NatWest Group plans to stop doing business with a group of coal companies and end lending to some oil and gas firms because of their lack of “credible” green plans.
The number of companies affected is “relatively small … dozens and less” according to the Financial Times, which cited James Close, the bank’s head of climate change, with the change to be enforced as soon as it is practical.
Energy firms that will be able to continue borrowing from the British lender will include those “that aren’t doing any more upstream oil and gas production”, Mr Close said.
The executive added that one of the companies it plans to remove considered coal a “growth business”.
“It was pretty obvious that there was no landing space between us,” Mr Close said, adding bringing relationships such as this to an end sends a “powerful signal” to other companies that do not have new climate change plans in place.
NatWest’s oil and gas sector lending exposure fell to £3.25bn by December 2021 from £4.13bn in the same month a year before because of “tighter lending criteria now in place for this sector”, according to its climate disclosure report published last week.
Banks and other financial institutions are facing growing pressure from climate activists to stop lending to companies that show no intention of transforming their operations to be compatible with global agreements to slow rising temperatures.
Many of the world’s major banks as well as insurers and asset managers are already finding creative ways to channel private money purposefully into investment that advances net-zero goals.
NatWest first made a commitment to stop lending and underwriting for companies with more than 15 per cent of activities related to coal in 2020, unless they had credible transition plans in place by the end of last year.
The bank said it had £1.43bn of exposure to polluting companies in these categories as of December, with plans to wind down lending and underwriting to customers that account of £967 million of that figure because their transition plans did not meet the bank’s criteria.
The financial institution said it planned to “stop lending and underwriting to these customers, including stopping renewal, extension or refinancing of any existing commitments”.
It added that it will also “fully exit” relationships with coal companies, which accounted for £437m of that exposure, as soon as possible.
In November last year, it reiterated that commitment by stopping new lending to coal projects in the same week the Cop26 environment summit met in Glasgow.
Chief executive Alison Rose said the bank would not lend any new money to the sector and planned to phase out all loans to coal in Britain by 2024 and globally by the end of 2030.
“It’s an important aspect of ending that harm from activity as well as funding the transition,” Ms Rose said at Cop26.
While coal is considered one of the dirtiest ways to produce electricity to power homes and businesses, the bank said it will continue to work with oil and gas companies that are switching to a greener future.
While 190 countries managed to reach a deal late at Cop26, the final decision left Cop26 President Alok Sharma close to tears over a change in the wording of the deal.
A push led by China, and backed by India, resulted in the language being changed from accelerating the "phase out" of unabated coal to "phase down", a move that not only disappointed politicians in the UK, Europe and vulnerable countries but also businesses.
At Cop26 Ms Rose always said it would “work with customers where there is a credible transition plan aligned with Paris”.
“Our oil and gas exposure is 0.8 per cent of our balance sheet, our coal is under 0.5 per cent of our balance sheet. It is not material parts, but we recognise it’s important we take it off," she said.
NatWest returned to profit last year, posting an operating pre-tax profit of £4bn after recovering from a loss of £481m in 2020 as the wider economy rebounded.
The UK’s biggest corporate lender said mortgage demand and customer deposits were growing, with its more buoyant figures coming after it returned £1.3bn to its balance sheet from the £3.2bn it set aside in the early stage of the pandemic to cushion against bad loans.
The biog
Favourite car: Ferrari
Likes the colour: Black
Best movie: Avatar
Academic qualifications: Bachelor’s degree in media production from the Higher Colleges of Technology and diploma in production from the New York Film Academy
The nine articles of the 50-Year Charter
1. Dubai silk road
2. A geo-economic map for Dubai
3. First virtual commercial city
4. A central education file for every citizen
5. A doctor to every citizen
6. Free economic and creative zones in universities
7. Self-sufficiency in Dubai homes
8. Co-operative companies in various sectors
9: Annual growth in philanthropy
About Takalam
Date started: early 2020
Founders: Khawla Hammad and Inas Abu Shashieh
Based: Abu Dhabi
Sector: HealthTech and wellness
Number of staff: 4
Funding to date: Bootstrapped
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Tottenham 4 (Alli 51', Kane 50', 77'. Aurier 73')
Olympiakos 2 (El-Arabi 06', Semedo')
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From Europe to the Middle East, economic success brings wealth - and lifestyle diseases
A rise in obesity figures and the need for more public spending is a familiar trend in the developing world as western lifestyles are adopted.
One in five deaths around the world is now caused by bad diet, with obesity the fastest growing global risk. A high body mass index is also the top cause of metabolic diseases relating to death and disability in Kuwait, Qatar and Oman – and second on the list in Bahrain.
In Britain, heart disease, lung cancer and Alzheimer’s remain among the leading causes of death, and people there are spending more time suffering from health problems.
The UK is expected to spend $421.4 billion on healthcare by 2040, up from $239.3 billion in 2014.
And development assistance for health is talking about the financial aid given to governments to support social, environmental development of developing countries.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
