- The botched attempt to oust Nigel Farage as a client of Coutts raises important ethical issues, key to how to manage ESG effectively.
- Leaking misleading information to the press was unprofessional and justifies why CEO Dame Alison Rose had to resign.
- In an attempt to be inclusive, Coutts ended up looking just the opposite.
As a case study in how to mitigate reputational risk the recent fallout at NatWest Group, which saw its CEO Dame Alison Rose depart in disgrace last month, was the absolute antithesis.
The owner of Coutts, a British private bank, was embroiled in a very public spat with well-known EU sceptic, former MEP and general loudmouth, Nigel Farage, and came out bruised and humiliated.
The private bank had sought to close their account with Farage, ostensibly on commercial grounds (i.e. he didn’t have enough money to meet Coutts’ official threshold). However, it transpired that executives inside Coutts were more concerned about his “xenophobic, chauvinistic, and racist views” on the reputation of the bank.
Although awkward, holding this view about a client was not quite enough to put Rose out of a job, or trigger the subsequent resignation of Coutts’ chairman Peter Flavel in late July. What pushed matters over the edge was her attempt to mislead the public on Coutts’ justification via the BBC.
Rose was forced to confirm she was the source of a story which ran on the BBC news site on 4 July, having fed its business editor the line that commercial considerations were the only reason for closing Farage’s account.
As distasteful as many find a character like Farage, Rose was wrong to impart not just misleading information to the press, but any information about a customer at all. At best, her leaking information to the BBC was unprofessional; at worst, it could have set a dangerous precedent on how bank executives choose to extricate themselves from thorny moral and public issues.
After pressure from the UK government, a major shareholder in NatWest Group, the decision to let Rose go (she officially resigned) therefore was, sadly, the right one. Her reputation is now diminished, as is Coutts, which has, grovelingly, offered to re-open the account for Farage.
Don’t throw the ESG baby out with the bathwater
However, the fallout of this event could have much wider implications for banking – in part because the media-savvy Farage is now on a crusade to push government to strengthen rules to protect customers from losing bank accounts, but also for how and where institutions should apply ethical decision making into their operations.
Capital Monitor is concerned that other financial institutions looking at the Coutts affair will draw hasty conclusions about applying their ESG values when conducting business with clients.
Anxious about being an “inclusive” bank, executives at Coutts believed it was appropriate to let go of a low-value customer on the grounds their personal views were anything but inclusive. However, the logical end point of approaching customers in this way is troubling, possibly hypocritical. Is it right to only bank with individuals who share the same worldview as a collection of largely invisible executives?
Outside of anti-money laundering and similar regulations to prevent criminality, a bank should look to bring all customers on board and educate them on the values that matter to the institution.
The art is not to kick people out simply because you don’t like their personal or political views, but to inform customers whether their views are compatible. Coutts, or any financial institution, has a right to make ESG commitments commensurate with the objectives set out by the board. If a client doesn’t share those values, then they can leave.
If Farage, for example, doesn’t want his money linked to a bank with strong commitments to social inclusivity then he has the right to move his money elsewhere. Rather than find excuses to get rid of him, simply make clear what investment options are available to him. Or, if a customer wants to invest in oil and gas, for example, but a bank is phasing away from that sector, so be it – tough luck to the customer.
The loss of Dame Alison Rose to NatWest Group is significant. In 2021, Capital Monitor ranked the institution as the best in the world on setting credible and transparent ESG targets for its top executives.
We do not want to see that changed. But hopefully this will be a lesson for all in how to apply non-financial values without behaving in precisely the opposite way as intended; by not being inclusive.