Archived press release

Royal Bank of Scotland profits mask destruction

3 August 2006

As the Royal Bank of Scotland prepares to post bumper profits this Friday, NGOs [1] warn of the associated price paid by society and the environment. RBS have financed some of the most controversial and destructive infrastructure projects, creating significant legal and political risks that could bite future profit margins.

Mika Minio-Paluello of London environmental watchdog PLATFORM commented, "RBS' corporate strategy is stuck in the short-term - by ignoring impacts on planet and society, they are risking future profits."

Most of RBS' predicted first half profits of £4.4bn will come from the corporate markets divisions and overseas investments - a fact used by the board to deflect complaints of ripping off British customers. Yet the bank's dominant role in project finance [2] is being won at the expense of vulnerable societies, impoverished nations and endangered species.

Controversial projects financed by RBS include the Baku-Tbilisi-Ceyhan pipeline, oil-backed loans to Angola, the Barrick Gold Mine in Chile and the South Hook LNG Terminal in Wales. Criticism has come from Amnesty International, WWF, Global Witness and Friends of the Earth. [3] In their drive to increase profits, even competing banks and analysts have described "shock" at RBS' "aggressive" bidding. [4]

Now, RBS are bidding to finance Shell's disastrous Sakhalin II project in the Far East of Russia. Most large banks have opted not to participate; only six banks remain in the bidding process to be lead arrangers. The project has been criticised by over a hundred NGOs and civil society organisations for its social and environmental impacts.

Sakhalin II threatens the critically endangered Western Grey Whale with extinction, with construction work continuing adjacent to the whales' only known summer feeding ground. Habitats of endangered bird and fish species have been damaged. Experts have reported that the projects' risk assessments are inadequate, risking a catastrophic oil spill. [5]

Stuart Hay, Head of Research at Friends of the Earth Scotland, added "Corporate responsibility and Shell's Sakhalin II project just cannot go together. RBS should withdraw its interest and start to work harder on its ethical positioning."

RBS is risking significant legal exposure through participation in projects such as Sakhalin II. Russian courts have already found project operator Shell/SEIC in violation of federal legislation, and a number of new court cases have already been filed. A leak resulting from faulty construction work could lead to significant liabilities to financial institutions involved.

Mika Minio-Paluello added "If RBS finance Sakhalin II, they will be underwriting the possible extinction of a whale species. At some point RBS' destructive lending practice will come back and bite their future profits."

RBS are a signatory to the Equator Principles, voluntary guidelines for the project finance sector. Yet implementation appears to be minimal; even in the bank's recent Corporate Responsibility Report, only 3 paragraphs in 36 pages reported on the Equator Principles. [6]

Mika Minio-Paluello concluded, "The proof is in the portfolio, not the public relations."

Notes

[1] PLATFORM: www.carbonweb.org
The Corner House: www.thecornerhouse.org.uk
Friends of the Earth Scotland: www.foe-scotland.org.uk

[2] RBS are widely recognized as global leaders in project finance, arranging larger and more loans than any other bank for several years running. League tables produced by Dealogic consistently place RBS at the top for arranging Global Project Finance.

[3] WWF: BTC www.panda.org/btc/
Amnesty: BTC www.amnesty.org.uk/news_details.asp?NewsID=14542
Baku Ceyhan Campaign: BTC www.baku.org.uk
Global Witness: Angola www.globalwitness.org/press_releases/display2.php?id=309
Gold Mine - Chile www.corpwatch.org/article.php?id=13680
Friends of the Earth: Wales: www.foe.co.uk/cymru/english/press_releases/2004/hazards_milford_haven.html

[4] "RBS makes eyes water with Sonangol bid", Euroweek, Issue. 944, p 1 10 March, 2006

[5] www.carbonweb.org/showitem.asp?article=6&parent=66&link=Y&gp=3
Friends of the Earth International: Sakhalin http://www.foei.org/ifi/sakhalin4.html

[6] Assessment of Corporate Responsibility Report:
www.carbonweb.org/showitem.asp?article=172&parent=39 RBS CSR Report:
www.rbs.com/corporate01.asp?id=CORPORATE_RESPONSIBILITY

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Published by Friends of the Earth Trust