Summary and implications

Environmental groups have launched a landmark lawsuit against the Treasury to challenge the type of projects in which RBS is allowed to invest.

On 29 June 2009, World Development Movement, Platform and People & Planet commenced judicial review proceedings into the legality of the government's stake in the bank. The government became a 70% shareholder following a bail out in October 2008.

In contrast to rivals, RBS has not made a binding commitment to low-carbon principles.

The environmentalist groups allege that the Treasury's failure to impose green standards on RBS further to becoming majority shareholder is in violation of the Treasury's own guidelines.

Without precedent

It is not clear whether the environmentalists will succeed as this landmark case is without precedent. Such judicial review proceedings are notoriously difficult to win.

The challenge nevertheless firmly places the media spotlight on the climate change agenda, especially in the build up to the Climate Change Conference in Copenhagen later on this year.

The Oil and Gas Bank

RBS is one of the top lenders to the energy industry. In fact, RBS has publicly identified itself as "The Oil and Gas Bank" and provides lending facilities to oil and gas corporations. RBS’s loans to the coal industry totalled £100 billion in the two years leading up to the bailout.

It is estimated that in 2005, RBS loans to oil and gas caused 36.9 million tonnes of CO2 emissions. This is equivalent to more than a quarter of UK homes. By 2006 it is estimated that emissions had passed the 43.7 million tonnes (greater than those of Scotland).

Going forward

The parties bringing the action hope that it will force RBS to adopt low-carbon principles and to invest only in ethical and sustainable enterprises.

Platform envisages a reformed RBS funding green and renewable initiatives, upgrading housing stock and weaning companies off fossil-fuel dependency.

The court's permission to proceed is required in a claim for judicial review. The judicial review application is expected to be considered initially on the basis of written submissions by a judge to decide if it should proceed to a court hearing.