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ethical and ecological screening
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- Finance: ethical and ecological screening
- Finance: anti-money laundering
- Review and revise screening systems to ensure consistent implementation of the new Ethical Policy. TARGET ACHIEVED
- Issue a money laundering staff handbook. TARGET ACHIEVED
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performance
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|
| (Source: Ethical Policy Unit 2002)
|
|
|
Declines By Issue - Human Rights
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone i |
| International civil engineering group |
Absence of a human rights policy, despite concerns being expressed by a variety of indigenous campaigning groups about various issues associated with mega-dam building projects. |
£70,000 |
| International bank |
Part-owned by a Government classified as an oppressive regime. |
£10,000 |
| International bank |
Owned by a Government classified as an oppressive regime. |
£5,000 |
| Engineering firm (x2) |
Supply of engineering equipment to oppressive regimes. |
£1,000 |
|
|
Declines By Issue - The Arms Trade
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Technology corporation |
Supply of aircraft strategic equipment for ultimate use in oppressive regimes. |
£180,000 |
| Defence equipment manufacturer |
Supply of armaments to oppressive regimes. |
£57,500 |
| Casings Manufacturer |
Supply of military aircraft casings for ultimate use in oppressive regimes. |
£2,500 |
| Facilities management company |
Involvement in the provision of support systems for the maintenance of nuclear weapons systems. |
£1,500 |
|
|
Declines By Issue - Global Trade
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Toy manufacturer |
Concerns that suppliers based in developing world could not evidence satisfactory labour conditions. |
£180,000 |
| Stationery manufacturer |
Concerns that suppliers based in developing world could not evidence satisfactory labour conditions. |
£31,000 |
| Cabling manufacturer |
Concern that a core product was sourced from East Africa, where there is documented evidence of the use of child labour. Challenge not adequately addressed. |
£2,000 |
|
|
Declines By Issue - Fossil Fuel Extraction
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Multinational oil company |
Involvement in the exploration, production and refinement of oil. |
£502,000 |
| Multinational oil company |
Involvement in the exploration, production and refinement of oil and gas. |
£180,000 |
| Specialist engineering |
Involvement in the design and construction of oil rigs. |
£31,000 |
| Engineering company |
Manufacture of coal mining equipment. |
£8,000 |
| Support business to the oil industry |
Involvement in the design of oil refineries. |
£7,000 |
| Engineering firm |
Acquisition of a coal preparation plant. |
£4,000 |
| National Association |
Promotion of the interests of fossil fuels. |
£2,000 |
| Multinational oil company |
Involvement in the exploration, production and refinement of oil. |
£1,000 |
|
|
Declines By Issue - Chemicals
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Chemical manufacturer |
Unacceptable record on the discharge of problematic waste from operations. |
£30,000 |
| Multinational chemical manufacturer |
Involved in the manufacture of chemicals potentially linked to hormone disruption. |
£4,000 |
|
|
Declines By Issue - Diversity
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Leading container board manufacturer |
Evidence of sourcing raw materials from tropical rainforests in an unsustainable fashion. |
£275,000 |
| Subsidiary of global mining company |
Despite concerns about environmental impact, had not, as a minimum, introduced an environmental policy or environmental management system. |
£5,000 |
| Quarry Operator |
Quarry operating on land designated as an area of 'great landscape value'. |
£4,000 |
|
|
Declines By Issue - Other
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Upholstery Firm |
Unacceptable waste incineration proposal. |
£2,000 |
| Fish farm |
Impact of discharges; in particular, of medicines to local environment. |
£1,000 |
|
|
Declines By Issue - Nuclear Power
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Electricity generator |
Majority of turnover derived from nuclear power. |
£10,000 |
| Nuclear engineering firm |
Involvement in nuclear engineering. |
£4,000 |
|
|
Declines By Issue - Animal Welfare
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Manufacturer of household and personal care products |
Failure to have a fixed cut-off date for the testing of ingredients on animals. |
£112,000 |
| Interactive aquarium |
Concerns expressed by Marine Conservation Society, Born Free Foundation and WWF about the impact of proposal on both animal welfare and marine ecology. |
£20,000 |
| Toiletries manufacturer |
Failure to have a fixed cut-off date for the testing of ingredients on animals. |
£18,750 |
| Haulage firm |
Transportation of livestock over long distances. |
£5,000 |
| Trade Body |
Representing interests of major intensive farming operators. |
£2,000 |
|
|
Declines By Issue - Genetic Modification
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Plant biotechnology company |
Could not satisfy concerns that development of crop biotechnology would have an adverse impact on the environment. |
£2,000 |
|
|
Declines By Issue - Other Ethical Issues
|
| Business |
Primary nature of conflict with Ethical Policy |
Estimated Gross
Income Foregone |
| Adult entertainment business (x2) |
Could not satisfy concerns over the protection of children and community space. |
£23,000 |
| Finance company |
Irresponsible lending. |
£2,000 |
| Marketing company |
Misrepresentation of ethical credentials. |
£2,000 |
| Cheque encashment operator |
Exploitation of low income earners and exorbitant fees. |
£2,000 |
|
|
commentary
|
Ethical Policy implementation During 2002, the Ethical
Policy Unit reviewed the acceptability of 143 potential finance
opportunities. Of those, 29% were found to be in conflict with
the bank's Ethical Policy. This year, for the first time, the bank
has provided specific details of all business referred to the
Ethical Policy Unit and subsequently declined. Alongside a
rationale for each decision, details are provided of the
estimated gross income foregone (annualised basis). For legal
reasons, the bank is unable to name those businesses found
to be in conflict with its policy - this would be a breach of
customer confidentiality.
Ethical Policy review The bank's Ethical Policy was launched
in 1992 and has been subject to a periodic review. Monitored
by the bank's social auditor, ethics etc..., the fourth Ethical
Policy review commenced in 2001 and was completed in early
2002. In the February and May 2001 editions of the bank's
Customer Newsletter, customers were asked to comment on
the current Policy and suggest other issues that they would like
to see included. An Ethical Debate forum was established on
the bank's website where customer comments on Ethical
Policy issues could be posted. Genetic Modification (GM)
arose as a key issue from the letters and e-mails received from
customers. To facilitate comment and debate on this issue the
bank commissioned the Ethical Investment Research Service
(EIRIS) to produce a detailed report setting out the arguments
for and against a full range of potential applications for GM
technology. Over 2,000 copies of the paper were requested and
distributed to customers.
As part of the Ethical Policy review, MORI facilitated four
customer consultation sessions, where old and new issues
were explored in greater depth. At the same time, the bank
sought independent expert opinion on the detailed content
and implementation of the Policy from EIRIS and the Ethical
Consumer Research Association (ECRA). Input was also
sought from some of the bank's affinity partners, such as the
RSPB and Amnesty International (UK).
The comments received were evaluated and formed the basis
of a new Ethical Policy questionnaire which was sent to personal
and corporate and business customers with their bank
statements. The bank aimed to ensure that as many customers
as possible had an opportunity to participate. Customers
could therefore also participate in the review on The
Co-operative Bank's and smile's websites (31% of
participants voted on-line), in branches and by telephone. Over
70,000 personal customers and 3,000 corporate and business
customers took part. The questionnaire asked customers to
indicate how strongly they agreed or disagreed with a series of
Ethical Policy statements. 97% of customers stated that they
fully support the bank's Ethical Policy (2001: 91%, 1992: 84%).
In addition to the specified survey questions, one in eight
customers chose to make an additional comment.
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|
Ethical Policy launch The revised Ethical Policy (page 43)
was launched in May 2002 - the tenth anniversary of the
introduction of the bank's first Policy. The adoption of new
issues within the Policy required the bank to review its existing
portfolio of corporate customers and, where necessary, to
disengage from investment in certain corporate activities.
A copy of the new Policy was sent to all customers. In advance
of the new Policy being communicated to customers, all members
of staff were sent a copy and details of developments within
the Policy. Ethical staff advocates, who act as points of
information throughout the business, received training on the
new areas of the Policy.
Emerging issues In between formal Policy reviews it is
inevitable that new ethical issues will arise. When required, the
bank develops a position, communicates this on its website
and requests feedback both from customers and other
interested parties. In 2002, in light of concerns expressed by
customers over the issue of diamond sourcing from areas of
conflict, the bank undertook a review of this area and posted
the conclusions on its website ii. The review supported the view
of Global Witness iii and pledged to encourage business
customers to take a pro-active stance on the issue. During
2003, the bank will review the following four areas: quarrying,
private security firms in oppressive regimes, export processing
zones and toy manufacturers. Should other issues arise during
the course of the year, the bank may revise this list accordingly.
Anti-money laundering Money laundering is the disguising of
funds derived from criminal activity to give them legal
respectability. It has been estimated by the International
Monetary Fund iv that such financial flows are equivalent to
between 2% and 5% of global Gross Domestic Product. The
Financial Services Authority (FSA) has formal powers to
supervise and, where necessary, enforce corporate and
individual compliance with laws and regulations relating to
money laundering. All bank staff are obliged to report any
transaction which they suspect might be related to drugs,
terrorism or other serious crimes. Equally importantly, they are
instructed not to reveal to a customer that they are being
investigated. During 2002, a Money Laundering Handbook
was issued to all staff along with a self-certification letter to
ensure compliance with industry best practice. The handbook
and self certification form is issued to all permanent staff on
entry, with a summary factsheet being provided to all
temporary staff along with their contract of employment.
Alongside the distribution and return of the self-certification
form, Divisional Compliance Officers work with managers to
verify that all staff have read the staff handbook and to ensure
that appropriate training is received by staff. Training for a team
of staff typically includes a training video followed by a
discussion of the implications of money laundering for the
team. The bank's processes for account opening, reporting
suspicious transactions, money laundering training and self certification
are subject to internal audit and independent
review. It is widely accepted that, compared to other sectors of
the economy, financial services has more rigorous anti-money
laundering management systems. For example, of the 31,000
Suspicious Disclosures made to the National Criminal
Investigation Services (NCIS) in 2001, more than 60% were
attributable to banks, whilst less than 2% arose from solicitors
and accountants.
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- 'Estimated Gross Income Foregone' represents the income which the bank might
have expected to receive in 2002 based on the value and nature of each funding
proposal declined during 2002 alone.
- www.co-operativebank.co.uk/ethics/forum_diamonds.html
- www.globalwitness.org
- Financial Times (18.11.02), Money laundering: Ironing out those washday
wrinkles
To follow any of the links mentioned within the Partnership Report 2002, please visit the links page.
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ethical and ecological value analysis
|
- Estimated annualised gross income foregone in 2002 for
ethical reasons. It should be noted that this figure relates
to that portion of business declined where a referral was
made to the Ethical Policy Unit and income would have
been anticipated during 2002. This takes account of
referrals made in years prior to 2002, but where income
would have been anticipated during 2002. There are many
other business opportunities foregone, where staff decline
business, without referral, knowing the business would be
in breach of the bank's Ethical Policy £4,388,000
- Annual costs relating to ethics and ecology external
research, audit and commentary £325,000
- Internal annual overhead associated with maintenance and
development of ethical and ecological management and
performance £430,000
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new targets
|
- Draw customers' attention to the ethical issues arising from diamond sourcing in areas of conflict.
Barry Clavin, Ethical Policy Manager
- Explore the feasibility of developing management information systems which detail the proportion of bank monies involved with ethical, ecological and co-operative customers.
Barry Clavin, Ethical Policy Manager/Jon Lee, Ecological Business Development Manager/
Isabel Ponte-Marino, Project Consultant
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