The Royal Bank of Scotland has cut worldwide investment loans to oil and gas companies in the past year, it has also doubled its lending to green energy initiatives- reaching £1bn a year.
The figures may signify a major change of direction for the bank, which was bailed out during the economic crash. RBS have been, until recently, one of the biggest global financiers of fossil fuels- drawing repeated criticism from environmental campaigners.
This change has come about mainly because of the fact that RBS has started to pull out of North America and Asia, in a move that will bring most of its operations back to the UK. Royal Bank of Scotland is still 73% owned by the state, after it was bailed out by the taxpayer to the tune of £45bn in 2008 and 2009. As of the beginning of April this year, the bank ceased all business in Canada; the bank had previously been a large funder of highly polluting tar sands projects.
RBS said that it was taking environmental issues into account and would not being funding any new tar sands projects. The bank also ended all loans to mining companies that are only focused on coal.
The recently released figures showed that the company’s global involvement with gas and oil in 2015 dropped by 70% when compared to 2014- taking the total from £22bn to £6.6bn. The bank’s exposure to metals and mining, including coal, went down from £4.7bn to £2.1bn.
This divestment has comes after both the oil and coal industries slumped in 2015. Many other financial organisations are doing the same thing. Some commentators have said that these institutions’ commitment to green energy will come if those sectors recover.
Organisations such as the World Bank and the Bank of England have also begun moving their investments away from fossil fuels, many have said that global movements to tackle climate change could lead to assets in these areas becoming stranded. The world’s biggest sovereign wealth fund, owned by Norway, dropped 52 different coal firms including Drax.
A senior analyst at Carbon Tracker, Luke Susses, said:
“It is encouraging that financial institutions are beginning to understand the risks posed to fossil fuels by the low-carbon transition. The true litmus test, however, will be if RBS holds to this lending trend if the oil price rebounds in the short term.”
The bank’s global structured financing, that funds major projects, has changed a lot in the last few years; green energy plans accounted for over 90% in 2015, in 2014 this figure was just 67%.
On top of this, 100% of the bank’s structured financing in the UK was for renewable energy projects. Their total lending for sustainable energy doubled last year to reach £1bn and, according to InfraDeals, makes RBS the largest lender to renewable energy in the UK.
The initiatives that the bank has helped includes the biggest floating solar project in Europe. It has also expanded its programme of energy audits, which is aimed at helping companies find ways to cut energy use and also aides them will installation costs.
RBS released a statement saying:
“We are supporting customers in carbon-intensive industries to diversify and move away from the most high-impact activities. We will work with them to try and achieve this, but where the impacts are too high, we have proven we are prepared to withdraw our support.”
The campaign manager of Move Your Money, Fiona Travers-Smith, said:
“While this new direction of travel is welcome, it should be greeted with a degree of scepticism from the bank formerly promoted as ‘the oil and gas bank’.”
He went on to say that the majority of the largest coal producers are very diversified and that BHP Billiton, Anglo American, and Glencore, which have been lent more than £3bn by RBS since 2004, have not been affected by its new direction.
He said:
“If RBS wants to be taken seriously as an environmental bank it must divest completely from fossil fuels.”
Investors worth over $3.4tn have already stated their intentions to move away from fossil fuel investment.
Saudi Arabia have recently announced their plans to open up their state-owned oil company, Aramco, to private investment.
The plans were announced by the deputy crown prince, Mohammad Bin Salman, a powerful member of the Saudi royal family. The move would involve the Middle Eastern country using its PIF (Public Investment Fund) to purchase industrial and financial assets abroad.
Many people will see this as a watershed moment in the fight against fossil fuels and the climate change that they cause. However, there are many who believe that this change could be seen as more style than substance.
The first set of shares in the state-owned Saudi Aramco are due to be sold via an IPO (Initial Public Offering), this could happen as soon as 2017 according to some reports. The eventual goal of this move will be to allow Saudi Arabia to purchase some of the largest companies in the world, such as Apple or Google.
In an interview with Bloomberg, the crown prince said:
“IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil.
“What is left now is to diversify investments, so within 20 years we will be an economy or state that doesn’t depend mainly on oil.”
Saudi Arabia are not the first “big name” to consider moving away from fossil fuels in recent times. The Rockefeller Family Fund recently announced that they would be divesting all their holdings in fossil fuel as soon as possible.
RFF, which was formed by John, Laurance, Martha, David and Nelson Rockefeller, said that ExxonMobil, the world’s largest oil company was “morally reprehensible”.
The wealthiest man in American history when he passed away in 1937, John D Rockefeller made his billion dollar fortune from ExxonMobil’s precursor Standard Oil.
The Rockefeller Family Fund, which has comparatively small holdings of just $130m, said in a public statement:
“There is no sane rationale for companies to continue to explore for new sources of hydrocarbons. We must keep most of the already discovered reserves in the ground if there is any hope for human and natural ecosystems to survive and thrive in the decades ahead.”
A professor of energy policy at the University of Exeter, Catherine Mitchell, has called this change “extremely significant” and says that it clearly demonstrates the new trend in energy investment.
She continued:
“We are looking at serious sums of money being invested in clean energy, with the dirtiest forms of fossil fuels the losers. This is the direction of travel that we need to see to have a chance of escaping the worst impacts of climate change.”
