The Royal Bank of Scotland announced a new suite of energy financing policies at the end of May, which are designed to substantially reduce the bank’s exposure to fossil fuel investments and includes halting project-specific financing for new coal-fired power stations, coal mines, and oil sands and Arctic oil projects.
The bank framed the announcement of its new policies as part of its larger desire to reduce exposure to fossil fuels and increase its growth in renewables, specifically as it refocuses its attention on the UK, Ireland, and Western Europe. “There is growing interest in the role banks can play in tackling climate change,” the bank explained, pointing to a recent decision it made to commit £10 billion in funding to the sustainable energy sector between 2018 and 2020. This came at the same time as the bank announced that 80% of its energy project financing in 2017 was directed to renewables.
As such, the new policies continue the bank’s desire to change its approach and shifts its directions for the mining, power, and oil and gas sectors. Specifically, the Royal Bank of Scotland (RBS) will not provide project-specific financing to the following:
- New coal fired power stations
- New thermal coal mines
- Oil sands projects
- Arctic oil projects
- Unsustainable vegetation or peatland clearance projects
- Mining companies generating more than 40% of their revenues from thermal coal – a reduction from 65%.
- Power companies generating more than 40% of their electricity from coal – a reduction from 65%.
“The RBS of 2018 is very different to the bank we were a few years ago,” explained Kirsty Britz, Director of Sustainable Banking at RBS. “If we’re going to support our customers in the long run, then it means addressing the challenge of climate change and the risks and opportunities it presents. We want to help build a cleaner, more sustainable economy for the future, and these policy changes form part of our broader approach to this major issue.”
Responding to the news, London-based charity promoting responsible investment ShareAction praised RBS’ decision.
“The strengthened energy financing policies of RBS implement many of ShareAction’s recommendations for more robust management of climate-related risks,” said Sonia Hierzig, Project Manager at the responsible investment campaign group, ShareAction. “They also make RBS the bank with the strongest energy sector policies out of the top five UK banks. Based on this progress, RBS would now rank 8th in our climate ranking of the 15 largest European banks, up from 11th previously. This is an encouraging step forward in a relatively short space of time, and will hopefully inspire other banks to achieve similar progress.”
ShareAction’s climate ranking of the 15 largest European banks is the first comprehensive report to analyze the current state of the European banking sector’s response to climate-related risk and the transition to a low-carbon economy. The leading bank is BNP Paribas of France, designated as a “Leader.”
Similarly pleased with RBS’ decision was Dr Sam Gardner, Acting Director of WWF Scotland, who when reached for comment explained:
“This decision by RBS to end its funding of fossil fuel extraction in the Arctic is a welcome step in the right direction. With renewable energy supplying more and more of our energy needs, and climate change increasingly threatening our natural world, it’s right businesses move away from oil and coal. The Arctic is a vulnerable home to people and wildlife and the impact of climate change is already being felt there. An oil spill could have an irreversible impact on this pristine environment.
“We hope other banks and finance companies follow suit and instead invest in new, clean energy technologies.”
Given the rankings on ShareAction’s list of European banks, there is plenty of room for Dr Gardner’s hopes to be realized.