Some surprises appear on Morley's SRI funds blacklist

Morley Fund Management, one of Britain's largest fund managers, has drawn up a blacklist of firms that will not be included in its high-profile socially responsible investment (SRI) funds

The list includes tobacco, gaming and oil firms along with some well-known high-street names with no obvious connection to so-called "dirty" industries.

High-street retailer Next, HSBC bank, Liberty International and broadcaster BSkyB are among 29 firms in the FTSE 100 that Morley's specialist team deems unfit for SRI funds. Others include WPP, the advertising giant led by Martin Sorrell that has just signed a deal to buy Cordiant; Man Group, the hedge fund group run by Stanley Fink; and Morrisons, the supermarket chain headed by Sir Ken Morrison. Pharmaceuticals giant GlaxoSmithKline is in the list of firms that can be included in the SRI funds, but its ranking has slipped on "concerns regarding corporate governance".

Last month, the company's proposed pay package for Mr Jean-Pierre Garnier, its chief executive, was voted down by shareholders.

The list is based on Morley's FTSE 100 "sustainability matrix". The system ranks companies according to their social and environmental risks and liabilities, and produces a measure of business sustainability. A company's products and services are rated from A to E, while its management practices are rated from 1 to 5. Anything below C3 is deemed uninvestable by the SRI team.

Next, HSBC, Liberty International, BSkyB, WPP, Man Group and Morrisons are all rated C4. Their products are not seen as a problem but their management practices are.

Some companies that have problem products - notably the oil companies - are rated highly for management practices but remain uninvestable by SRI.

Shell is one of five companies that is rated "1" in recognition of its advances in socially responsible management. The others are BT, Severn Trent, Lloyds TSB and Scottish Power.

Mr Paul Moody, Morley's SRI director, said that, despite increasingly stringent criteria, most FTSE 100 companies maintained or improved their grade. Marks & Spencer, Standard Chartered, MM0₂, Associated British Foods and Hilton are among the firms showing the most improvement since last year.