Co-op defends investment portfolio

THE Co-operative Group has defended its decision to invest in companies involved in controversial sectors such as oil, defence and tobacco.

The Co-op has built a reputation for ethical investment, adopting the slogan “Good for Everyone” and its bank has turned away business worth £1bn since 1992 on ethical grounds.

But its asset managment arm Co-operative Asset Management has millions of pounds invested in FTSE 100 companies such as Royal Dutch Shell, BP, British American Tobacco, Smiths Group and Imperial Tobacco.

Earlier this week it said it would use its influence as a Shell shareholder to oppose the re-election of Lord Kerr of Kinlochard as a director because of Shell’s “persistent payment of inappropriate executive rewards”.

A spokesman for the group said the investment arm runs an ethical fund which avoids companies involved in tobacco, armaments and animal testing for cosmetics, while its mainstream funds seek to influence corporate behaviour through shareholder pressure.

But its holdings in companies such as Shell and British American Tobacco will surprise many who see the group as a purely ethical investor.

Co-operative Asset Management has three funds and shares worth £2bn under management. Its UK Income with Growth fund has 5.8% invested in Shell, 5.8% in BP, 3.8% in Imperial Tobacco and 3.3% in British American Tobacco.

The UK Growth Trust has 5.7% in BP, 4.6% in British American, 4.5% in Shell, 4.2% in the Smiths Group and 3.4% in Imperial Tobacco. Its ethical fund – the Sustainable Leaders Trust – has its biggest stakes in utility and drug companies – but does hold 5.6% of the fund in Smiths Group shares.

The Co-op’s spokesman said: “As an institutional shareholder we will use our influence to get these companies to improve their corporate social responsibility. We don’t disinvest in companies because of difficult issues. When we disinvest we lose that influence.

“If our customers want to avoid sectors such as armaments and tobacco there’s a fund available for them to do that but if they want to invest in a mainstream fund we can do that as well but we try to use our influence where necessary.”

Until 2007 the Smiths Group was ranked as the world’s 26th biggest defence supplier. Its aerospace division made parts for fighter jets and helicopters but since selling the business it has focused on medical equipment, detection apparatus and speciality engineering.

It supplies detection equipment and satellite communications to the military and seals to the oil and gas industry but is a member of the ethical FTSE4Good Index in recognition of its code of ethics.

Of the fund’s other holdings Shell has been the most controversial, criticised for its activities in the Niger Delta and by Co-operative Financial Services for oil extraction in the Canadian wilderness. In February CFS committed £50,000 to support a legal challenge by indigenous groups to stop the oil industry from operating in the area.  

Last year British American Tobacco was accused of marketing its cigarettes to children in Africa. In 2003 it pulled its investments from Burma after pressure from campaigners and the UK government.