Advocates took to the streets of Glasgow last month to press banks and other financial institutions to become more responsible stewards of the climate at the 26th United Nations climate summit. But a bank just 50 miles east of the Scottish city is already showing what that could look like.
NatWest, formerly the Royal Bank of Scotland, has made an unexpected transformation from a key oil and gas industry financier to a leader in green finance, reducing its fossil fuel exposure and pledging to make £100 billion, or $133 billion, sustainable. – Energy projects in the next four years.
Headquartered in Edinburgh, the bank is one of the UK’s banking and investment sectors, in the words of the government, “the world’s first net zero aligned financial center.”
Britain’s financial industry since Brexit lost some of its shine, because London can no longer be used as a center for European trade. Determined to protect the nation’s reputation, the Treasury is exploring other ways to attract investors, including loosening rules on listing companies to attract founder-led tech start-ups. and supporting fintech companies. But green finance could also be the answer.
NatWest’s climate-friendly transformation has even won the cautious praise of some protesters.
Johan Frijns, co-founder of BankTrack, a Dutch startup that is pressing banks to stop financing fossil fuel projects, said NatWest could set a new benchmark for turning a large bank into a low-carbon economy.
“We want to see NatWest as a beacon of hope, a bank that shows it can change,” said Mr. Frijns. “And it comes from afar. It was an honor to be an oil and gas bank.”
The transition in NatWest has helped along with its dwindling global size. Shortly before the 2008 financial crisis, largest bank in the world by assets. But then, facing huge losses as the global credit crunch hit hard, he was bailed out by the British government and reined in his ambitions. Now, nearly half of its loan book is made up of mortgages, reflecting its smaller, local focus.
But over the last decade, NatWest has become more diligent in its climate-related goals, first slowly and then rapidly. In 2012, it set aside £200m for businesses to undertake energy efficiency projects. Over the next few years, it helped fund more renewable energy projects, including wind farms. In 2017, it reported that it did not directly finance any new coal mining or coal plant projects. The next year, NatWest said it will channel £10 billion into sustainable and climate finance over the next two years.
But the biggest changes have come under the leadership of Alison Rose, who took over as CEO in late 2019. Ms Rose said she wanted to pursue a “purpose” as well as renaming the bank and removing it from its crisis-ridden past. led bank” focuses on “helping address the climate challenge”.
In October the bank announced it would channel it. £100bn for green and sustainable finance He said he would stop lending and making commitments to major oil and gas producers unless they had a coherent transition plan to limit global warming to 1.5 degrees Celsius above pre-industrial levels by the end of this year. (UN Paris agreement target). The bank has also committed to a “complete phasing out” of coal-related investments by early 2030; That same year, it plans to halve carbon emissions from all of its finances before reaching net zero by 2050.
The bank’s transformation is not complete: at the end of September, NatWest’s exposure to major oil and gas companies, mostly loans, was £1bn and £600m to companies where more than 15 percent of operations are coal-related. . But its priorities are following the government-set path, setting a legally binding target of reducing carbon emissions by more than three-quarters from 1990 levels by 2035 and achieving net zero greenhouse gas emissions by 2050. is to explore how to achieve these goals.
Rishi Sunak, the UK’s highest financial officer as Minister of Finance, initially came out of financial institutions and publicly traded companies, including asset managers and pension funds. post how they will fit activities and investments that will help the country achieve its net zero goals. These transition plans will build on existing requirements to publish financial information on climate risks for its business operations and investments.
“It’s a really positive sign that the UK has acknowledged that it needs to account for emissions associated with the financial sector,” said Alison Kirsch of Rainforest Action Network. banks to finance fossil fuels. “Something not in the USA”
However, he said the transition plans are not yet mandatory and the British government will let the market decide whether the plans are adequate or credible. “We didn’t see the market being a good judge on many climate-related issues,” he said.
There are other ways Britain can struggle to achieve its goals. Before transition plans become mandatory, the government creates a task force to determine what a good plan looks like. While some international groups have already offered guidance on transition plans and delayed mandatory reporting, it is not expected to report for another year. And the government has clearly stated that these transition plans not designed to prohibit investments in carbon-intensive activities.
“The rules are all about disclosure – and disclosure is very helpful – but it won’t solve anything on its own,” said CEO Chris Stark. Climate Change CommitteeA watchdog funded by the British government to advise MPs on environmental policy.
“But I think it’s an important first step to take further action later on,” added Mr Stark, who recommended the group to commit to being a net-zero-aligned financial center of the UK.
The UK is one of the few countries trying to achieve climate targets using financial regulation. But advocates say more needs to be done to become the leader of this group, which includes France.
“If you’re really serious about being a net-zero-aligned financial center, you should move on to mandatory reporting really quickly,” said Bethan Livesey of British charity ShareAction. “And you have to have an accountability mechanism there.”
Chris Dodwell of Impax Asset Management, a former climate negotiator for the British government, said transition plans should also show investments in sustainable energy and green projects. Achieving the UK’s climate goals will require a fivefold increase in investment in electric vehicles and alternatives to home gas boilers by 2030, for example, according to the Climate Change Committee.
As the financial industry seeks to restructure itself to meet these goals, NatWest’s reputation as a leader faces a close test. The deadline for major oil and gas companies to present a credible transition plan or for the bank to forfeit its lending and brokerage services is one month away. Lawyers want to know that the threat of walking away is real.
James Close, the former director of climate change at the World Bank, who joined NatWest this year to spearhead climate change, said the bank has told some companies it cannot finance them in the future based on the information they have provided. change strategy. He said these companies came back to the bank to check if the information was correct.
“It’s a conversation – not some kind of one-time decision,” said Mr. Close. “And then we’ll have to evaluate.”
While NatWest’s business with oil and gas companies is smaller than some of the other major British banks, Mr. Frijns of BankTrack is not willing to take the pressure off.
“I promise that if we see things as usual for NatWest by the end of this year, they will be the target of the campaign next year just like any other bank,” he said.