NatWest looks to end ties with polluting clients

Lender will stop doing business with some coal companies as well as some oil-and-gas companies

NatWest is cutting ties with a group of coal businesses and some oil and gas companies that lack green credentials. Reuters

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.