Item will be on CBC Radio - "As it Happens" tonight:

http://www.guardian.co.uk/business/2008/may/21/ethicalbusiness.banking

No arms, no oppression ... and no sealskin sporrans, says Co-op

Phillip Inman
The Guardian,
Wednesday May 21 2008
Article history
Ethical rules cost the Co-op Bank more than £14m in 2007 after it rejected a succession of deals involving oppressive regimes, military hardware - and sporrans.
The bank said strict rules on how customers treated their workers and the environment also led to record numbers of accounts being turned away or closed.
Reasons for rejection included the sourcing of hardwood flooring and use of child labour. Kilts by Lindsay, a traditional Scottish dressmaker based in Livingston, was turned down for a business account because some of its sporrans are made from seal skin.
Lindsay Cross, the firm's chief, who sold just three of the £175 sporrans last year, said: "We've been selling them for 300 years and then this policy came in six or seven years ago. The whole thing is a farce. It's all very well having an ethical policy but you have to take into account what is in place when you make the policy. You can't just override it."
A spokesman for the Co-op attributed the rise in rejections to the bank's growth as a corporate lender, with more companies looking to the Co-op for finance.
He said the ethical policies adopted in 1992 had remained largely unchanged. "We are getting more requests to finance deals and it is these requests that are falling foul of our ethical policy."
The credit crunch also probably played a part. In the second half of 2007 corporate financiers cast their net wider for funds to support mergers and takeovers. The Co-op said the bank had noticed more sovereign wealth funds from developing countries were asking western banks to help finance their purchase of western assets. Some regimes failed the Co-op's ethical test because they were deemed "oppressive". Of 123 deals offered to the bank by international development funds, 11 were declined.
Animal welfare accounted for 30% of the income forgone by the bank. Cosmetics manufacturers using animal testing were top of the list and there were several firms selling fur products. Firms considered to damage the environment made up a quarter of the lost income.
Corporate banking profits increased by 11.7% last year from £49.3m to £55.1m. The bank said it uses external auditors to check its policies and verify their cost.