Ethics: where religion trumps business

Ethics is a strange topic. It's not about law, nor morals nor religion - yet in some respects, it's about all of those things.

But one thing is certain: if a company espouses a particular set of principles, say that it is a bank that is run for and by those of a particular religious group, then it must follow the principles of that religious group.

And so, the Catholic Church teaches against, for example, contraception.

And therefore the actions of Pax Bank of Germany are causing some consternation.

German newspaper Der Spiegel reported that it had discovered that Pax had invested in aseveral tobacco companies (not banned under Catholic teaching but nevertheless regarded as a harmful product and therefore unwise), BAE Systems, an armaments company which has been accused of obtaining business by dubious means and US drugs company Wyeth.

It is the investment of only euro160,000 that is causing the upset because amongst its wide portfolio of pharmaceutical products are birth control pills: and birth control pills, like most forms of contraception, forbidden by the Vatican, although some factions are less forceful in their condemnation of the use of various forms of contraception.

The Bank has, media reports say today, said it is sorry for the investments. And it has little defence in relation to the BAE and tobacco shares.

But in relation to Wyeth, the bank's position demonstrates a much more complex problem: should there be a question of balance in relation to the companies in which investments are made? Should one product group prevent all investment in a company with many product groups, most of which do far more good than harm?

As the borders between morals and religion are grey and porous, this is a question that will arise more often. In a globalised world, with large complex businesses involved in a wide range of areas, the limits of where to look are open to question.

And investment managers are going to have to do a lot more than look at potential returns, and to make certain that they do as they say they will do.