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RBS, Barclays, HSBC ... it's time to get out of coal!
Greig Aitken / BankTrack
4th August 2015
There's one big thing that Britain's biggest banks could do to reclaim their grievously impaired reputations, writes Greig Aitken: commit to stop investing in coal projects. As well as reducing climate change and local environmental impacts, it would also 'de-risk' their balance sheets as the global tide, from the US to China, turns against the dirty, carbon-heavy fuel.
RBS, Barclays and HSBC just happen to be the UK banking sector's top 'climate criminals', having doled out, according to our conservative estimates, in excess of £40 billion to the global coal industry in the last ten years.
In advance of the UN climate summit in Paris, campaign groups are urging the banking sector to take one concrete step towards combatting the climate crisis, and quit financing coal.
It is hard to think of a UK business sector in more dire need of an image boost than the banking sector. The UK's three biggest banks - Royal Bank of Scotland, Barclays and HSBC - appear stuck on a never-ending, Escher-esque scandal treadmill of their own making.
Round and round they go, ripping off small businesses (RBS), enabling Latin American drug cartels to launder billions and orchestrating tax evasion in Switzerland (HSBC), and blatantly mis-selling payment protection insurance to vulnerable customers (Barclays).
This behaviour is of course accompanied by obscene bonuses that the same banks have still seen fit to churn out to staff as regularly as clockwork every year since the 2008 crash.
Reporting from outside RBS's City of London headquarters in November last year as a further multi-bank scandal concerning illegal foreign exchange rate manipulation was breaking, the Economics Editor of Channel 4 News, Paul Mason, visibly fighting back the expletives, let rip on air:
"I'm just sick of it, after six years why do we have to keep coming to do it?"
He was referring to yet more time spent covering yet more market manipulation, with little in the way of effective sanctions being dished out to prevent it, Mason's angst summed up the UK public's views about the banks.
Ending climate crimes
RBS, Barclays and HSBC just happen to also be, in BankTrack's estimation, the UK banking sector's top 'climate criminals', having doled out, according to our conservative estimates, in excess of £40 billion to the global coal industry in the last ten years.
In spite of this, and mindful of the fact that the UK's big three could really be doing with a much-needed injection of positive PR, we've decided to provide them with a (free of charge) tailor-made solution with the potential to bring about major and - crucially - rapid advances in the struggle against global climate change.
This summer, with the collaboration so far of groups including Global Justice Now, Greenpeace, Move your Money and 350.org, we've launched an international public campaign in the run up to the United Nations Paris climate summit at the end of the year.
We're urging RBS, Barclays, HSBC and the rest of the world's big banks to do the Paris Pledge and publicly commit to a phase out of their financing for the coal industry.
Such global summits are of course manna from heaven for PR flacks that hover around - or are embedded within - big corporations such as banks.
We've already seen BNP Paribas, currently the top French coal bank by a long way, provoking widespread incredulity and criticism by becoming one of the corporate sponsors of the Paris summit. This announcement came just a few weeks after BNP Paribas stone-walled the opportunity at its AGM to say or do anything positive about its deep ties to coal.
HSBC - banking on climate spin?
In the UK bank context, HSBC has been the first mover when it comes to jumping on the Paris summit 'pro-climate' bandwagon, but its intentions thus far appear paper thin at best. To date, HSBC is one of only two international banks - along with Dutch bank ING - to have joined a coalition of 43 'CEO climate leaders' calling for "concrete climate action" from world leaders.
This coalition proclaims: "We welcome transparency and disclosure regarding financial investments and policies in relation to all energy-related activities - including fossil-based and alternative", concluding that "Delaying action is not an option - it will be costly and will damage growth prospects in the years to come."
It all sounds admirable and reasonable - but when are these ambitions going to be realised? HSBC, in fact, still refuses to disclose information related to its energy-related activities.
Like almost all of the world's major banks, HSBC is notably shy about disclosing its financing for coal, oil and gas, preferring to focus in its annual and other reports on any clean energy investments it can possibly point to.
Barclays gets out of mountain-top removal coal mines
The same is true at Barclays, though the bank's fossil fuel policies have shown some signs this year of being dragged out of the twentieth century.
In April the bank joined a growing number of its competitors in getting out of financing the highly controversial mountaintop removal (MTR) coal mining practice that has devastated ecosystems and communities, most strikingly in the Appalachian mountains in the eastern US.
And that's definitely the kind of change we need: as recently as 2013 the bank was reckoned to be the world's biggest financier of MTR companies.
RBS - welcome transparency, but little else to like
The picture is different, however, at RBS where for a few years now the bank still associated with Fred 'the Shred' Goodwin has - really - been shedding a good degree of light on its entire energy investment portfolio.
Although still to publish its full Energy Review report for 2014, RBS estimates on the sustainability section of its website that of the several billion pounds it invested in the energy sector last year, "22% of our general lending to our top 25 power customers is funding coal and gas energy generation, and 6% is funding energy generation via renewables."
While the transparency is welcome, the statistics represent a jaw-dropping discrepancy from a bank that has sought to shake off the 'Oil Bank of Scotland' tag by positioning itself as a renewables champion, and that 12 months ago was telling us that within five years it "aims to lead from the front on ethical banking".
With RBS currently embarking on a major pullback from global markets to streamline its business and focus predominantly on the UK and Ireland, it now has a golden opportunity to jettison its coal and other fossil fuel investments for good.
Mainstream calls for radically different approach
It is not just campaigners arguing the case for banks to quit coal. At the end of June those renowned tree-huggers at KPMG warned in a new report that the European banking sector must adopt a "radically different approach for directing capital toward environmentally and socially sustainable economic activities."
Focusing on 12 major European banks, including RBS, Barclays and HSBC, KPMG offered a frank and damning assessment that the banks in question are simply not doing enough to incorporate environmental and social (E&S) considerations into their operations.
"E&S issues like climate change, water scarcity and ecosystem decline are already impacting the risk profiles and current and future cash flows of sectors and companies they finance and invest in", the 'Ready or not?' report argues.
"Not taking into consideration these E&S issues in valuing and rewarding economic activity would be unwise and reduce the banks' resilience. It is not a matter of 'if' E&S externalities will be internalised by regulation, market dynamics and stakeholder actions, but 'when' and 'to which extent' this will happen."
The 'Crédit Agricole moment'
French bank Crédit Agricole, another of the banks in KPMG's firing line, notably made a major move forward by announcing in May that it is ending direct financing for coal mining projects. For other corporate lending and underwriting activities, it "will not develop relationships with clients predominantly active in coal mining."
That's almost, but not quite, a blanket pull-out from coal mining for Crédit Agricole. The bank has told us that their commitments means that they will not touch global coal players with more than 50% of their business in coal mining, thus excluding 30-40 companies that the French bank previously supported.
Nonetheless, this is a major breakthrough within the European banking sector, and in the climate change debate may come to be seen in future years as the 'Crédit Agricole moment'. As the bank further notes in its updated coal sector policy,
"Coal raises a specific dilemma to the extent that, while a significant share of the global energy mix is still based on its combustion, the current development of the coal industry seems incompatible with the international agreement to combat climate change."
This is about as close as one can imagine to a proper statement of 'climate activism' from a bank, and of course the sea change has in large part been brought about thanks to more than ten years of campaigning from our colleagues at Friends of the Earth France and other groups.
Now we are campaigning to extend this 'Crédit Agricole' moment across the European banking sector, in the UK and beyond, and to seize the opportunity afforded by the Paris climate summit.
Achieving this would free up capital to invest in the booming, but still under-funded, renewables and energy efficiency sectors, and avoid the huge risks of stranded assets which come with financing old dirty energy.
It could also contribute to turning round the reputations of some household banking names by getting them working tangibly and urgently in the public interest.
They certainly need it.
Action: Support our call and insist on a much better deal for public health, the environment and the climate by pressuring banks to end their financial life support for coal.
Greig Aitken is coal campaigner with BankTrack, a Netherlands-based campaign group tracking the operations and investments of private sector banks and their effect on people and the planet. Join the Paris Pledge campaign and support the call for banks to sign the pledge to quit coal. Twitter: @BankTrack
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