Associate Feature: Taking the lead

When Royal Bank of Scotland owner NatWest Group was unveiled as the banking sponsor of COP26 last year, its chief executive Alison Rose said the aim was to show the organisation is committed to going above and beyond what is expected of it in the normal course of business. “We want to do more than play our part,” she said at the time, adding that NatWest’s ambition was to “lead on the collaboration and cooperation that is so critical to influencing the transition to a low carbon economy”.

A year on, and with the UN climate summit getting under way in Glasgow this week, the bank has proved itself equal to the task. On the one hand it has, as Rose puts it, set about “getting its own house in order”, achieving net zero status by the end of 2020 and taking steps towards becoming carbon positive within the next four years.

On the other, it has doubled down on its commitment to helping customers make the transition too, launching a green mortgage, making available £100bn in environmentally friendly loans and sealing a multi-year partnership with the University of Edinburgh aimed at transforming Scottish businesses into climate change leaders.

“We committed to being net zero by 2020 - which we are – and climate positive by 2025 and are doing that by sourcing all our energy from renewables and making sure our branches are served in that way,” Rose says.

“We also have a team of people in our property and sustainability group who look at removing plastic from our supply chain and from our own products, and we’re making sure we’re being sensible and credible about what we can do. 

“Becoming climate positive is about continuing to take things out of our supply chain, making sure we’re not buying more energy than we need, making sure branches are insulated, and eliminating plastics.

“We recognise that for us as a bank we have the resources to enable us to do that – and it’s important to get our house in order – but our role is to help all our customers too, particularly small businesses.”

When Royal Bank of Scotland launched its partnership with the University of Edinburgh in September, the organisation said the rationale was to “empower Scottish companies and help them become climate change leaders”. With funding provided by the group and input from the university’s Climate Change Institute, up to 500 businesses will be supported to identify the opportunities a net zero economy can create while also helping them become more sustainable operations.

The bank has committed to investing £1m in the partnership between now and 2027, with the money coming from its 300 Fund, whose purpose is to support projects in Scotland that make a positive difference in areas such as climate change, financial capability and enterprise in the run up to the bank’s 300th anniversary. 

Similarly, in October the banking group announced that it would be making up to £100bn of climate and sustainable funding and finance available between now and the end of 2025 after publishing a report that highlighted just how vital the energy transition is not just to the environment but to the economy too. As the UK makes the move to net zero, it is being presented with the opportunity to create 30,000 new businesses and 130,000 new jobs, which in turn is expected to boost the economy by £160bn.

“The research we’ve done shows there’s an opportunity of about £160bn in moving to a low-carbon economy, but SMEs really need to be supported – 80 per cent want to have a more sustainable supply chain but getting the information and tools and help to do that is a particular challenge,” Rose says.

“SMEs account for 60 per cent of the revenue of the UK, 50 per cent of the employment and 30 per cent of the emissions. 130,000 new jobs and new technologies could be created from the transition, but how do we help businesses unlock that opportunity, model the sustainability of their supply chain and give them access to different funding to develop long-term, sustainable business choices? 

“This is an enormous opportunity and we’re making a very significant commitment of funding to unlock that opportunity.

“Businesses have been incredibly entrepreneurial during the pandemic – a huge amount of support has been put into the economy, but the response of business has been incredible. Lots of businesses have had to pivot their models to be able to survive. We’re now focusing on working with our customers to transition because the economy is not yet in the position where we can flick a switch and say we are now in a renewable economy.”

The bank is committed to helping retail customers move in the right direction too, with its green mortgage offering a preferential rate to anyone buying a property with an energy efficiency rating of A or B. Rose recognises this is a thorny area, not least in parts of Scotland’s biggest cities where many properties are old and, as such, have traditional single glazing and poor insultation. “A huge amount of the housing sector doesn’t have an EPC rating at all,” she notes.

For customers who are not yet in a position to take advantage of such a deal, the banking group is looking at other ways to help them be part of the overall energy transition, such as teaming up with fintech business CoGo to help customers track their carbon footprints. “It is an app that is [integrated] into ours to help customers track their carbon footprints so they can make changes,” she says.

It may seem like a small contribution when the world is facing a climate crisis, but when it piloted the technology within its app NatWest found that customers reduced their carbon emissions by an average of 11kg a month by committing to behavioural changes such as composting, reducing meat consumption or switching utility providers. If that was replicated across the eight million people who use NatWest’s mobile app, a billion kilos of emissions would be saved each year, the equivalent of planting 17 million trees.

The bank’s overall aim in helping customers transition to the zero-carbon economy is to halve the level of emissions on its balance sheet, something it will only be able to achieve if its customers cut their emissions too. As the largest lender to UK businesses that is inevitably leading to some tough decisions on the kinds of companies NatWest will and will not support, though Rose stresses that it is not as clear cut as simply cutting off businesses in polluting sectors such as agriculture and oil and gas.

“We are very clear around ending harmful activities and will phase out lending to coal and only work with oil and gas companies that have a credible transition plan by the end of this year,” she says.

“Agriculture is a really important sector for this country. It represents one per cent of the lending on our balance sheet but significant multiples of that of the emissions on our balance sheet. We’ll not stop lending to that sector, but we will work with farmers, the supply chain and with universities on [developing] new technologies.

“Sometimes it’s easy to go ‘oil and gas bad, everything else good’, but it’s about moving the whole economy in a way that’s really helpful.”

Ultimately, while banks can often suffer in the same way as oil and gas companies when it comes to public perception, Rose says the climate emergency is showcasing that the banking world can be a force for good too.

“One of the really important roles that finance has is as the fuel for the economy,” she says. “We put liquidity into the economy and one of the things we’ve done in terms of strategy is [commit to] being purpose led and building long-term sustainable value for our customers and for the communities we serve. Financing has a major impact and can be a force for good.”

Although there are concerns that organisations, cities and states could fall short of their net-zero aspirations, Rose says setting targets is a good way to focus minds and ensure everyone is working towards the same end goal. In that sense, the size of the contribution does not matter so much as the contribution itself. 

“The net-zero target is a really good one because it brings to life a sense of direction,” she says. “We don’t want to create massive dislocation because it’s a global economy that needs to transition - we don’t want to create dislocation for the poorest parts of the economy.

“COP26 is an opportunity, when the eyes of the world are going to be on Glasgow, for world leaders to hopefully set new targets around the climate challenge. That’s very important for helping our customers. What’s great is that we’ve got business and the private sector coming together with politicians and government organisations. That’s the only way we’re going to solve this.” 

This article is in association with the Royal Bank of Scotland.