Barclays Plc plans to stop direct financing of new oil and gas projects, as the British bank expands the scope of assets that will find it harder to access capital in the future.
The plan involves restrictions on new and non-diversified oil and gas customers participating in the expansion, according to an emailed statement. Barclays said its new policy sets out “clear expectations of transition strategies and decarbonisation requirements for energy customers”.
The announcement comes shortly after Barclays said it was establishing an energy transition team within its corporate and investment bank, which Bloomberg News reported will be made up of more than 100 bankers. This comes as the financial industry seeks to benefit from the business opportunities represented by the transition from fossil fuels to low-carbon energy sources, a shift that BlackRock Inc. has identified as a “mega” force driving the global economy.
Barclays’ oil and gas loans represented about 2% of its total loan portfolio and 2.6% of its capital markets business, according to its 2022 annual report. It provided $4.9 billion in loans to the fossil fuel industry in 2023, compared with an average of $7.2 billion over the previous seven years, data compiled by Bloomberg show.
The U.K. bank has been growing environmental lending and underwriting faster than its peers, according to a December analysis by BloombergNEF that looked at the ratio of green financing to fossil financing. Barclays was at 1.55 at the end of 2022, meaning that for every dollar it provided to the fossil fuel industry, whether through direct lending or debt underwriting, it allocated $1.55 to green projects, it showed. BNEF analysis.
Laura Barlow, chief sustainability officer at Barclays, called the funding shift needed to address climate change “complex.” She also emphasized that the bank will work with energy customers to reduce their carbon footprint in “a way that is fair, orderly and addresses energy security.”
Barclays’ decision on oil and gas mirrors similar moves by its British and European peers. Societe Generale SA said in September it plans to suspend lending to some new oil and gas projects, following restrictions by BNP Paribas SA and HSBC Holdings Plc.
Its historical ties to the fossil fuel industry have long made Barclays a target of climate activists, with protesters frequenting its annual meetings and office buildings. The bank has also faced shareholder resolutions over eliminating its loans to the oil and gas sector. In that context, Barclays’ new restrictions on fossil financing won measured praise from climate activists.
“ShareAction welcomes the publication of Barclays’ policy update. “It contains some positive commitments by the bank, including its decision to establish basic climate testing for its oil and gas clients, along with its promise to stop financing new oil and gas projects directly,” the nonprofit organization said. United Kingdom in an emailed statement on Friday.
“However, the strategy could have gone much further,” ShareAction said. “Barclays’ intention to request decarbonization plans from its oil and gas clients is the right one. But to be strong, the bank must require its clients to stop engaging in activities that add to the climate crisis, such as oil and gas exploration.”
Barclays has set a goal of facilitating $1 trillion of sustainable and transition financing between 2023 and 2030. Its latest restrictions on oil and gas financing will help the bank achieve that goal, it said.
The new restrictions disclosed by the lender do not include project financing, or other direct financing to energy customers, for oil and gas expansion projects or related infrastructure. It will also impose restrictions on new energy customers that are expanding.
Non-diversified energy customers engaged in long-term expansion also face restrictions, Barclays said. And there will be additional restrictions on unconventional oil and gas, including the Amazon and extra-heavy oil, he said.
Energy customers are expected to have 2030 methane reduction targets that encompass “a commitment to ending all routine/non-essential venting and flaring by 2030 and scope one and two targets aligned with near-term net zero.” by January 2026,” Barclays said.
The bank’s clients will be required to draw up transition plans or decarbonisation strategies by January 2025. “Barclays will continue to support an energy sector in transition, with a focus on diversified energy companies investing in low carbon emissions and with greater scrutiny on those participating in the development of new oil and gas projects,” he said.
2024-02-12 05:06:26
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