West LB have decided not to finance oil & gas development projects in the Arctic and F & C have dropped Arctic oil explorers Cairn from their ethical portfolio.

The German corporate finance & investment bank, West LB, launched a new environmental policy in February and its guidelines are important in relation to the push by oil companies into the Arctic.

Speaking about the policy, Dustin Neuneyer, sustainability manager, group development said: “There are projects that are evidently unsustainable in an encompassing sense. For WestLB, the risks and costs are simply too high.” “The further you get into the icy regions, the more expensive  everything gets and there are risks that are hard to manage, “For example”, he said, “remediation of  any spills ‘would cost a fortune’, and natural processes by which spilt oil would be broken down  are slower or non-existent at freezing temperatures.”

West LB, a very significant debt financer of oil & gas projects, is making a powerful statement here that should make other banks - such as RBS - think about their practices. As Neuneyer states: “Other banks contacted us and are very interested in this approach andPolicy.”

The contrast between West LB and RBS is striking. Platform, along with BankTrack, Indigenous Environment Network and seven other groups, co-signed a letter to RBS in June 2011, calling on the  bank to make policies relating to five key points on greenhouse gas emissions, 'free, prior & informed consent', and lending to coal and tar sands extraction projects. The letter stated: “Our recommendations are being made with reference to significant policy shifts occurring in other international banks, in the hope that the RBS Group can be seen as being a pioneer rather than a laggard in these areas. Our recommendations are practical, possible, deliverable and, above all, necessary.” Sadly we are yet to receive a reply or see any policy outcomes from this process of engagement - hopefully they will be spurred into action by West LB's announcement.

Meanwhile F & C, one of the leading London institutional investors with an SRI fund, has decided to drop its holding of Cairn from its ethical portfolio. For several years it has held Cairn shares as part  of its Stewardship Funds, whilst pointedly refusing to hold either Shell or BP on environmental & social impact grounds. Finally, after the sustained campaign pressure on Cairn's offshore Greenland drilling - led by Greenpeace - F & C have quietly dropped Cairn from the portfolio. Karina Litvack, director of governance and sustainable investment at F & C stated in an article: “Cairn Energy has been removed from our Stewardship range of funds because of its move into Arctic drilling. We feel that the level of environmental and safety management and the levels of oversight by the Greenland Government is not sufficient to give us comfort.”

West LB, based in Dusseldorf and effectively the central savings bank of the states of Nordrhein-Westfalen and Brandenburg, has set a new benchmark for the project finance sector. Platform has contested West LB's decisions in the past - particularly over the financing of the Baku-Tbilisi-Ceyhan pipeline - but this new policy decision is a really positive step.

In collaboration with Greenpeace UK and Fair Pensions, we're are on the brink of publishing a new report and on the basis of this aim to hold a series of briefings with asset managers and analysts in the finance community in order to encourage other instutional investors and debt financers to  make oil projects in the Arctic, projects too far.