The direction of travel for RBS Bank has been away from financing of fossil fuel developments over the last few years and the appointment of new Chief Executive, Alison Rose, seems to have accelerated that trend. Now we have the news that it will stop lending to major oil and gas producers that do not have credible transition plans in line with the Paris Climate Agreement Goals by 2021, it will phase out coal financing entirely by 2030 and its own operations will be ‘climate positive’ by 2025. But what does this mean in practice for the energy industry? Ms Rose said she wants to take ‘bold actions’ to help transition to a low carbon economy but has admitted that this will present a ‘significant challenge’ to implement particularly as there is no standard methodology to apply.
As with all these statements, the devil will be in the detail and how the limits will be applied and the transition plans assessed for credibility remains to be seen. What constitutes a ‘major’ oil and gas producer also remains unclear with many of the smaller oil companies uncertain if they will be impacted. Further details will be developed in the coming months and that will provide more visibility on the extent of the bank’s commitment which was heralded today. The larger energy companies have already indicated they are working towards a greener future with BP recently pledging to cut its emissions to zero by 2050 and others investing heavily in green alternatives but the knock on effect of the withdrawal of financing could be felt by a wider group than the big players in fossil fuels. The statement has been broadly welcomed by environmental groups and the pressure is now on other lenders both in the UK and elsewhere to follow suit with the resulting squeeze likely to be felt throughout the energy industry.