Last month, headlines across the UK ran that Barclays was ending funding for new oil and gas, with the Telegraph notching this up as a ‘victory for net-zero activists’. Sounds great right? Yes and no. While campaigners humbly take some credit for this win, there’s a lot more going on behind the headline.

What Barclays actually committed to was to end a very specific type of funding for new oil and gas – so-called ‘project finance’. That’s when a bank puts money directly into a specfic oil or gas field, for example, where the money is earmarked to pay for the construction of that field.

BUT it is only a minuscule part of banks’ financing for the fossil fuel sector. ShareAction finds that between 2016-2021 only 1% of Barclays’ financing for oil and gas expansion was via project finance. And across all European banks it still only represents a maximum of 8%. Most of the funding is not in specific projects, but in financing the company making the project. So rather than $5 billion going to that new oil field that Exxon want to drill in the Amazon, Barclays just gives the money to Exxon instead, no strings attached. So the drill still destroys the Amazon, but Barclays get to say they didn’t fund the project.

The financing that bank provides to the fossil fuel company can take a few forms:

  • The bank acts as an agent to find and get investors excited about investing in a company. When a company issues a bond, which is a type of IOU, to raise money, banks act as the cheerleader and help run the whole fundraising process. They make a lot of money from this. This is called underwriting.
  • The bank can join up with other banks to make big loans to companies and gain back interest. The banks sometimes call this lending ‘general purpose financing’.

Together, lending and underwriting form the vast majority of banks’ financing for fossil fuel companies. According to the latest numbers, it’s about 50/50 on average.

What’s more, Barclays was the 17th European bank to make a similar commitment on project finance, according to ShareAction, so this hardly represents the pinnacle of climate action in the banking sector.

While ruling out direct project financing is symbolically a useful signal to the fossil fuel industry that its days are numbered, Barclays still massively funds the companies like Shell and Exxon behind the projects and pretends it doesn’t know they’ll use those funds to build new fossil fuel infrastructure that is incompatible with its own climate goals.

It’s obvious that if a company receives an unconditional, no-strings-attached loan for ‘general purposes’, it’s going to use that money to fund expensive new fossil fuel projects. Even the world’s fourth-biggest fossil fuel banker admits this is the case.

Make My Money Matter puts it well: “It’s like Barclays saying they would never directly invest in cigarettes, but are happy to provide billions to tobacco companies.