses that illicit or criminal interests could have at their disposal. The compartment, in fact, finds, in the trust and in the values, its raison d’être, and for this it has to be protected more than the others.
While in the Islamic finance the function of protection, above cited, is exercised by the Committee of the Shari’ah, in the ethical finance, the ethics Committee does not seem to dispose of analogous powers. There does not exist, in fact, either at the national or international level, a precise definition, not even legislative, of ethical common fund – more generally, ethical finance – neither are there found, at the same levels, normative indications of the criteria of selection to adopt, or instruments of ascertainment of the level of social responsibility of the investment. It suffices, therefore, the declaration of the issuer subject of the use of criteria of selection, qualifiable as ethical on the basis of the common meaning attributed to such term, to be guaranteed the attribution of the qualification of ethicality (31) . The existence of procedures of control and conformity to the ethics within the organization of the issuer subject constitutes a further element, not always necessary, to consider a financial instrument ethical.
The “ethical” phenomenon becomes important also for the Intelligence of the State, in the moment in which the activities – which are referred to it – on the part of public or private entities, begin to concern the National security.
In fact, the enterprises interested in investing ethically (for opportunity or necessity), are at risk of utilization of funds of dubious provenance (gathered to finance said policies), particularly, in a cycle of stagnation/recession like the present one. The vulnerability is greater if one refers to local realities which, once developed, could create dangerous commingling in the “ethical” sector.
The above mentioned risk is accentuated by the panorama highlighted by the results of the first “Report on Responsibility and Competitiveness” drawn up by the Consultancy Society, RGA, according to which – out of 31 Countries examined at a world level – Italy is in the 26th place in the application of socially responsible company strategies.

The investigation evidenced how the social responsibility is interpreted in a significantly different way in Italy, compared to what happens in other Countries. The Italian businesses, in fact, place the accent on the side of reputation, but without considering the potential in terms of competitiveness of the phenomenon. According to the results of the Report, in Italy, the social responsibility is a mere question of image, which is not reflected in the company policies of competitiveness and development.
Furthermore, apart from the financing-risk (ex ante), there is also the investment-risk (ex post). The limitation of the allocative choices of portfolio by the screening procedure, prevalently of an ethical character, is susceptible to making it much more difficult to guarantee the obtaining of adequate financial performance (32) .
In general, Islamic finance and ethical finance represent possibilities available to the investors in an hypothetical “arbitrage based on ethics”, as well as valid options alternative to the finance based on criteria of rational choice. In Italy, the absence of a normative which allows the operativeness according to the Shari’ah, reduces the availability of choice limited to the ethical finance as alternative to the traditional one.
In presence of an arbitrage for operators, both from the legal and illegal compartments of the economy and finance, the attention of the CONSOB – more on the ethicality of the investment, less on the ethicality of the financing of the ethical funds themselves – creates a vulnerability in the commingling between “ethical” savings and “criminal” financing, (obviously, non-ethical).
An application of modality of re-cycling of proceeds deriving from unlawful activities through financing of the assets of the ethical funds could cause extremely serious repercussions in terms of credibility, on the very intangible asset at the base of the ethical financial instrument, i.e. the trust. Such setbacks would be far superior (given the specific target) to those of the traditional finance in the present international crisis.