Unprecedented legal battle over RBS’ unethical investments

Press Release 19 Oct 2009 admin

Today, an unprecedented legal battle will take place in the High Court over the Treasury’s failure to stop the publicly owned Royal Bank of Scotland (RBS) investing in what campaigners describe as ‘some of the most environmentally damaging and socially irresponsible projects and companies around.’

The case is being brought by three small climate and social justice campaigning groups: PLATFORM, People & Planet and the World Development Movement, which has led some commentators to bill it as a ‘ground breaking, David and Goliath case’.

Today’s oral hearing will determine whether their claim can proceed to a full substantive hearing, likely to take place early next year. The Treasury has hired one of its top barristers, James Eadie QC, to handle the case but the campaigners are optimistic that they will be successfu Deborah Doane, director of the World Development Movement said:

“This is a classic David and Goliath battle. But we believe we have a strong case. The Treasury’s decision to allow RBS to continue to invest in companies that exacerbate climate change and are linked to human rights abuses is unlawful, immoral and undemocratic. Hopefully, this case will be a pivotal point in ending RBS’ destructive lending habits that go against the interests of UK taxpayers, the climate and people whose human rights are being violated.

The campaigners are represented by the leading human rights law firm Leigh Day & Co and the solicitor working on the case, Rosa Curling said:

“The legal challenge has already resulted in a significant victory for the campaign groups. The Treasury, having strenuously resisted any suggestion that it should consider applying environmental and human rights standards to RBS, has now conceded that it does have to, and has undertaken an assessment on whether such standards should be imposed. The Treasury has decided it should not. When it comes to climate change and human rights, it has decided it should not go beyond what is narrowly in the “commercial” interest of RBS. However, this conclusion is unlawful. It is based on a misunderstanding of the law and flies in the face of the government’s wider policies on corporate social responsibility and climate change.”

The hearing coincides with the release of an independent report that finds the financial value of RBS to taxpayers is best served by requiring the bank to phase out investment in fossil fuels. The report, ‘Towards a Royal Bank of Sustainability: protecting taxpayers’ interests; cutting carbon risk’ argues that UKFI, the company set up to manage the government’s shares in the bailed-out banks, should take an ‘active ownership’ approach to its investments with respect to environmental and social issues. This is consistent with best practice and legislation which has been developed over a number of years by institutional investors and the government.

Mel Evans, finance and climate campaigner from PLATFORM said:

“The court case today is clearly showing the legal reasons why the Treasury under the Company Law Act must take action to stop RBS from investing in companies that trash the climate. But there’s also a business case which is demonstrated in this new report. In an increasingly carbon-constrained world, investors, and in this case, the public as owners of RBS, are exposing themselves to more and more risk in continuing to pump billions into new fossil fuel projects.”

The campaigners have calculated that the carbon emissions traced back to RBS’ investments in fossil fuel projects are equivalent to the annual emissions of Scotland, or Bangladesh – a country of over 150 million people, who are facing huge devastation from climate change.

An example of the company and projects that RBS helps to finance is the controversial London-based mining company, Vedanta Resources. After RBS was bailed out, its subsidiary ABN-Amro acted as the lead financial advisor for Vedanta’s Indian subsidiary, Sterlite in its takeover bid of Asarco in March 2009. Recently, it has been reported that over 100 people were killed in a Vedanta mine in India due to alleged lack of concern over health and safety for the workers, and the UK government last week criticised the company over the human rights of indigenous people when planning to construct a new open cast mine. The campaigners point to this as an example of the chasm between government rhetoric and action.

Ian Leggett, director of People & Planet said: “Taxpayers have already had to pick up the tab for bailing out RBS for its irresponsible lending. Yet if the government allows it to carry on investing in projects and companies in the certain knowledge that such investments will accelerate climate change, we will have to pick up an even bigger tab in the future. Investing in high carbon projects is not in shareholders’ and taxpayers’ interests and the sooner RBS stops supporting climate damaging projects the better.”

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