Soaring investment in biofuels could expose companies to financial and social risk because of the environmental problems they can cause, Co-operative Insurance of the UK has warned.

In a report published Monday, Co-operative Insurance calls on the companies in which it invests to tackle the problems associated with biofuels, saying it plans to "engage with companies and seek reassurance that they will put strategies in place to mitigate the risks".


In the US, there has been rapid growth in the production of ethanol, made from corn and used as an additive in petrol. That growth is expected to continue as the country moves towards President George W. Bush's target of replacing 15 per cent of gasoline consumption with biofuels by 2017.

In Europe, biodiesel, produced from vegetable oils, has grown faster but the use of ethanol is also rising, helped by the European Union's target of getting biofuels to 5.75 per cent of road fuels by 2010.