UK-based bank Barclays will no longer directly finance new oil and gas projects, and will require its energy sector clients to produce transition plans or decarbonization strategies by the beginning of next year, according to a new “Climate Change Statement” released by the bank.
Alongside its new energy policies, Barclays also released a new transition finance framework, outlining its criteria for classifying financing to decarbonize high-emissions sectors as “transition,” as part of its efforts to achieve its goal to facilitate $1 trillion in sustainable and transition finance by 2030.
The new policy makes Barclays the latest in a series of major European-based banks to commit to exit new fossil fuel financing, with similar policies introduced by HSBC, BNP Paribas, Crédit Agricole and Societe Generale. After HSBC announced its policy in December 2022, each of the other banks were targeted in a campaign led by ShareAction and including investors representing more than $1.5 trillion in assets, calling for commitments to end financing for new oil and gas fields this year. ShareAction also led a campaign at Barclays’ AGM in 2023 urging the bank to end its financing of new oil and gas projects, and to provide more details on the bank’s plan to assess its clients’ climate transition plans.
In its statement announcing the climate change statement, Barclays acknowledged its engagement with ShareAction, alongside other stakeholders, in informing the new policy.
The new policy introduces a series of restrictions and expectations for Barclays’ energy sector clients, including ending project finance, or other direct finance to energy clients for upstream oil and gas expansion projects or related infrastructure, no longer providing financing to new clients with more than 10% of planned oil and gas capex for focused on expansion, and significantly restricting financing to non-diversified energy clients engaged in long lead-time upstream oil & gas project expansion, as well as requiring energy clients to have 2030 methane reduction targets, commitments to end routine flaring by 2030, and near-term net zero aligned Scope 1 and 2 targets by 2026, in addition to transition and decarbonization strategies by 2025. The new policy also outlines a series of restrictions for projects and clients in areas including non-conventional oil and gas, thermal coal mining and power, mountain top removal coal mining, and a commitment to conduct enhanced due diligence on clients with large installed biomass capacity.
Laura Barlow, Group Head of Sustainability at Barclays, said:
“Addressing climate change is a critical and complex challenge. We continue to work with our energy clients as they decarbonise and support their efforts to transition in a manner that is just, orderly and addresses energy security. Today we strengthen our commitment to the energy transition, with policies that will focus our capital and resources to the energy companies that play a key role in the transition.”
Barclays’ new transition finance framework follows a commitment by the bank in 2022 to facilitate $1 trillion of sustainable and transition financing between 2023 by the end of 2030, and the establishment earlier this year of a new Energy Transition Group within its Corporate and Investment Bank, responsible for advising clients in the exploration of energy transition opportunities, and supporting clients on the path to net zero.
The new framework sets out the criteria for classification of transition financing, supporting emissions reductions in high-emitting and hard-to-abate sectors, such as cement, chemicals and steel. The framework defines transition financing as “any financing including lending, capital markets and other financing solutions provided to clients for activities (including technologies) that support greenhouse gas emission reduction, directly or indirectly, in high-emitting and hard-to-abate sectors towards a 1.5 degree pathway,” and also includes a set of principles to guide the bank in the application of the definition.
Daniel Hanna, Head of Sustainable Finance, Corporate and Investment Bank, said:
“Capital is critical to the energy transition, to decarbonise hard-to-abate sectors for the world to reach net zero emissions and create a resilient economy. As the number two ranked clean energy advisor globally by BloombergNEF, Barclays is strongly positioned with our capabilities and experience, global reach and role in the global economy to accelerate the investment needed for real-world decarbonisation, while supporting our energy clients’ transition.”
While welcoming the new energy financing policy and acknowledging its “positive commitments” and the pledge to end new oil and gas project financing, ShareAction said in a statement that Barclays “could have gone so much further” in its new commitments.
Kelly Shields, Campaign Manager at ShareAction, said:
“Barclays’ intention to request decarbonisation plans from its oil and gas clients is the right one. But for it to have teeth, the bank must demand clients stop engaging in activities that increase the climate crisis such as oil and gas exploration.
“Barclays is wrong not to have ruled out financing companies that focus exclusively on fossil fuel extraction. This should include fracking, which is causing so much environmental and social harm and is an activity the bank is heavily exposed to.”