The Royal Bank of Scotland has long ploughed money into fossil fuels – but now we own it, shouldn’t it stop? Kevin Smith looks at the campaign to get the bank to take responsibility for climate damage.
First published at https://www.redpepper.org.uk/The-oil-and-gas-bank/ by Kevin Smith.
One of the main causes of the current banking crisis has been the ability of big institutions to conceal risk through complex and ever more exotic financial structuring to the point where barely any sort of transaction can be trusted – and without trust, the entire system has juddered to an abrupt halt.
The Royal Bank of Scotland (RBS), formerly a banking behemoth, has been brought to its knees by the crisis, taking a government bailout and agreeing to part-nationalisation. But although the hidden ‘risk’ that got it into trouble has been defined primarily in monetary terms, RBS has been equally adept at concealing the ecological risk inherent in its investment portfolio.
The private banking sector makes considerable profit from lending our money to finance the development of big infrastructural projects around the world – and the UK bank that has been putting the most money into new oil pipelines, coal mines and companies like E On, is RBS.
Until very recently, RBS – which also owns NatWest – even went so far as to promote itself as ‘The Oil and Gas Bank’ with a website of the same name and an international team devoted to making fossil fuel deals happen. While other high-street banks such as HSBC and Barclays have also put up finance for dirty fuels, research has repeatedly shown RBS to be the most heavily involved.
A 2007 Platform report, The Oil and Gas Bank, showed that the emissions embedded within RBS’s oil and gas project finance reached 36.9 million tonnes of carbon – equivalent to one quarter of UK households, and almost as much as the entire emissions output of Scotland itself.
The Cashing in on Coal report (Friends of the Earth/People & Planet, 2008) shows that in the preceding two years, RBS had loaned an estimated $16 billion in 27 different loans to coal-related companies around the world. This included taking part in loans worth $70 billion to E On at a time when it was announcing plans to construct 17 new coal and gas-fired power plants across Europe.
The campaign against RBS’s fossil fuel financing is mounting and involves student groups such as People & Planet and NGOs like Friends of the Earth Scotland, as well as more radical networks such as Rising Tide and the Climate Camp. Even the Women’s Institute has signed letters questioning the bank’s involvement in particular projects.
At the heart of the campaign lies the threat of a consumer boycott if RBS doesn’t start to take responsibility for capping and reducing the emissions embedded in its financing. To the bankers, the threat of such action in the context of widespread consumer concern over climate change evokes the spectre of the high-profile boycott of Barclays in the 1970s and 1980s over its involvement in apartheid-era South Africa.
Choosing one particular bank to target poses certain questions, given that so many of them (with the honourable exception of the Co-op) are involved in fossil fuel development. If RBS were to stop financing such companies and projects, then what would stop other financial institutions from providing the necessary money instead?
As extraction costs in the fossil fuel industry rise, companies are increasingly turning towards injections of private capital to make new projects happen, but there is a limited pot of capital available and expectations are not always met. Strategically eliminating large chunks of financing that would otherwise have been available can seriously slow down the rate at which fossil fuels are being extracted and consumed.
In addition, by targeting the ‘worst offender’, any progress made on their part can then be used as leverage to address the performance of other actors in the sector. This tactic of selecting one target in order to ‘shepherd’ the rest has already been met with some success in the US in a campaign by civil society groups to get major banks to stop financing the wave of planned new coal power stations.
RBS looks set to receive up to £20 billion of taxpayers’ money in the recapitalisation of the bank after its spectacular crash in stock market value in early October. With the government in charge, intervention can’t just be limited to the relatively cosmetic business of capping executive bonuses. It should cut to the heart of the climate damage being inflicted by RBS and other banks through their expansion of fossil fuel use around the world. It’s bad enough that Joe Public’s savings have been used to bankroll this expansion: now his taxes could be as well.
The government appears keen to take an ‘arm’s length’ approach to running the bank and to sell it back to the private sector at the first opportunity. But the majority public ownership could provide an example of how the democratisation of such financial institutions could play a vital role in redirecting capital flows away from climate damage and towards the urgent and substantial investment urgently needed in renewable energy, public transport infrastructure and energy efficiency measures.
Freed of the short-term profit interests that dictate the ‘free’ market, banks could play a huge role in allocating capital towards the massive decarbonising overhaul that the global economy needs.
More information on the campaign can be found on www.oyalbankofscotland.com or the Facebook group ‘Stop the Oil Bank of Scotland’. Kevin Smith is a climate and finance campaigner at eco-justice group Platform