Updated: Banks face criticism over coal funding

Several of the UK's largest high street banks are running the risk of a green consumer boycott after a new report revealed that despite high profile advertising campaigns touting their green credentials, they are consistently funding carbon intensive coal-related projects.

The report from Friends of the Earth Scotland, green group Platform and student network People & Planet claims that Royal Bank of Scotland (RBS), HSBC and Barclays have all issued large loans to coal and carbon intensive energy companies in recent years, while simultaneously highlighting their investment in renewables.

The study details how RBS has invested almost $16bn in coal-related firms in the last two years, while HSBC has ploughed $10bn into the sector and Barclays has invested $5.79bn. It also claims that together the three banks have loaned energy company $70bn last year, despite its plans to build the UK's first new coal-fired power station in 30 years at Kingsnorth in Kent.

Bronwen Smith-Thomas, campaigns officer at People & Planet said that the student group was prepared to organise a boycott of RBS if the bank failed to " pull out of fossil fuels and focus their investments and experience into supporting renewable energy development".

A spokeswoman for RBS insisted that the company remains "committed to supporting the transition to a low carbon economy", and is one the largest financiers of renewable energy globally, with over $1.5bn committed to such projects.

She also argued that by investing in coal-related projects the company could help ensure that such projects adhere to environmental best practices. She added that RBS is signed up to the Equator Principles, which obliges the company consider the environmental risks associated with infrastructure projects when making investment decisions.

These investment principles, which are endorsed by more than 50 banks globally, require investors to ensure that "the projects we finance are developed in a manner that is socially responsible and reflect sound environmental management practices". They also oblige investors to ensure that "negative effects on project-affected ecosystems and communities should be avoided where possible, and if these effects are unavoidable, they should be reduced, mitigated and/or compensated for appropriately".

A spokeswoman for HSBC similarly highlighted the bank's support for the Equator Principles, adding that while it would continue to work with fossil fuel-based companies they had to meet the strict criteria set out in its Energy Sector Policy.

However, a spokesman for Friends of the Earth Scotland dismissed the argument that investing in coal projects allowed banks to help push mining and energy companies towards embracing greener technologies and practices. "The idea that by investing you can help encourage clean coal doesn't wash," he said. "There is no such clean coal, only coal that is a bit more efficient. Arguing that you are pushing for firms to embrace carbon capture is not enough – either make it a mandatory condition of investment or don't invest."

But the spokeswoman for HSBC countered that while banks were rapidly increasing investment in renewables, it was economically unrealistic for them to ditch traditional forms of energy altogether. "Many of the potential solutions to the problems of climate change are medium or long-term, and not short-term," she said. "Whilst the technologies which will support the move to a low carbon future exist, it is still too early in their development to be commercially deployed at the necessary scale to fully replace our traditional sources of heat, power and transport, without undermining economic growth."