Examination of Witnesses (Question Numbers
40-49)
MR ROBIN
BUDENBERG AND
MR SAM
WOODS
9 MARCH 2010
Q40 Dr Turner: It is clear that you
do not adopt a particularly interventionist approach in your dealings
with publicly-owned banks and certainly not with the wider banking
sector. Is this to an extent a function of your resources? For
instance, do any of your staff have environmental expertise?
Mr Woods: I am not sure I completely
accept the premise and if you called up the banks and said, "Does
UKFI get involved with you at all?", you might well get quite
a different view on the extent to which we intervene, but we do
have to do that within the framework we have been given which
is that the boards of the banks are running the banks and we are
managing the investments. Our budget has not been a great constraint.
There was a deliberate decision, if you like, but it was taken
by the UKFI board that UKFI should be a small but relatively senior
organisation because we are there to manage the investments. We
do not have anyone on our staff with specific environmental training
but we do have a member of our team who is responsible for being
across issues in the policy space more broadly.
Q41 Dr Turner: Presumably your budget,
which we gather is £4.5 million, is essentially just staffing
for your body. Things like large share disposals, which will actually
incur serious costs, will be borne by the Treasury, will they
not? Are there risks in that arrangement? Could you find yourself
undertaking disposals which a normal commercial investor would
not?
Mr Budenberg: If we felt that
we were getting ourselves into a position where we were in risk
or under risk of doing something that was sub-optimal because
of budgetary constraints around fees, then I am sure we would
talk to Treasury and make sure that we did not do the wrong thing
just because of an issue around fees.
Q42 Dr Turner: So the Treasury are
watching you and you are watching the banks.
Mr Budenberg: Clearly they are
responsible for our funding. To the extent that we change the
funding requirements set out in our business plan, that will require
Treasury approval, yes.
Q43 Dr Turner: If you actually had
a desire to intervene more with the banks on environmental performance,
does the existing framework document that you work within give
you sufficient leeway to do so?
Mr Budenberg: If we wanted to
play a role in the active way in which I suspect this Committee
would prefer us to play—and I am not saying we are inactive—in
a very proactive way, then the framework agreement would need
to be changed to make it clear that that should be a significant
priority for us, along with other things such as financial stability
and competition, which are mentioned in our documents.
Q44 Dr Turner: Your remit is constrained
then?
Mr Woods: What we are saying is
that it is our remit to engage on these issues in the way that
we have described. If we were to go much beyond that, that would
probably be inconsistent with the remit we have currently been
given.
Q45 Dr Turner: The Treasury is currently
consulting on proposals for sustainability reporting in the public
sector. As a public sector body yourselves, will UKFI have to
produce sustainability reports if the Treasury proposals go through?
Mr Woods: We will do whatever
we are asked to do. My understanding is that the preliminary thinking
is that because we are very small, only 15 people, we will come
under a de minimis cut-off but I do not think that debate
has completely landed yet.
Q46 Dr Turner: Would your sustainability
reporting include the emissions of the publicly-owned banks?
Mr Woods: No, I do not think it
would. The Government's policy on disclosure by companies in which
it has an investment—and this is quite a long-standing convention—is
that they should disclose what other companies in their sectors
have to disclose, which are usually Stock Exchange requirements.
We did ask the Government whether that policy was the policy they
wished us to follow for the banks in which we are invested and
the answer to that was yes.
Q47 Dr Turner: So the publicly-owned
banks will not be making sustainability reports in practice. Is
that what you are saying?
Mr Woods: They already publish
sustainability reports. How those sit exactly alongside what is
contained within the current proposals in the Treasury for the
public sector I am not totally clear. Broadly the policy is likely
to be the same one as it has been for other issues, for instance
in relation to disclosure on pay, that the banks should do what
all other banks have to do.
Q48 Mark Lazarowicz: I understand
the Treasury proposals envisage not just reporting on the direct
and the closely associated emissions from their activities but
on the whole supply chain and business activity which is associated
with a particular operation of government. I take it from what
you are saying that you have no plans to do that for your ownership
and require the banks to look at the implications of the whole
range of the activities in which we are investing.
Mr Woods: That is right. We do
not have such plans. Both are signed up to the carbon disclosure
project and we expect them to follow some credible set of principles
that other banks are following but there is no intention, at least
on our part, to push them into some different space.
Q49 Mark Lazarowicz: My understanding
is that the carbon disclosure project does not require them to
report indirect emissions.
Mr Woods: I think that is correct.
Chair: Thank you very much. It has been
useful from our point of view and hopefully not uncomfortable
from your point of view. Thank you for coming in.
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