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Barclays needs transparency to avoid climate embarrassment

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Christian Aid dumping Barclays for fossil fuel finance highlights bank’s unclear progress

Losing the business of UK charity Christian Aid is not going to put much of a dent in Barclays’ bottom line.

The aid organisation had total funds of £35m at the end of its 2022 financial year.

But Christian Aid’s decision, announced on Tuesday, to end its relationship with Barclays after eight years may cause a few blushes in the bank’s boardroom, nonetheless.

Founded by churches in 1945, Christian Aid is one of the best known charities in the UK, and attracted £77m of donations last year.

Its decision, prompted by alarm at Barclays’ financing of fossil fuel producers, has been reported by Bloomberg and London’s Evening Standard as well as such papers as the Church Times.

This is not a good look for Barclays, which prides itself on having been one of the first banks to set an ambition to become net zero, including in its financed emissions, by 2050.

It comes three weeks after a clutch of celebrities and NGOs wrote to the All England Lawn Tennis Club to criticise it for accepting sponsorship for this year’s Wimbledon championships from Barclays, which they accused of “financing and profiting from climate chaos”.

‘Weak commitment’

Christian Aid campaigns actively on the damage climate change is causing to the livelihoods of the world’s poorest.

Record-breaking heat causing fires and droughts around the world this year only makes this clearer and more urgent.

Having reviewed the relationship, Martin Birch, Christian Aid’s chief operating officer, said in a statement: “Whilst Barclays was able to provide banking services to fragile contexts, their record on fossil fuel finance, and their weak commitment to future improvements in this area meant that we had to seek a more suitable provider.”

Several other Christian and ethical campaigners welcomed Christian Aid’s announcement, including Rowan Williams, former Archbishop of Canterbury and chair of the charity, who said: “It is essential that banks like all public and corporate bodies be held accountable for the use of their resources in the context of our global emergency.”

Expanding fossils

Christian Aid made several specific charges against Barclays. Having provided $190bn of financing to oil and gas companies since the Paris Agreement was signed at the end of 2015, it is the seventh largest bank in the world for fossil finance and the largest in Europe.

The figure is drawn from the Rainforest Action Network’s widely used annual study of the issue.

Second, Barclays continues to finance companies that are expanding oil and gas production, even though the International Energy Agency said in 2021 that no new production infrastructure was needed if the world was to achieve net zero greenhouse gas emissions by 2050.

While HSBC, Lloyds and NatWest all at least had policies ruling out direct project financing for new oil and gas, Christian Aid said, Barclays had not even taken this “first step”.

And “banks need to go much further [than banning project financing] and address their financing at the client level, through general purpose loans and underwriting of bonds,” the charity added.

It said Barclays needed “to publish a policy to stop extending all types of financing (loans and underwriting) to coal, oil and gas clients that are still exploring and developing new fossil fuels. Even though the bank has set a target to reduce real world emissions by 40% by 2030, the lack of a coherent policy to achieve this has drawn concern from campaigners and investors.”

Urgent challenge

Is Christian Aid right to be targeting Barclays?

Barclays declined to answer GlobalCapital’s questions on the issue, but gave a prepared statement.

“We are clear that addressing climate change is an urgent and complex challenge,” it said.

Barclays was “using our entire franchise to support new green technologies and infrastructure projects”. It had provided £87bn of green finance since 2018 and had a target to facilitate $1tr of “sustainable and transition financing” between 2023 and 2030.

The bank will also invest £500m of its own capital in climate tech start-ups by the end of 2027.

On fossil fuels, Barclays said it was integrating the IEA’s Net Zero 2050 scenario — the one that says new fossil infrastructure is unnecessary.

In doing that, it had set targets to reduce financed emissions in five high emitting sectors. In energy, meaning oil and gas, it had lowered financed emissions 32% since 2020, well ahead of its target for a 15% cut by 2025.

Climbing down the table

A strong point for Barclays, recognised by the Rainforest Action Network, is that its climate targets cover bond underwriting as well as lending — still rare among investment banks.

RAN’s data hold some other facts that look better for Barclays, too.

In its fossil finance league table, Barclays is seventh in the world for the whole period since 2016, but for just the last two years, 2021 and 2022, it has fallen to 14th, with $38bn in that period. Less good is that Barclays is still the top European bank.

RAN also produces a table that examines just financing for 100 key companies expanding fossil fuel production. Here, Barclays still ranks seventh in the world for the 2016-22 period, with $56bn of financing. But it has markedly dropped in the past two years, with just $5.9bn in the period.

That puts it way down the list at 27th, well below the likes of BNP Paribas and Crédit Agricole, which have each provided around $10bn to those companies.

A quick analysis of Dealogic’s bond database shows Barclays was the eighth biggest bookrunner of oil and gas bonds globally in 2016-19, with an average of $6.1bn of league table credit a year and a 3.7% market share.

In 2020-21, Barclays underwrote $5bn a year and had sunk to 11th, with a 2.9% share, lower than HSBC and BNP Paribas from Europe.

Since the beginning of 2022, Barclays remains 11th, behind only Santander from Europe. Its market share is 2.7%.

Transition claims

These figures are moving in the right direction. Does that mean Barclays is getting out of fossil fuel finance? Only if the trajectory is steep enough, and sustained.

Like most other big investment banks, Barclays says it wants to finance clients as they transition, rather than divesting from high emitting sectors.

It wants to facilitate “the finance needed to change business practices and scale new green technologies. This includes many oil and gas companies that are critical to the transition, and have committed significant resources and expertise to renewable energy. Where companies are unwilling to reduce their emissions consistent with internationally accepted pathways, they may find it difficult to access financing, including from Barclays.”

The argument sounds great in principle. The difficulty is evaluating how honestly and thoroughly a bank puts it into practice.

Barclays’ bond clients from the oil and gas sector this year have included BP — in some observers’ eyes, the greenest oil major, but which has rowed back on its emissions commitments this year. Clients have also included Pemex, Phillips 66 (pictured), Williams Companies, Ovintiv (the new name for Encana) and Australian petrol station chain Ampol.

Few if any of these would come close to convincing environmentalists that they were transitioning to renewable energy at anything like an “internationally accepted pathway”. Are they using all those bond proceeds for the transition? It’s doubtful.

Peering through a thicket

Faced with all these facts in the public domain, and with Barclays' fossil fuel exclusion policies that RAN scores poorly, Christian Aid had to make up its mind. This is exactly the same task as faces investors when they try to weigh up Barclays’ environmental, social and governance performance.

Are the recent reductions in Barclays’ prominence in fossil fuel finance the result of a deliberate policy — or a fluke?

Do they count for much, when Barclays is still the biggest European bank in overall fossil finance and channelled $38bn into this climate-destroying technology in the past two years?

How do these figures map on to Barclays’ own figure of 32% lower financed emissions from oil and gas?

Barclays may have a sophisticated story to tell, of carefully thought out retreat from fossil finance. But it just isn’t cutting through to public perception.

Its energy exclusion policy, like most from banks, is a cat’s cradle of conditions, thresholds and bands that it would take a PhD student hours to translate into plain English.

And on its actual performance, what stakeholders want to see — and would find useful — would be a specific list of financing deals to specific companies, year by year, with evidence of how this is either declining in a planned and sustained way, or being made less damaging and risky by the companies themselves transitioning to net zero.

Confidentiality cannot be a barrier, since RAN and Dealogic have access to much of the data.

A grown-up, transparent policy and disclosure on fossil fuel financing are not hard to imagine or devise.

The investors that supply Barclays’ money — which includes all its depositors, large and small — deserve nothing less.