FTSE 'ethical' index includes oil but excludes Tesco and RBS

Tesco, Royal Bank of Scotland and Marconi were among the corporate giants excluded from the new FTSE index of "ethical" companies.

The line-up for FTSE4Good, which will be a benchmark for the growing market for socially responsible investment funds, sparked immediate controversy when it was detailed yesterday. It excluded household names that loudly promote their community and environmental projects, while allowing in the oil companies despised by the environment lobby.

RBS demanded an immediate meeting with FTSE to discuss its exclusion on human rights grounds. The bank has operations in Indonesia, a country that has attracted criticism for its human rights record.

FTSE says the bank should have an explicit policy to uphold human rights. But an RBS spokesman said: "We feel our record is second to none and we need to clarify what we do and don't have and how the FTSE thinks the bank operates."

Tesco was also shocked at its failure to qualify on environmental grounds. The retail chain said it recycled the equivalent of 3 million trees last year, was committed to urban regeneration and runs a "books for schools" promotion.

FTSE4Good screens out companies with a poor human rights or environmental record on the basis of recommendations by Eiris, one of several companies that advise on socially responsible investing (SRI).

Tobacco, defence and nuclear industry companies are barred automatically, but most exclusions are based on the information in companies' annual reports or other publications. FTSE4Good requires companies to have published policies on upholding human rights, minimising environmental impact and fair treatment for employees and local communities.

Karen Eldridge, director of Eiris, said the qualifications for inclusion in FTSE4Good would become tougher as more companies improved their transparency on SRI issues.

"In due course, we hope to see management systems in place to indicate quite how to tackle human rights issues, but at the moment a public commitment is sufficient for FTSE4Good," she said.

The efforts made by oil giants BP and Shell to improve their image and cut environmental damage earned them places.