Dutch banks still invest in arms companies-report

* Six of 12 surveyed banks make weapons investments

* State-owned banks out of such investments - report

* Report calls on banks to tie loans to arms

AMSTERDAM, July 1 (Reuters) - Despite some progress in the last two years, six major Dutch financial institutions still invest their own money or client money in companies that either make controversial weapons or trade arms with a select list of nations, a consortium said on Wednesday.

But the group also said most banks have established clear policies against such investments and follow them closely.

The report from a group called Eerlijke Bankwijzer ("Fair Bank Guide") named ING Groep ING.AS, Rabobank [RABO.UL] and its subsidiary Robeco RBEN.AS, Aegon AEGN.AS and two units of SNS Reaal SR.AS as those that make such investments.

The group said ING invests its own money and client money in weapons makers and traders, while Rabobank and Robeco invest their own and client money in weapons makers. Aegon and the SNS units do not put their own capital in such investments, the group said, but place client funds in them.

“It’s not our goal to blackmail banks. We want them to improve their sustainability policies, particularly on arms trades. And we want to do this through clients and customers,” said project leader Peter Ras in an interview.

“The majority of the banks, they follow their policy and there are no contradictions between policy and reality.”

The group is an initiative of Amnesty International, the Dutch affiliate of Oxfam, Milieudefensie (Friends of the Earth Netherlands) and trade union promoter FNV Mondiaal.

ING, in a statement, applauded the ultimate goal of the group but said its report was flawed.

“Eerlijke Bankwijzer lacks nuance and we do not recognize ourselves in the findings of the report,” the bank said.

Aegon also welcomed the concept and said it was pleased with the ratings it received for corporate responsibility. But it said it was not happy with the ratings for its investment funds.

“We try to find a balance between the requirements of our customers, on one hand, and the need to respect the principles of responsible investment, on the other,” Aegon said.

Rabobank and SNS were not available to comment.

It follows up on a report Oxfam Novib issued two years ago, which came amid controversy in the Netherlands about whether banks and pension funds should hold stakes in defence companies.

Pension funds divested themselves of such investments in early 2007 after a TV report, and a number of banks pledged to do the same in June 2007 after the Oxfam Novib report.

Six other institutions, the group said, had no controversial investments in weapons makers or suppliers: state-owned ABN AMRO and Fortis Bank Nederland [FORTH.UL], ASN Bank, DSB Bank, Friesland Bank [FRIBK.UL] and Triodos [TRIOD.UL].

The report recommends that banks not invest in arms makers or traders, that they not invest client money in those companies and that they apply pressure to arms makers and traders to change their ways as a condition of bank financing. Editing by David Cowell)