Research in recent years suggests more and more customers prefer to spend with ethical businesses and also investors prefer to invest in ethical business models...

Is the expansion of the Co-op banking services, the Co-op known as one of Britain’s best ethical brands, the latest confirmation that ethical business is good business?

The Co-operative Group has agreed terms to buy 632 Lloyds TSB and Cheltenham and Gloucester branches from Lloyds Banking Group.

The sale follows guidance from European regulators on competition...

The Co-operative Group is buying the branches from Lloyds Banking Group, representing 6 per cent of the UK market, and including 4.8 million customers.

The transaction sees the Co-op's ethically driven banking model develop a combined banking set up of almost 1,000 branches across the UK, enormous growth in effect... representing nearly 10 per cent of the UK bank network and reaching about 11 million customers...

The growth of the Co-operative Financial Services can be seen as a sign of a desire for ethical standards in banking from the public and public approval of the Co-op, a member owned cooperative bank with a strong ethical policy. The Co-op’s ethical policy is based in part around support for the Fair Trade movement. The move also follows in a week that has seen the latest scandal rock British banking, i.e. the findings in the US that HSBC has been involved in laundering money...

With public confidence in many UK banks at an all-time low the Co-operative Group's expansion in contrast is a success story in high street banking led substantially via its commitment to ethical standards.

The Co-op launched its ethical policy in 1992. The Co-operative Bank since then has withheld over £1 billion of funding from business activities that its customers say are unethical, whilst growing commercial lending to almost £9 billion...

Co-operative Group Chief Executive, Peter Marks, says:

"We're delighted to be announcing that we have reached agreement in principle with Lloyds Banking Group on the terms of this important and transformational transaction...

"It would be a great deal for customers because it would make the services of our member-owned, customer-led, ethically-driven bank available to millions of people..."

The Co-op says it hopes to: "restore trust in a sector whose image has been badly tarnished over recent years..."

Despite the economic downturn the Co-op posted an increase in profits in its last full year report (2011): £585 million, up 0.5 per cent on the previous year; and also invested £595 million in the business in 2011...

The company can be seen as having got through the financial crisis in banking substantially due to maintaining its ethical and socially responsible credibility not abandoning it.

The growth of the company’s bank services have been shown previously in an independent report by the CBI which has published a case study focusing on how development sustainability reporting helped the Co-op Bank and Co-operative Financial Services gain competitive advantage as a direct result of its ethical reputation...

The finance arm of the Co-op has been building up its ethical policy since the 1980s when it discovered a portion of its new customers were joining the bank due to its perceived ethical standards.

The report found that since then the Co-op bank has developed its sustainability reporting and customer-focused ethical policies considerably and was now achieving greater customer recognition and profitability via its ethically motivated standards...

"ethically motivated customers...are more likely to be loyal to the bank when considering new products and are more likely to recommend the bank to friends and family..." the joint Article 13 and CBI report said.

The Co-operative bank, the UK's biggest bank with a reputation for ethical investing, and one of the few of the big banks with positive branding in place in the light of scandals of recent years was seeing a 25 per cent increase in applications the week after the Barclays Libor controversy erupted...

That backs numerous independent reports that have shown how Corporate Social Responsibility including environmental responsibility actually drives up business success rather than harms it.

Stock values rise when companies disclose environmentally friendly information, a UC Davis Graduate School of Management survey has revealed.

The study found companies investing in carbon reduction strategies saw their share prices increase...and that investors preferred to invest in green businesses.

One good thing about the banking crisis may be that more and more consumers and business leaders wise up to the value of ethical business practices and investment in CSR programmes...

And ones that are about making a genuine impact not just grabbing positive headlines...