Environmental, Social & Ethical (ESE) and Reputational Risk Management

Our ESE framework applies to all legal entities within NatWest Group for the onboarding of non-personal customers (for the purposes of providing lending or loan underwriting services and applies to the management of ESE risk throughout these customers’ lifecycles). Business segment executives are responsible for ensuring that the framework is implemented and have accountability for all material customer appetite decisions.

To manage these risks, we have developed risk acceptance criteria (RAC) for eight sectors and one topic which present heightened ESE risk. These define the level of ESE risk the bank is prepared to accept. In 2024, we undertook 330 customer ESE assessments (2023 – 520). The reduction in cases reflects the review cycle. We also undertook 71 trade-related transactions involving defence equipment (2023 – 79).

We also have an ESE risk concerns process which seeks to ensure that ESE risk is identified and managed for customers and transactions in sectors which are not covered by RAC, or where there may be multiple issues or complexities. 

ESE Risk Framework oversight and effectiveness is provided by the Risk Function and reported annually to the Group Reputational Risk Committee.

We have been members of the Powering Past Coal Alliance since 2021 and following the achievement of our ambition to phase-out of coal for UK and non-UK customers who have UK coal production and UK coal-related infrastructure by 1 October 2024, we aim to phase-out of coal for customers who have coal production or coal-related infrastructure globally by 1 January 2030. As a result, we have stopped the renewal, extension or refinancing of any existing lending or loan underwriting commitments to these customers where it exceeds the phase out date above.

During 2024 we established a working group within the C&I business segment to support the development of guiding principles for the assessment of thermal and lignite coal embedded within activities like transportation, storage, supply chain and value add services, while ensuring due consideration is given to external factors such as energy security. These considerations have now been reflected in our ESE Risk Acceptance Criteria and represent an evolution of our point-in-time credible transition plan (CTP) assessment completed in 2021.

Our point-in time CTP assessment also included oil and gas major customers and supported our stated ambition to stop lending and underwriting to major oil and gas producers unless they had a CTP aligned with the 2015 Paris Agreement in place by the end of 2021. We plan to review our climate ambitions and targets during 2025 in the context of the UK CCC’s Seventh Carbon Budget. Alongside that review, we will also be reviewing our ESE Risk Acceptance Criteria for major oil and gas customers. For further detail on our point-in-time CTP assessment for oil and gas majors and in-scope coal customers refer to page 31 to 32 of the NatWest Group plc 2021 Climate-related Disclosures Report.

Since February 2023, we have not provided reserve-based lending specifically for the purpose of financing oil and gas exploration, extraction and production for new customers and, after 31 December 2025, we will not renew, refinance or extend existing reserve based lending specifically for the purpose of financing oil and gas exploration, extraction and production.

In 2024, we undertook 330 customer ESE assessments (2023: 520), and 71 trade-related transactions involving defence equipment (2023: 79)