The Chinese Government’s proposed financing of the Barclays Bank takeover of ABN-Amro has dismayed the ethical investment sector, due to China’s abysmal human rights record.

Ethical investments are now big business in Britain. Earlier this year, for the first time ever, an ethical fund topped the UK all companies growth league. The Co-operative Insurance sustainable leaders trust topped the list of the 324 UK all companies unit trusts for the 12 months to January 31st 2007, with a return of 29.3 per cent in just twelve months.

Interestingly, the Co-Operative bank is the only High street bank to have an ethical policy, something which could cause problems for ethical investors in the future.

Geoff Griffiths, Managing Director of ethical investment specialist, Barchester Green Investment says that in recent years, ethical funds may have drawn a line under the actions of many banks involved in third world debt during the 1970s, whilst they have embraced programmes of social responsibility and corporate governance.

But he added that many ethical funds who have, in recent years, invested in Barclays will now be watching developments very carefully after it was announced that the Chinese government could possibly boost Barclay’s bid to buy out Dutch rival ABN-Amro. The fact that Barclays are even considering this move will bring considerable concern.

“This move, if it goes ahead, will drive a coach and horses through Barclay’s social responsibility programme, of which human rights are a major plank,” says Griffiths.

“The reputational damage to Barclays will be immense.”

Chinas has one of the worst human rights records in the world, with considerable repression against religious minorities, women and rural migrants to the country’s booming cities. Amnesty International believes that, based on public reports, an estimated 1,010 people were executed and 2,790 sentenced to death during 2006, although the true figures were believed to be much higher. The death penalty is used in China to punish around 68 crimes, including economic and non-violent crimes.

Many ethical investors believes that it is not just ethical funds, but Britain’s growing number of ethical investors – those who like to use their money to do good, or at least nothing detrimental to the environment and human resources - with Barclay’s accounts, may well decide to switch.

“We will be making our feelings known to the Bank as will others,” concludes Griffiths. “It is in situations like these that the difference between rhetoric and reality.”

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