Body Shop dropped from ethical fund's approved list: City investors are concerned over forthcoming claims against one of Britain's 'greenest' companies (CORRECTED)

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The Independent Online

A LONDON fund which invests only in green and ethically sound companies has removed the Body Shop from its approved list until it answers allegations in a report to be published later this month.

National Provident Institution, which has an ethical fund worth pounds 11.5m, has seen advance copies of research by Jon Entine, an American investigative journalist, which is due to be published at the end of the month.

Mark Campanale, company analyst for NPI, said the Body Shop was more open about its ethical standards than most companies, but NPI was waiting for it to announce its detailed response to Mr Entine's research before giving it the all clear. Its high moral tone had exposed it as a target, when other companies with more to hide were not scrutinised so closely, he said. Other ethical funds in Britain and the United States are aware of the forthcoming allegations, and have kept the Body Shop on their list of acceptable companies, but are reviewing its status or plan to do so when the research is published.

City investors remained concerned yesterday about the impending publication. Body Shop shares fell 7p to 229p yesterday, a slightly worse decline than for the market as a whole, while they lost 8p last week, despite a rise in share prices generally.

That reflects the belief of many investors that the Body Shop's ethical claims are only part of its appeal. John Richards, retail analyst with NatWest Securities, said the ethical record 'is an important ingredient in establishing the image in consumers' minds of what the Body Shop is about. In day-to-day trading, it is not necessarily the key.'

However, another analyst warned that the Body Shop could be hit if the claims in the research were substantiated. 'It depends on how it is communicated to the public,' Julie Ranshaw, of the American investment bank Morgan Stanley, said.

A leading American ethical investment group said last night that it is reviewing its shareholding in the Body Shop following the attacks on the company's green credentials.

Working Assets, based in California, has 54,000 Body Shop shares in its global equities portfolio. It is now investigating the dossier compiled by Mr Entine.

Ben Corson, manager of the group's social research department, said: 'We are reviewing the information that we have received. Some of it is pretty troubling but we are checking it out. One of the most troubling things is the Trade Not Aid project. The most difficult distinction to make is to evaluate companies on a relative basis and find out whether other companies are better.' The Body Shop's Trade Not Aid policy involves buying local products from indigenous peoples in developing countries rather than giving them handouts. This has been criticised for possibly exploiting some Third World nations.

Franklin Research and Development, the American ethical investment company which sold pounds 33,000 of Body Shop shares five weeks ago and advised others to do the same, denied a story in yesterday's Guardian newspaper that it is now backing the store chain.

Joan Bavaria, company president, said that while Franklin would consider buying Body Shop shares again it is investigating the claims being made against it before making any decision. She said that the decision to sell had been partly for financial reasons, but the investigation by Mr Entine had also been a factor.

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NATIONAL Provident Institution has asked us to say that it has not dropped The Body Shop from the list of companies it is prepared to invest in through its Global Care ethical fund, as was understood from a conversation with one of its analysts on Monday. NPI confirms it is discussing with The Body Shop allegations made in an American report due to be published this month.

(Photograph omitted)