Treasury faces legal action over 'dirty' banking investments

Campaign groups say bank bailout breaches government's own policies on reducing carbon emissions by lending money to coal, oil and gas companies

Afua Hirsch, legal affairs correspondent
guardian.co.uk, Wednesday 1 July 2009 11.37 BST

The government is facing legal action after environmental groups accused it of spending billions on "dirty and destructive projects" through the recapitalisation of banks including the Royal Bank of Scotland (RBS).
"RBS has the worst record by far of any UK bank when it comes to financing projects around the world which cause environmental damage [and] particularly bad human rights records," a claim by three campaign groups says.
The claim, the first to challenge the bank bailout on grounds that it breaches the government's own policies on reducing carbon emissions, alleges that since it was recapitalised in October 2008, RBS has contributed to loans worth an estimated £10bn in coal, oil and gas companies.
"The Treasury has displayed a blatant disregard to the government's own commitments to tackling climate change, and its rules for spending public money," said Julian Oram, from anti-world poverty network World Development Movement.
The case comes after the environmental audit committee called on the Treasury in March to consider "imposing some form of environmental criteria on the investment strategies of those banks in which the state had a controlling stake."
Last year a new Climate Change Act came into force, which includes a legal duty to reduce the UK's carbon emissions by 80% from 1990 levels by the year 2050.
The claim also points to the government's "green book", which requires assessments of all new projects to promote the public interests, and the groups say, have made numerous domestic and international statements about its commitment to tackling climate change and human rights abuses linked to corporate activity.
But in April the Treasury stated that "the environmental and human rights records of the individual banks were of no relevance" to the decision to bail out the banks, in a letter to environmental group Platform.
"The refusal by the Treasury to even consider whether an investment could contribute to climate change or result in human rights abuses is clearly unlawful and completely out of line with the government's own guidance, policies and targets on these issues", said Rosa Curling at Leigh Day solicitors who is representing the groups.
"The decisions RBS has taken since recapitalisation have been very harmful," Curling added. "It's the most dark example of how the government's decision not to consider in any way the human rights and environmental issues is having a really negative effect".
Although the case is being brought against the government it is also a further challenge for RBS, which also faced controversy over the pension of its former chief executive Sir Fred Goodwin after he was initially awarded a £16m pound pension despite being widely regarded as having presided over "irresponsible" risk-taking at the bank. The bank, which has described itself as "the oil and gas bank", is estimated to have taken part in £10bn in loans to coal, oil and gas companies since the bailout.
The groups, which will now await a response from the Treasury and permission to proceed with the case at London's high court, said they were not challenging the decision to bail out the banks, an area of policy that the courts have in the past refused to consider.
"We are not suggesting that the banking bailout shouldn't have happened", said Kevin Smith, campaigner at Platform. "We are saying that now that it has happened, the government has a responsibility, especially given its posting in the international political arena as being a 'global leader on climate change' to ensure that the public isn't paying to expand further fossil fuel developments."
The Treasury, which has 21 days to respond to the claim, did not comment.