Get Red Pepper's email newsletter. Enter your email address to receive our latest articles, updates and news.
In the year since it was effectively taken into public ownership, the Royal Bank of Scotland (RBS) has used public money in ways that often look little different to its use of private money previously. On the environmental front, this has included extending at least $2.7 billion in loans to companies that own or are building infrastructure to extract tar sands oil in Canada – an endeavour that has been slammed for its devastating impact on climate change, local ecosystems and indigenous peoples. This is just one example of RBS’s post-recapitalisation finance of fossil fuels.
During the same period, the British Wind Energy Association publicly called for some form of targeted government intervention for the UK to achieve its renewable targets. I approached a number of green energy associations looking to speak to someone who had attempted to obtain finance from RBS for their projects, but I was told that no one would waste their time in such fruitless efforts.
The report that Platform and others commissioned at the end of last year, Towards a Royal Bank of Sustainability, is about attempting to democratise financial institutions. We as taxpayers have paid for it, so we should have some say in how the RBS is run. Financial institutions should exist to finance the needs of society rather than as a means of making large amounts of money for small numbers of people. The political opportunity to assert the public ownership of RBS comes at a time when there is an stark contrast between the social need for low-carbon and the ‘business as usual’ approach of fossil-fuel finance.
The ‘hands off’ approach of the Treasury is looking increasingly untenable. It’s not just left-wing economists and environmentalists that are challenging this position. Jeremy Scott, the global financial services chairman of PricewaterhouseCoopers, has said that ‘Governments need to accept, given the limited likelihood of a quick extraction from the sector, that their main focus needs to be on the positive role they can play given they are “inside the tent”.’
If we put aside for a moment the obsession with short-termist profit maximisation that characterises our economy, there is a clear business case for banks to divert the flow of capital away from new fossil fuels and into clean energy. The government-commissioned Stern Review on climate change clearly laid out that the longer we delay the changes we need to make to our societies and our economies, the higher the annual percentage of GDP we will end up paying to adapt to the consequences of the destabilised climate.
A number of groups are calling for some sort of state-managed green investment bank that would finance the multiple projects necessary for the transition to a low-carbon economy. Some argue that the change in institutional culture might be too great for a bank like RBS to be used to perform this function, and that new financial architecture will be necessary. Regardless of this, the fact remains that any new green infrastructure will need to be accompanied by the withdrawal of banks such as RBS from the fossil-fuel sector. An infinite number of windmills won’t help if they continue to extract and consume coal, oil and gas at the same rate.
The spectacular losses caused by reckless financial practices have been socialised. But the banks continue to insist that the profits remain privatised – and, importantly, the decisions as to how go about creating those profits remains firmly in the hands of the banking executives.
Yet the fact that RBS is majority owned by the public provides an enormous opportunity to demand a much-needed dose of public involvement in financial institutions that up until now have been entirely unaccountable and opaque to the wider public.
The UK taxpayer has paid and will keep paying an enormous price to have kept the banking sector afloat. Possibly the only silver lining to be found in this situation is the political potential to put the sustainability and human rights agenda at the heart of one of the biggest financial structures in the country.