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Unprecedented legal battle over RBS’ unethical investments
Today, an unprecedented legal battle will take place in the High Court over the Treasury’s failure to stop the publicly owned Royal Bank of Scotland (RBS) investing in what campaigners describe as ‘some of the most environmentally damaging and socially irresponsible projects and companies around.’
The case is being brought by three small climate and social justice campaigning groups: PLATFORM, People & Planet and the World Development Movement, which has led some commentators to bill it as a ‘ground breaking, David and Goliath case’.
Today’s oral hearing will determine whether their claim can proceed to a full substantive hearing, likely to take place early next year. The Treasury has hired one of its top barristers, James Eadie QC, to handle the case but the campaigners are optimistic that they will be successful.
Deborah Doane, director of the World Development Movement said:
“This is a classic David and Goliath battle. But we believe we have a strong case. The Treasury’s decision to allow RBS to continue to invest in companies that exacerbate climate change and are linked to human rights abuses is unlawful, immoral and undemocratic. Hopefully, this case will be a pivotal point in ending RBS’ destructive lending habits that go against the interests of UK taxpayers, the climate and people whose human rights are being violated.
The campaigners are represented by the leading human rights law firm Leigh Day & Co. The solicitor working on the case, Rosa Curling said:
“The legal challenge has already resulted in a significant victory for the campaign groups. The Treasury, having strenuously resisted any suggestion that it should consider applying environmental and human rights standards to RBS, has now conceded that it does have to, and has undertaken an assessment on whether such standards should be imposed. The Treasury has decided it should not. When it comes to climate change and human rights, it has decided it should not go beyond what is narrowly in the “commercial” interest of RBS. However, this conclusion is unlawful. It is based on a misunderstanding of the law and flies in the face of the government’s wider policies on corporate social responsibility and climate change.”
The hearing coincides with the release of an independent report that finds the financial value of RBS to taxpayers is best served by requiring the bank to phase out investment in fossil fuels. The report, ‘Towards a Royal Bank of Sustainability: protecting taxpayers’ interests; cutting carbon risk’ argues that UKFI, the company set up to manage the government’s shares in the bailed-out banks, should take an ‘active ownership’ approach to its investments with respect to environmental and social issues. This is consistent with best practice and legislation which has been developed over a number of years by institutional investors and the government.
Mel Evans, finance and climate campaigner from PLATFORM said:
“The court case today is clearly showing the legal reasons why the Treasury under the Company Law Act must take action to stop RBS from investing in companies that trash the climate. But there’s also a business case which is demonstrated in this new report. In an increasingly carbon-constrained world, investors, and in this case, the public as owners of RBS, are exposing themselves to more and more risk in continuing to pump billions into new fossil fuel projects.”
The campaigners have calculated that the carbon emissions traced back to RBS’ investments in fossil fuel projects are equivalent to the annual emissions of Scotland, or Bangladesh - a country of over 150 million people, who are facing huge devastation from climate change.
An example of the company and projects that RBS helps to finance is the controversial London-based mining company, Vedanta Resources. After RBS was bailed out, its subsidiary ABN-Amro acted as the lead financial advisor for Vedanta’s Indian subsidiary, Sterlite in its takeover bid of Asarco in March 2009. Recently, it has been reported that over 100 people were killed in a Vedanta mine in India due to alleged lack of concern over health and safety for the workers, and the UK government last week criticised the company over the human rights of indigenous people when planning to construct a new open cast mine. The campaigners point to this as an example of the chasm between government rhetoric and action.
Ian Leggett, director of People & Planet said:
“Taxpayers have already had to pick up the tab for bailing out RBS for its irresponsible lending. Yet if the government allows it to carry on investing in projects and companies in the certain knowledge that such investments will accelerate climate change, we will have to pick up an even bigger tab in the future. Investing in high carbon projects is not in shareholders’ and taxpayers’ interests and the sooner RBS stops supporting climate damaging projects the better.”
ENDS
For more information and interviews, please call:
Kate Blagojevic - World Development Movement - 0207 820 4900 / 07711 875 345
Mel Evans -PLATFORM - 07790 430620
Ian Leggett - People & Planet - 01865 245678/ 07880 652207
Notes to editors
The court hearing will take place at the High Court of Justice, The Strand. The time of the hearing is not made public until Monday 19 October.
The report ‘Towards a Royal Bank of Sustainability: protecting taxpayers’ interests; cutting carbon risk’ has been commissioned and contributed to by Friends of the Earth Scotland, PLATFORM, People & Planet, Investor watch, Landman Economics and the World Development Movement. It has been written by Nick Silver, an independent consulting actuary. He is an honorary senior visiting fellow at Cass Business School and chairman of the actuarial profession’s Resource and Environment Group. The foreword has been written by Dr. Craig Mackenzie, Director of the Centre for Business and Climate Change, University of Edinburgh Business School
In March 2009 RBS was the lead financial advisor to Sterlite (60% owned by Vedanta) in the company’s bid to take over Asarco; the proposed acquisition is backed by two letters of credit from RBS/ABN-Amro to the tune of US$ 100 million, RBS participated in a loan to Vedanta plc which apart from being the worst of the large London-based mining companies in terms of human rights violations, poor corporate governance and violation of laws, is also constructing a thermal coal power station to power one of its Indian bauxite operations; and a chimney collapse at the construction site recently killed up to 100 workers because of the alleged appalling lack of attention to safety. See the London Mining Network press release
Vedanta has also come under fire from the British government in an unprecedented attack on a FTSE 100 company, the government ruled that Vedanta “did not respect the rights” of the area’s indigenous people; “did not consider the impact of the construction of the mine on the [tribe’s] rights”; and “failed to put in place an adequate and timely consultation mechanism”. The report concluded that a change in the company’s behaviour’ was “essential”. See the Guardian report from 12 October
PLATFORM has calculated that the embedded emissions from project finance attributable to RBS was 44 million tonnes of CO2 in 2006. This is just over Scotland’s total emissions of 43 million tonnes in 2007 - Ref: Greenhouse Gas Inventories for England, Scotland, Wales and Northern Ireland: 1990 - 2007, AEA Technology report for Department of Energy and Climate Change, The Scottish Government, The Welsh Assembly Government, The Northern Ireland Department of Environment.
RBS’ 44 million tonnes of CO2 is also equivalent to Bangladesh which emitted 39 million tonnes in 2006 according to the Energy Information Agency.
Further info
Since its bail out, RBS has taken part in an estimated £10 billion in loans to coal, oil and gas companies including:
£6 billion to controversial energy giant E.ON
In January 2009, RBS helped raise £400 million for the Irish company Tullow Oil, and in March 2009 RBS was part of a consortium of 14 banks that lent £1.4 billion to Tullow Oil. Tullow Oil is involved in the exploration and extraction of oil on the border between Uganda and the Democratic Republic of Congo (DRC). This area has seen some of the fiercest fighting in an extractive resource-driven civil war as rival armies and militias have struggled for control of the land, leading to thousands of civilian deaths and refugees.
RBS has helped to raise £116 million for Cairn Energy, a Scottish oil company, to be used for ‘accelerated drilling’ in arctic Greenland.
The World Development Movement (WDM) tackles the underlying causes of poverty. We lobby decision makers to change the policies that keep people poor. We research and promote positive alternatives. We work alongside people in the developing world who are standing up to injustice. [www.wdm.org.uk] (http://www.wdm.org.uk)
For over 20 years, PLATFORM has been bringing together environmentalists, artists, human rights campaigners, educationalists and community activists to create innovative projects driven by the need for social and environmental justice. www.platformlondon.org
People & Planet is the largest UK student campaigning organisation, with more than a hundred groups in universities, colleges and schools taking action on world poverty, human rights and the environment. For more info, see /tour
30 June 2009
The World Development Movement, PLATFORM and People & Planet have today launched legal action against the Treasury for allowing public money, poured into the Royal Bank of Scotland to be invested in energy companies, and projects linked to climate change and human rights violations.
Since RBS was bailed out in October 2008, it has contributed to loans worth an estimated £10 billion in coal, oil and gas companies. Coal is the biggest source of carbon emissions globally, which contributes to dangerous climate change. The campaigners believe that by investing in RBS, the Treasury is in direct conflict with the government’s legislation and policies to reduce carbon emissions and prevent dangerous climate change.
Julian Oram, from the World Development Movement said:
“The government has spent billions on a bank with a track record of financing energy companies’ dirty and destructive projects. We’re launching this action because the Treasury has displayed a blatant disregard to the government’s own commitments to tackling climate change, and its rules for spending public money. The taxpayers’ interests would be vastly better served by RBS investing in a low carbon future than in undemocratic regimes and environmentally devastating projects around the world.”
Kevin Smith, from PLATFORM said:
“The government can’t pretend to be a global leader on dealing with climate change while at the same time refusing to rein in a public body that is financing new coal, oil and gas projects all over the world.”
Ian Leggett, from People & Planet said:
“The government now controls RBS and has an exceptional opportunity to drive investments in low carbon jobs and infrastructure — not to repeat the recklessness of the past. If we are to stand a chance of stopping catastrophic climate change, the first priority is to make a clear and irreversible commitment to stop investing in high carbon companies and projects, but to prioritise investments in renewable energies.”
Rosa Curling, solicitor from Leigh Day said:
“The government has the power and control to ensure public money provided to UK banks is not invested in or lent to projects that harm the climate or individual human rights. 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.”
Since its bail out, RBS has taken part in an estimated £10 billion in loans to coal, oil and gas companies including:
£6 billion to controversial energy giant E.ON, which is aiming to build the first new coal power station in the UK for over 20 years.
In January 2009, RBS helped raise £400 million for the Irish company Tullow Oil, and in March 2009 RBS was part of a consortium of 14 banks that lent £1.4 billion to Tullow Oil. Tullow Oil is involved in the exploration and extraction of oil on the border between Uganda and the Democratic Republic of Congo (DRC). This area has seen some of the fiercest fighting in an extractive resource-driven civil war as rival armies and militias have struggled for control of the land, leading to thousands of civilian deaths and refugees.
£116 million for Cairn Energy, a Scottish oil company, to be used for ‘accelerated drilling’ in arctic Greenland.
RBS has previously promoted itself as ‘the oil and gas bank’, financing fossil fuel projects and companies around the world. Between May 2006 and April 2008, RBS took part in loans to the coal industry worth nearly $100 billion.
The campaigners believe that the evidence submitted to the High Court today provides convincing grounds to order the government to ensure that taxpayers’ money in RBS supports investments in the wider public interest, by promoting a low carbon, sustainable and ethical future.
For more information, please call:
- Ian Leggett - People & Planet — 01865 245678 / 07880 652207
- Kate Blagojevic - World Development Movement — 020 7820 4900 / 07711 875 345
- Kevin Smith — PLATFORM — 0207 403 3738 / 0784 5502063
Notes to editors:
RBS was first recapitalised by the UK government in October 2008, the government’s voting stake is currently capped at 75 per cent .
On March 2, 2008, the Treasury established the framework for the management of public investment in recapitalised banks via UK Financial Investments. The framework sets out the basis for how the board of UKFI should manage government shares in the banks, but makes no reference to the need to consider social and environmental criteria, nor indeed supporting or even being consistent with other public policy objectives.
The Green Book: Appraisal and Evaluation in Central Government/ requires central government to undertake a comprehensive and proportionate assessment of all new policies, programme and projects so as to best promote the public interest when using government resources (GB:1, para 1.1). One of the stages of this appraisal is the ‘option appraisal: that is, an appraisal of a range of different options against key variables such as costs, benefits and distributional, unvalued and non-market impacts [including environmental impacts including, but not limited to the impacts of policies and measures on greenhouse gas emissions (GB: 9, para.2.25, 63 — 64, paras. 37 — 43)].
In a letter dated 21 April 2009 from the Treasury to legal council instructed by PLATFORM, the Treasury states that “The environmental and human rights records of the individual banks were of no relevance to the decision and therefore the appraisal of the decision that was carried out did not consider the environmental or human rights records or policies of the individual banks.”
In a report published on 16 March 2009, Pre-Budget Report 2008: Green fiscal policy in a recession, the Environmental Audit Committee made the following recommendation to the Treasury on green finance. “The Committee also calls on the Treasury to look at the benefits and practicalities of imposing some form of environmental criteria on the investment strategies of those banks in which the state had a controlling stake.”
People & Planet is the largest UK student campaigning organisation, with more than a hundred groups in universities, colleges and schools taking action on world poverty, human rights and the environment.
- People & Planet homepage: peopleandplanet.org
- More on the legal challenge: peopleandplanet.org/ditchdirtydevelopment/legalchallenge
The World Development Movement (WDM) tackles the underlying causes of poverty. We lobby decision makers to change the policies that keep people poor. We research and promote positive alternatives. We work alongside people in the developing world who are standing up to injustice. www.wdm.org.uk
For over 20 years, PLATFORM has been bringing together environmentalists, artists, human rights campaigners, educationalists and community activists to create innovative projects driven by the need for social and environmental justice. www.platformlondon.org
