RBS and Bank of Scotland under scrutiny over green credentials

Banks can finance fossil fuels in a variety of ways - through lending to fossil fuel companies for specific projects, general corporate lending and capital markets activity such as underwriting.

The examination by the consumer organisation Which found that among the six in the "red" category meaning they finance the fossil fuel industry was the NatWest group including the Royal Bank of Scotland and the Lloyds Banking Group including the Bank of Scotland.

The others were JPMorgan Chase, Santander, Barclays and HSBC.

Which and the non-profit research organisation Reclaim Finance carried out an analysis of the banks' fossil fuel policies - which were broadly found to be too weak amongst the six.

Of the banks that do finance the fossil fuel industry there were differences in financing, policies and promises, the study said. Two of them, Lloyds and NatWest, were less involved in these sectors than their peers, the analysis said.

The researchers also considered transparency levels and whether banks had credible targets to reduce exposure to environmentally damaging sectors, and checked whether they publish independently verified data.

Which said NatWest, including RBS had taken strides to reduce its exposure and set ambitious targets to reduce emissions, but said it "still funds fossil fuels". They said the bank says it will lend to companies with a ‘climate transition plan’ in line with the Paris Agreement.

But Which said this potentially allows too many loopholes. The exposure to fossil fuels of Lloyds, including Bank of Scotland was said to be "minor" compared with peers but the analysis says they do not yet exclude all financial services for firms with oil and gas expansion plans.

It said that Edinburgh-based TSB did not carry out investment banking or offer big corporate finance, so it is not directly involved in funding fossil fuels and was rated 'amber'.

But the analysis said it was owned by Spanish banking group Sabadell, which does have fossil fuel exposure.

TSB has said it was committed to tackling climate change and delivering a 'just green transition', and aligns to recognised standards and targets.

Sam Richardson of Which? Money, said: “Consumers seeking to make more sustainable choices might want to consider switching banks if they are uncomfortable with their money being invested in the fossil fuel industry and other projects which could be damaging to the environment."

The three banks labelled by the research as Eco Providers with no exposure to fossil fuels in their banking activities are Nationwide, The Co-operative Bank and Triodos.

A NatWest Group spokesman said: “NatWest Group is determined to continue to be a leading UK bank in helping to address climate change. Oil and gas is a small part of our balance sheet, accounting for just 0.7%. We have strict policies in place to ensure that we only continue to work with major oil and gas producers that have a credible transition plan in place aligned with the Paris Agreement.

“We only support upstream oil and gas companies where the majority of assets being financed are based in the UK (onshore or offshore UK Continental shelf) and where those companies report to us the overall emissions of operated assets by the end of 2023. We will stop financing coal in the UK by 1 October 2024 and globally by 2030.”

A Lloyds Banking Group spokesman said: “We have a key role to play in transitioning the UK economy towards net zero, and our focus is on playing our part in financing the transition as we help build a more sustainable and inclusive future for people and businesses.

"Our exposure to fossil fuels is minor compared to peers, but we are engaged in supporting the sector’s transition and are actively working with oil and gas clients supporting them to establish credible transition plans by the end of 2023. We know time is critical and the next few years will be decisive in tackling climate change and enabling the transition to a low carbon, more sustainable future for the UK.”

A TSB spokesman said: “TSB do not carry out investment banking or offer big corporate finance, so we are not involved in funding fossil fuels.

“The wider contribution that TSB makes to society is crucial to the continued success of our business. That’s why our strategy includes commitments to encourage financial inclusion, tackle climate change, deliver a just green transition, support small businesses to thrive, and champion diversity and inclusion – all aligned to recognised standards and targets.”