Co-op Bank's ethical stance adds £25.6m to profits

The Co-Operative Bank claims today that its heavily publicised ethical stance was worth a net £25.6m in profits last year, compared with a total net profit of £122.5m. The value of business lost due to "ethical and ecological reasons" last year was £4.38m. But market research shows the bank's ethical stance gained it £30m in extra profit.

That figure is arrived at, says the bank's 2002 annual report today, by "aggregating the profitability contribution made by ethically motivated customers". The extra costs are more readily identified, by calculating how much dearer "green" electricity is, and the opportunity cost of forgoing certain corporate business, together with overheads such as the costs of running its ethical policy and ecology units.

For the first time, the bank has disclosed the rationale behind its decisions and revealed what it cost in lost income. Refusing to provide banking services to companies involved in fossil fuel extraction cost £1.13m; turning away business from companies and organisations associated with "exploitative labour practices, nuclear power, deforestation and genetic modification" cost £673,000; declining to do business with arms businesses that supply oppressive regimes lost it more than £240,000; and turning away business for animal welfare reasons cost more than £157,000.

Ironically, the contribution to profits from the ethical stance fell as a proportion of the total last year, thanks to better performance by treasury and asset and liability management. But the chief executive, Mervyn Pedelty, was still able to say that, as a proportion of retail banking profits, ethical customers made a larger contribution in 2002 than in 2001.

Amid all the furore over fat cats, Mr Pedelty shows how ethics can be good for your wallet too. Last year he was given a performance-related bonus of more than 100 per cent on top of his basic salary of £458,250 to make his total pay £1,054,005 last year. This was equal to more than a quarter of the Co-op Group board's overall pay.