Close to Sustainability? Don’t Bank On It

Close Brothers and pollution. Building waste dumped on Peter Fabish’s meadow by BF Design Solutions Ltd

Close Brothers, the investment bank, financed BF Design Solutions, the company which dumped building waste on half an acre of agricultural land.

It was the Summer of 1984 and my computer graphics company had been trading for two loss making years. The BBC had just asked to borrow one for a TV program it was making and a wealthy yacht owner living in Switzerland wanted to create a digital map of the Mediterranean for a computerised navigation system. Neither project seemed viable so we jumped at the chance of earning £3000 writing software for a text scanning device called the Oberon Pen. Jumped too soon as it turned out because the yacht owner, or at least his wife keen her husband stop wasting money, flew us to Zurich to explain why the mapping was impossible using 1980s technology: then gave us three times what we received for the Oberon software as a gift. A few weeks later the BBC program was broadcast and we were inundated with orders.

The consolation prize, for myself and the business partner who had worked 48 hours straight in an otherwise deserted warehouse on Cambridge science park was an invite to the London offices of Nicholas, then ‘Nick’, Samuels who today is the 5th Viscount Bearsted but then, some believed, destined for a career in Hill Samuel, the bank founded by his great grandfather. Also present were investors from the US and here was an ideal opportunity to pitch our own technology to Silicon Valley’s money men. But with more cash than we knew what to do with, we simply left everyone taking 1980’s style selfies. Nick acquired rabbit ears care of one of the American guests stood behind him. As I recall there was wine and canapes or maybe someone popped out to buy a pizza: it really was a long time ago.

In the years that followed I met a lot of bankers, although none quite as laid back as Nick Samuel. There was austere director of Schmidt Bank, which funded for our German subsidiary. Also, the constantly bemused young man from Skandhas Bank with whom I developed a long-lasting relationship after our company briefly became an acquisition target for Hasselblad, the Swedish Camera manufacturer. As time past investment banking, and the role of the investment banker, changed beyond all recognition. Once merely the custodians of investor’s cash banks became the guardians of the environment and signallers of virtue. Soon no financial institution’s website was complete without a least two pages given over to sustainable investment. I cannot remember exactly when sustainability was shoehorned into the investment banker’s business model but I’m sure Frank Pennal does.

Frank began his banking career in the property department of Hill Samuel not long after that meeting in Nick’s office and has been with the company ever since, seeing his employer acquired first by Lloyds TSB and then by Close Brothers. It was to Frank I sent a photograph of the half acre of building waste spread over the meadow adjacent to the BF Design Solution’s development. First because of the contrast between this image and the one of a part harvested wheat field on Close Brother’s web site. Second because Close Brothers were financing the building company responsible for dumping the waste. As well the claim on the website the bank was ‘helping the people of Britain thrive’ seemed oddly detached from reality considering Susan was still recovering from the asthma and a suspected heart attack following Gordon Bell’s bonfire of building waste which filled our house with smoke.

There was a week of emails between St Helier in Jersey and Close Brothers staff working from home in London, emails I suspect less concerned with damage to countryside surrounding BF Design Solutions’ site and Susan’s health than potential damage to Close Brother’s reputation. Finally came a statement, not from Frank but a someone called Libby speaking on Frank’s behalf, which said BF Design (sic) had been a client since 2014 during which time Close Brothers had provided finance for 9 developments, involving several million pounds of lending and, to date the bank had not experienced any concerns raised by third parties. There followed several paragraphs about due diligence and monitoring by third parties, which largely replicated what appeared on the sustainability page of Close Brothers’ website. I was going to ask for permission to use a screen shot of the webpage for the book but guessed the answer would have been ‘no’. The subtext of Libby’s response was, despite the photographs backed up by soil analysis, it could not happen so it did not happen and what I had witnessed was obviously some sort of apparition. As well I noticed ‘to date’ in the Close Brother's statement post-dated my concerns that waste material was either being burnt or disposed of in Peter Fabish’s meadow. Obviously I was the wrong sort of third party.

Nothing Libby said came as a surprise because Close Brothers’ commitments to protecting the environment, reducing emissions and improving people’s lives, were merely commitments rather than obligations and, unlike the bank’s core business, fell outside any regulatory framework. There is not an environmental version of the Financial Services Authority. Close Brothers has made commitments to its shareholders and depositors and is obliged to keep to these if it wishes to remain competitive with other financial institutions. In turn pension funds investing in Close Brothers are obliged to provide the best rate of return for their members. All these obligations trump any aspirations to do no evil or ensure Close Brother’s funds are only used to finance sustainable, low carbon and environmentally friendly activities.

Much as I disliked what BG Design Solutions did at least Tristan and Gordon were being honest: there was no greenwash on their website. OK, so there was no web site, but nor was there any attempt by the two men to project themselves as anything other than owners of a building company determined to squeeze as much profit as possible out of an increasingly troublesome development.

In his personal life Tristan is virtuous and philanthropic, showering the nurses who treated him after a lifesaving operation with gifts as well as raising money for a hospice. But corporate Tristan is constrained by a financial reality dictating the health of the nurse I married was worth less than the money saved by burning waste on site rather than having it taken away in a skip. Rather being showered her with gifts - it seems a wide screen TV is the going rate for a nurse - Susan had to make do with a bunch of flowers, which admittedly the paramedic treating her that evening thought were impressive, and a note saying 'sorry for the fire’. And if Peter Fabish was misguided enough to allow his meadow to be used as an unlicensed rubbish tip surely Gordon would have failed his investors if he passed up on this opportunity to boost BF Design Solutions’ profits.

The Environment Agency did not care, Cambridgeshire District Council turned a blind eye so why splash out on an expensive waste disposal service if toxic runoff from the site could be dumped on adjacent land or let flow into the nearest watercourse. There was that troublesome sustainability commitment on Close Brother’s website, on a page which most likely Tristan and Gordon or anyone else borrowing money from the bank never visited. But while Close Brothers might give BF Design Solutions a slap on the wrist it was hardly likely to turn its back on the company, not with a multimillion-pound development in the Essex village of Arkesden in the pipeline.

According to the Financial Times regulators are planning to step up scrutiny over investment industry ‘greenwashing’ although it is unlikely banks will be forced by law to cut ties with companies polluting the environment. Protecting Britain's countryside and atmosphere will be left up to the now toothless Environment Agency and near bankrupt local authorities. As well banks are adept at turning polluting borrowers into lucrative opportunities, upping the interest charged on loans a couple of basis points citing the need to offset the risk of reputational damage. At Cop26, which Close Brothers obviously regarded as a marketing opportunity because it splashed the conference banner across its web site, Mark Carney suggested the financial services industry would navigate the economy towards a sustainable future. Unfortunately, this navigation assumes banks are holding a tiller which is connected to the ship’s rudder which, given how BF Design Solutions used Close Brother’s money, it clearly is not.

The Oberon Pen was not a commercial success turning out slower and less accurate than a copy typist. As far as I know two survive; one currently listed on eBay for £30 and the other in the Cambridge Computer Museum. It was also an environmental disaster with most of the high-tech pens manufactured ending up as landfill. Forty years ago no-one cared, now everyone pretends to care: I wonder if Frank Pennal feels this is progress.