Until now, ethical investment opportunities have been confined to pensions, personal equity plans and investment trusts. For individuals wanting to put everyday savings into an ethical account, the small-scale Ecology Building Society was the only option. Now the Co-op will offer all its 1.5 million customers ethical savings and current accounts under its ethical policy.
The policy covers issues such as human rights, arms exports and animal experimentation, and outlines the criteria which the Co-op will apply in these areas when deciding whether to lend money or do other business with companies.
Market research among 30,000 of the Co-op's existing customers showed that 78% endorsed the policy. Only 5% felt that ethics had nothing to do with banking. The environment came high on the list of customers' concerns, with 70% considering it important.
However, the Bank's stance on environmental misdemeanours is less uncompromising than on other ethical issues. It will not lend money to any of its 250,000 mainly small business customers if, for example, they are engaged in animal experiments involving cosmetics, blood sports or tobacco manufacturing.
On the environment, however, the policy says that the Co-op will only "encourage" business customers to take a proactive stance. A spokesman commented that a firm which flouts the environmental policy consistently will ultimately, after friendly warnings, have its account closed. However, the policy itself is not sufficiently explicit to inform companies of what is expected of them.
In addition, the only instruction given to lending managers is that they should consider the environment when taking decisions. They have not received specific guidance on what questions to ask, such as whether a business has an environmental policy or complies with environmental legislation.
It appears that only when a firm is thought to be acting in an environmentally irresponsible manner will the issues be explored in any detail. The Co-op says that it will then seek advice on whether the company's behaviour is acceptable from groups such as the World-wide Fund for Nature and Greenpeace, or its environmental consultants Technica. However, with no formal "green" lending procedures, it will fall largely to lending managers to spot environmental wrong-doings - and this when many meetings are held on bank premises.
The Co-op's move may nevertheless have set a potentially significant precedent. The Government's Advisory Committee on Business and the Environment is presently examining how financial institutions could play a more positive role in environmental protection, and the Co-op's new policy has set it a minimum baseline from which to work.