Barclays Turns Off Oil Project Finance Tap

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    Stockholm (NordSIP) – One of the major providers of financing to the fossil fuel industry took a step towards positive climate action as Barclays Bank published its new Climate Change Statement on 9 February 2024.  With almost $200 billion worth of financing Barclays sits in 7th place in the “Dirty Dozen” list of biggest fossil fuel financiers since the Paris Agreement was signed.

    Barclays’ will no longer provide project finance or other direct finance to energy clients, for upstream oil and gas expansion projects or related infrastructure.  The bank announced its net-zero 2050 goal in 2020, based on achieving net-zero operations and aligning its financed emissions with the 1.5-degree pathways.  It also previously committed to facilitating $1 trillion worth of transition Financing by end of 2030.

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    Financing at entity level will continue for now

    Alongside the blanket exclusion at project level Barclays also laid out a new stricter methodology for evaluating clients at entity level.  Energy groups will be assessed according to their alignment with Barclays’ emissions reduction targets, including Scope 1, 2 and 3 targets, production expansion plans and low carbon activities.  The short-term strategy involves mandatory annual reviews of energy groups that have more than 10% of their upstream oil and gas capital expenditure targeted at expansion of production.

    Following the publication of this new statement, Barclays will expect its energy group clients to provide full transition plans by 1 January 2025.  This phased approach also means that non-diversified energy groups (i.e. non-state-owned entities that generate almost all of their revenues from upstream activities such as exploration, development and production), will only be financed “by exception.”

    Barclays also sets out its specific financing criteria and thresholds for a range of unconventional oil and gas practices, and thermal coal.  However, the bank’s phased approach allows for continued financing of many harmful types of fossil fuel exploitation in the run-up to various stated deadlines.  Moreover, exclusions for Hydraulic Fracturing (Fracking) are only applicable in the Europe, which presumably leaves Barclays free to continue financing the fracking industry in the United States and elsewhere.

    Critics point to loopholes

    Although the headline targets and project level restrictions demonstrate a positive step towards Barclays’ net-zero goals, the myriad exceptions and conditions at entity level have already drawn some criticism.  Commenting on the updated Climate Change Statement, Huw Davies from campaigning NGO Make My Money Matter said: “There is a climate-emergency-sized-hole in Barclays’ new fossil fuel financing policy.  Its assessment of oil and gas clients’ decarbonisation plans lacks teeth and will allow the bank to continue financing clients involved in expansion.”

    Laura Barlow, Barclays Group Head of Sustainability, 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.”

    With its long track record of financing the fossil fuel industry, any positive steps by Barclays will be welcome.  Nevertheless, environmental campaign groups will be keeping a close eye on the bank as its progresses towards its interim targets to evaluate the effectiveness of these latest measures.

    Image courtesy of Luis Tosta on Unsplash
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.
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