Thursday 17 September 2009

"Publicly-backed banks should hit higher standards on climate change"

Guest post by Ian Leggett.

Given the research published today by IPPR about the public's half-hearted commitment to action against climate change, the government needs to focus on what is within its power to make an immediate difference to this vital global issue.

The Royal Bank of Scotland, along with Lehman Brothers, Enron and Northern Rock, has become emblematic of everything that was wrong with the way the financial sector has used its enormous power. Driven by greed and short-term thinking, RBS accumulated billions of pounds worth of toxic assets. Like all gamblers, it didn't know when to stop and only when its imminent collapse threatened to bring down the entire banking system did the government step in and take action.

The Royal Bank is the major culprit in another form of irresponsible lending. More than any other UK bank it has a long history of providing support to projects and companies that are investing in projects that are certain to make climate change more likely. Now a publicly-owned bank, it should be living up to higher standards than this.

These loans to energy and oil companies, which are still seeking every opportunity to invest in coal-fired power stations and open up new oil fields in ecologically fragile areas, are the equivalent of investing in some dodgy derivative.

But this time it is the world's climate system, not its financial system, which is being pushed over the edge. RBS's behaviour is simply irresponsible and all the more unacceptable because climate science has become increasingly clear in warning us about the consequences of seeking to profit from perpetuating our dependency on highly polluting carbon fuels. The price for RBS' reckless disregard of the consequences of their support for the fossil fuel sector will be paid by poor and vulnerable people in communities all over the world who are on the front-line of catastrophic climate change. In this country it will primarily be the younger generation who will pick up the tab.

This situation is made all the more shocking when we bear in mind that it is a Labour government - a government which proclaims its determination to provide aid and support to the poorest overseas; which prides itself on challenging inter-generational inequalities and
which has led the fight against climate change - which is allowing RBS to continue to pursue lending policies and priorities which are so clearly contrary to the public good.

In the government's low carbon strategy it is made crystal clear that it recognises that there is no high carbon future. So why is the government allowing millions of pounds of taxpayers money to be poured into dirty coal-fired power stations, the exploitation of tar sands and
oil prospecting in ecologically fragile areas such as the polar regions?

It does not have to be like this. The government should exercise the power it has - not to manage the bank on a day-to-day basis, but to shape its investment mandate to convert RBS into a global leader for low carbon lending. The need is obvious. Recent research by IPPR and others shows that lack of upfront finance is a significant barrier to the development of new green technology.

So we have an exceptional opportunity. Let's not waste it. Urgent and decisive action is needed to tell RBS to stop sawing down the branch upon which we are all sitting.

Ian Leggett is the director of People and Planet, an NGO which works on climate change.

1 comment:

Stuart White said...

Ian: thanks for this very interesting and important post. I think it raises a very big - but neglected - question about appropriate control of these banks. The banks are making choices all the time which implicate all kinds of values. Since we finance them, we are complicit in the projects they choose to pursue. Yet we have no say in what projects they choose to pursue. A government which believed in taking the 'ethical personality' of its citizens seriously would have to put the banks under democratic control.