This report has been commissioned by People & Planet, World Development Movement, Platform, Friends of the Earth Scotland, and BankTrack to investigate whether and how the Government should align its recent investment in the Royal Bank of Scotland (RBS) with social and environmental objectives, in particular to combat climate change. Although many of its recommendations can be applied to other Government-rescued banks, this report focuses specifically on RBS.
Download the report (pdf) or read online below.
The report examines investment good practice with respect to environmental and social factors and focuses in particular on how the Government, through UK Financial Investments Ltd (UKFI), might apply a risk management perspective to RBS’s lending to companies involved in fossil fuel extraction and high carbon industries. It argues that such an analysis should form the basis of the Government’s policy towards its investment in RBS. The report does not suggest that Government should be involved in the day-to-day management of RBS; but argues that the Government, through UKFI, should be acting as an active owner, for example by setting goals, incentives and boundaries under which RBS operates, in the way that is considered good practice by investors.
The Government had to take majority ownership of RBS because the bank failed; which strongly suggests that its risk management was less than optimal. This has also led to widespread public anger at the use of public funds for the bail-out, along with concerns over executive remuneration at the failed bank. RBS’ reputation is currently at a low ebb, and the banking industry and RBS in particular are facing the widespread public perception that they are unconcerned and disconnected with the society in which their activities are embedded. Dealing with environmental and social issues should be a major priority for the banks, if for nothing else than to help restore their tattered reputation. However this report argues that with regards to RBS, there is a strong business case for UKFI to intervene, as an active owner, to reorientate the investment strategy of the bank.