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NatWest cuts exposure to most polluting clients

UK bank NatWest has said it will stop doing business with a group of coal companies and end lending to certain oil and gas majors because they do not have “credible” decarbonisation plans.

Those changes would be enforced “as soon as is practicable,” the bank said this week, as part of its commitment to tackling climate change. James Close, NatWest’s head of climate change, said he could not name the companies but told the Financial Times the number involved was “relatively small . . . dozens and less”.

One of the companies viewed coal “as a growth business . . . It was pretty obvious that there was no landing space between us,” he said. Ending the relationships sent a “powerful signal” to companies without robust climate plans, he added.

Banks and other financial institutions are under growing pressure to re-evaluate how and whether to do business with the most polluting companies. Many have made net zero emissions commitments that include the pollution associated with their portfolios.

In 2020, NatWest said it would stop lending and underwriting for companies with “more than 15 per cent of activities related to coal,” and to large oil and gas producers, unless they had credible transition plans by the end of 2021.

In a climate disclosure report published on Friday, NatWest said it had £1.43bn of exposure to companies in these categories as of December, and that it would wind down lending and underwriting to customers accounting for £967mn of that exposure because their plans were insufficient.

The bank will “stop lending and underwriting to these customers, including stopping renewal, extension or refinancing of any existing commitments,” it said.

It will also “fully exit” relationships with the coal companies, which accounted for £437mn of exposure, “as soon as is practicable.”

Close said the companies that passed the test were “by and large . . . [those] that aren’t doing any more upstream oil and gas production”.

During discussions with companies about their plans, NatWest was given “some feedback that . . . coal wasn’t as bad as a lot of people make out, and you could say coal is better than gas because of methane [emissions] from gas,” he said.

Coal is the most polluting fossil fuel, and weaning the world off it is seen as a priority for tackling climate change. At the international COP26 summit in Glasgow last year, negotiators promised to “phase down” coal, though did not set a timeline for doing so.

NatWest’s assessment took into account whether company plans were aligned with the Paris Agreement to limit global warming, and how credible those plans were, based on factors such as executive incentives and investment plans.

The bank said its oil and gas sector lending exposure had fallen to £3.25bn by December 2021, from £4.13bn in December 2020, owing in part to the “tighter lending criteria now in place for this sector”. It has committed to stop all new lending to coal projects by January 2030.

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