New banking rules should reveal emissions from investment, campaigners say

Environmental campaigners concerned that tax payers are potentially bankrolling highly polluting projects

Allegra Stratton, political correspondent
guardian.co.uk, Monday 2 March 2009 13.11 GMT

The government is under pressure to insert environmental criteria into new UK banking regulations as campaigners and opposition politicians call on it to use the state's 70% stake in the Royal Bank of Scotland to force the failed bank to disclose the carbon emissions of its investments.
In the past six months, when RBS received £33bn in consecutive government bail outs, it was also involved in financing loans to coal, oil and gas companies worth nearly £10bn (£9,941m) — over a quarter the amount the bank has received from the tax payers.
In November last year, RBS — along with a group of other banks — refreshed the financing for an existing £6.66bn loan to the German energy company E.ON. Campaigners claim E.ON's plans to build the UK's first new coal-fired power station for 20 years at Kingsnorth in Kent — as well as a reported 17 coal-fired power stations across Europe — will render impossible the UK's binding target of an 80% cut in greenhouse gas emissions by 2050. A Nasa scientist and leading climate change expert, Jim Hansen, recently called coal-fired power stations "factories of death".
The ABN Amro arm of RBS recently helped finance a £1.1bn pipeline to the Alberta Oil Sands region. Between 2004 and 2007 RBS was involved in loans to oil sands company OPTI Canada. The greater energy needed to extract oil from the sands results in three times more greenhouse gas emissions than producing a barrel of conventional oil.
A report last year from Platform, a pressure group, concluded RBS had helped lend more money to the coal industry, in more deals, than any other major UK bank.
The revelations have prompted anger from environmental campaigners, upset that tax payers are potentially bankrolling highly polluting projects, and criticism from the Liberal Democrats who point out a lack of transparency and possible conflicts of interest.
"It's a scandal that the hard-earned pounds of climate conscious tax payers across the country could be being used to bank roll the development of new coal-fired plants," Kevin Smith, the director of Platform, said. He called for greater clarity in the purpose for which banking finance is provided, since it is impossible to tell the extent to which financing supports high or low carbon projects.
The campaign group Climate Rush, which calls RBS the "biggest investor in climate chaos", will protest against the bank's coal investments outside its headquarters on Thursday.
The Liberal Democrats willtoday put down an early day motion (EDM) calling on the government to bring in new legislation to make banks disclose the nature of their carbon liabilities. Their EDM will also demand the government addresses the role banking finance plays in projects "that exacerbate climate change" by inserting into new banking regulation environmental concerns alongside financial ones. The chancellor, Alistair Darling, has asked Lord Turner, chair of both the Financial Services Authority and the Climate Change Committee, the government advisory body, to draw up new city guidelines. He is expected to publish them in mid-March.
The EDM will further call on the government to make RBS publish its "embedded emissions" — those that result from lending to fossil fuel projects rather than only those of its UK operations. This comes at a time when the government will announce its first national carbon budgets alongside the budget in April, putting limits on CO² emissions into legislation.
The Lib Dems are also pushing for legislation that would see banks, pension funds and other private finance investments investing in "unconventional" fossil fuels — such as the highly polluting tar sands extraction — accountable to share holders and the public for their investments.
Opposition politicians also urge the government to encourage investments by RBS in renewable energy. In September last year, RBS was also involved in at least one financing project for renewable energy worth £427m. In 2007, the bank described its investment in renewable energy at being just over £1bn.
RBS has been heavily involved in financing loans to E.ON. Data published in the magazine Project Finance, sourced to the finance analysts Dealogic, shows that over the past three years, RBS was involved in two other loans to E.ON — one worth £33bn in November 2006 and one for £15bn in November 2007. The RBS-involved extension of £6.66bn worth of credit to E.ON in November 2008 was detailed in a company press release.
E.ON has one of three bids in play to win a government competition for funding of the UK's first demonstration of carbon capture and storage (CCS), technology that aims to capture and bury underground damaging greenhouse gases.
The prospect of RBS-backed E.ON winning a contract from the government, which controls RBS, is "dubious", said Lib Dem climate change spokesman Simon Hughes: "The [bid] should be put on hold until independent scrutiny can make sure there is not a conflict of interest or vested interest. The Kingsnorth decision will be controversial enough without this added and dubious complication."
A Treasury spokesman dismissed the suggestion of any conflict of interest. He said: "The government has made clear all its investment in banks will be run on an arm's length basis [by United Kingdom Finance Investments LTD]. There is clear blue water between the government and the investments of the banks. This is just silly."
RBS has, in the past, also been involved in financing companies involved in the two other CCS bids, though these loans were smaller.