The Co-operative Bank, ethical investment and the killing of 34 people

Most people will have noticed in the news recently that conflicts between miners and management at the Lonmin-owned Marikana mine in South Africa led to the police shooting dead 34 people. If you really want to you can watch some footage of it. Some observers say that the miners were herded into a barbed wire pen, had tear gas shot at them, then the police killed them as they tried to escape.

Now here is something I came across in the course of other research: a quote from the Co-operative Bank’s 2012 ‘Responsible Investment’ Review.

Lonmin is one of only two mining companies presently allowed in our Sustainable range of funds. Lonmin’s sole product is Platinum Group Metals, which are mostly used in catalytic converters to scrub emissions and increasingly in renewable technologies. Lonmin had historically demonstrated the best safety record in a dangerous industry, South African platinum mining. So we shared the alarm expressed by CEO Ian Farmer at the 2011 half-year results that the fatality rate for the half-year was already double the number for all of 2009. The loss of life and serious disability are cause enough for reflection but it was sobering as investors to realise that 10% of operating days were lost at the Marikana mine in 2010 because of safety – and this itself was a 42% improvement on the previous year.We engaged immediately with Lonmin, contacting the senior independent director to understand what analysis the company had carried out and planned remedies.

[…]Lonmin’s investor relations team also sent a detailed letter, which we followed up with several meetings, that examined the causes of the accidents (which appear to be behavioural rather than inadequate procedures) and spelled out their remedies. It also confirmed no one in the company would receive any bonus element relating to safety for the year. The last quarterly results showed a major decrease in fatalities but we continue to monitor the situation.

So the most ethical funds of the UK’s most ‘ethical’ high street banks have money in Lonmin. Isn’t that an interesting lesson in ethical investment? And isn’t that last line more than a little uncomfortable to read now? The Co-op Bank considered themselves to be engaged in a process with Lonmin that would render it a more ‘ethical’ company. Now we know that while the Co-op believed themselves to be having a positive effect, Lonmin was enacting all sorts of other policies that would ultimately lead to the killings of their workers.

For me it calls into question the whole model of ‘ethical investment’ the Co-op believes in. The problem is, even if you accept that an obsessive focus on the profit motive is a good way to do economic organising, there is something about corporations that resists ethical pressure. As currently structured they are fundamentally secretive, non-transparent, unaccountable organisations. If you pressure them into improving something in one place they can do something horrific where you’re not looking. I was just yesterday trying to look up information on certain mining projects in Colombia. The details are not available even to investors. You simply can’t know what they’re up to. Corporations were designed that way. The details of their operations are not considered your business. Just invest, buy the products and shut up.

Incidentally while current accounts with the Co-op Bank don’t go into mining companies for ethical reasons, the Co-op investment funds also have money in Glencore, Xstrata, Rio Tinto, BHP Billiton and other companies complicit in throwing indigenous peoples of their land, environmental destruction and corrupting governments. I think the Co-operative Bank should at least be more honest about what they can and cannot do in terms of their ‘ethical’ influence. Or if they really want to have an ethical influence perhaps they should call for corporations to be transparent (it would be a start if we could put in FOI requests to corporations for example) and accountable for their actions. Any effect the Co-op could have on individual corporations would be dwarfed by, for instance, pressuring the government to ensure UK corporations and their senior management can be sued more easily for crimes overseas – and for crimes in the UK for that matter.

3 Comments

  1. preorg

    And a response from Tim from elsewhere:

    I wonder how many publicly traded companies would pass an ‘ethical’ review that, for example, prohibited profiting from mineral extraction? I suspect pretty much every large UK company in some way either is involved in the extraction of, sells products to miners, or uses the products of mining.

    Half these companies lend each other money, or they hold reserves with banks which lend it to other companies. The mining companies use telephones, so the telephone companies get money from them, and they buy vehicals and equipment and computers and blah blah blah. In my personal experience I have found it very hard to find a company that was not somehow involved in either supplying or borrowing from or lending to or buying from some other company that I don’t like very much.

    Also; how much benefit do you create from not buying these companies on the secondary markets? You buying the shares on the secondary market does not actually fund the operations of the company; so reducing demand for the shares of Lonmin will reduce the price without affecting the profitability of the company – i.e. it will increase the dividend yield so make the shares /more/ profitable for anyone else who /is/ willing to buy them (and also you will still have put your money out into the system, so whoever you bought your “ethical” shares off can now go buy the ‘unethical’, high yield, ones with it).

    If you want to actually effect the operations of these companies with your money, I think maybe the only way is to try to prevent them from being liquid. Which means making sure your money is not lent to them (also don’t buy IPO or any new share issues or any of their bonds). But even if you lend your money to any company, or just put it in a bank account, (or even just spend it) what you are doing is satisfying some of the money demand, and that will make money in general cheaper so benefit the “unethical” companies too (as long as there is some liquid money market that will lend to them).

    Ahh the beauty of the modern finance system. Burn the damm money… or not…

    Reply

  2. It strikes me that Co-op might give you a response to this. Have you tried raising it with them? I may be naive, but it would be good to see if/what they have to say.

    Essentially the only way that companies are ‘accountable’ is through pressure from the PR department. It’s not much, and there should certainly be more, but…

    Reply
  3. preorg

    A response to this blog post from one Andy Hammerton at the Co-operative Bank:

    Unlike some competitors, we have always been transparent about the companies we invest in, especially those whom some might regard as controversial. This is what led us to disclose our holding and engagement with Lonmin. While we do not hold Lonmin responsible for the subsequent violence that broke out at the Marikana mine, this new tragic development pushed Lonmin from being borderline to unacceptable for such a Trust in our view, and accordingly we immediately removed it from the approved list for investment for the Sustainable Trusts.

    One point of clarification. The info disclosed in the review does not relate to The Co-operative Bank. The Bank does not lend in stocks and shares. It’s the asset management business that makes such investments.

    As is to be expected from PR people this attempts to make sure they don’t look like the ‘bad guys’ while not addressing the substantive point made – that the Lonmin incident represents a failure of their ethical investment model.

    The final point is one they have brought up before when the dire investment policies of their funds have been pointed out (Glencore? Really?). While true, it is essentially a semantic point. Not only are the funds advertised on their main banking page (click on the ‘investments’ tab) but the structure of the Co-op Bank renders it a pretty meaningless distinction.

    From wikipedia: “Despite its name, the Co-operative Bank is not itself a true co-operative as it is not owned directly by its members, but by a holding company which is a co-operative—it is wholly owned by Co-operative Banking Group, whose sole shareholder is the member-owned Co-operative Group.” Their asset management business is a part of that Banking Group.

    Reply

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