“Barclays Announces Fresh Curbs on Oil and Gas Financing”

Barclays, the largest lender to the oil and gas industry in Britain, has announced new measures to curb its financing of fossil fuel projects. The move comes in response to mounting pressure from environmental campaigners and aims to reduce the bank’s contribution to climate change. Barclays’ Transition Finance Framework (TFF), released on Friday, includes a halt to direct financing of new oil and gas fields and stricter lending restrictions for energy companies involved in expanding fossil fuel production.

Laura Barlow, Barclays’ group head of sustainability, stated that the new policy is part of the bank’s commitment to reducing emissions linked to its lending activities and supporting greener alternatives. The bank will also implement enhanced oversight for existing upstream energy clients that exceed a 10% threshold for expenditure on production expansion. While this will not be a red line, it will inform the bank’s risk appetite.

Barclays joins other major banks, such as HSBC and BNP Paribas, in tightening their lending to the oil and gas sector while increasing funding for renewable energy projects. These banks have set a target of $1 trillion in renewable energy lending by 2030. Non-profit organization ShareAction, which had been pressuring Barclays to take stronger action on climate change, has withdrawn a proposed shareholder resolution in response to the bank’s new curbs.

The impact of these project finance restrictions on Barclays’ business is expected to be minimal, as the bank holds a limited market share in this area. However, it is a positive step towards aligning its financing activities with climate goals. Jeanne Martin, head of banking standards at ShareAction, commended the move but expressed concerns about the bank’s funding of fracking. She emphasized that ShareAction will closely monitor Barclays’ implementation of its fossil fuel policy and escalate engagement if necessary.

While some investors and organizations have praised Barclays’ new policy as a significant step forward, they believe that further action is needed. Danish investor Sparinvest acknowledged the bank’s commitments but called for additional measures, particularly regarding short-lead time assets. Katharina Lindmeier, senior responsible investment manager at UK pension investor Nest, also commended Barclays but urged the bank to go further, specifically in addressing fracking.

Barclays has faced criticism for its substantial funding of fossil fuels in Europe. However, the bank clarified that its on-balance sheet financing for oil and gas represents less than 2% of its total lending activities, with capital markets financing for the sector accounting for less than 3% of its total activity. The bank reported a 32% reduction in emissions linked to its lending to the energy sector between 2020 and 2022, surpassing its target reduction of 15%.

In addition to the curbs on financing, Barclays has introduced further restrictions, including no financing for exploration and production in the Amazon and a ban on financing firms that derive more than 20% of their production from unconventional sources like oil sands starting from June 2024. All corporate clients in the energy sector will be required to present transition plans or decarbonization strategies by January 2025, along with methane reduction targets for 2030 and a commitment to end non-essential venting and flaring by 2030. The bank’s head of sustainable finance, Daniel Hanna, highlighted that Barclays assesses over 80 variables when evaluating clients’ decarbonization plans and has committed to reviewing 750 client entities at the last annual general meeting.

Barclays has also recently established an energy transition group to provide strategic advice to clients on renewable energy, nature-based solutions, and carbon capture. These initiatives demonstrate the bank’s commitment to supporting the transition to a low-carbon economy and addressing climate change.

Overall, Barclays’ announcement of fresh curbs on oil and gas financing marks a significant step towards aligning its activities with climate goals. While some stakeholders believe that further action is necessary, the new measures demonstrate the bank’s commitment to reducing its contribution to climate change and supporting greener alternatives. As other major banks also tighten their lending to the fossil fuel sector, the financial industry is increasingly recognizing the importance of transitioning to a sustainable and low-carbon future.