Our friends at Share Action did the hard work to unpack what Barclays’ new fancy sounding “Net Zero” fossil policy really means. TLDR: it talks a good game, but punts most material action on fossil fuel investing 30 years into the future.
Following three months of intense talks with investors, including co-filers of a shareholder resolution filed by campaign organisation ShareAction, Barclays today announces an ambition to become a “net-zero bank”, covering its scope 1, 2 and 3 emissions by 2050. This is a milestone announcement reflecting the positive pressure of shareholders and other stakeholders, and the bank’s willingness to listen. Nevertheless, the bank has urgent work to do this year to significantly curb its financing of fossil fuel companies in the short-term.
Barclays today commits to “set, disclose and implement a strategy, with targets, to transition its provision of financial services across all sectors (starting with, but not limited to, the energy and power sectors) to align with the goals and timelines of the Paris Agreement.”
In a highly unusual move, the bank’s board is putting this proposal to a formal vote by investors at the company’s AGM on 7 May.
Barclays’ AGM will therefore see two climate resolutions put to a vote. ShareAction recommends shareholders vote for both. The resolution filed in January by 11 institutional investors, 130 individual investors and co-ordinated by ShareAction is more detailed and targeted in nature, calling for phase-out of financing activities to the most carbon-intensive energy companies.
Wolfgang Kuhn, Director of Finance Sector Strategies at ShareAction said: “Voting for both these resolutions will cement the bank’s new high-level climate commitment while at the same time insisting on the near-term ambition needed to deliver the results everyone wants. A climate strategy cannot be considered complete without recognising that transition necessarily means phase-out when it comes to fossil fuels, particularly the highest carbon fuels where Barclays has significant exposure.”
ShareAction has fully analysed Barclays’ accompanying energy policy and found that, while the bank as made genuine progress on its Arctic oil policy, changes to its position on fracking and tar sands financing will be immaterial. Particularly concerning is that an update to its policy for coal power will grant most coal-heavy companies a five-year grace period in which to receive unmitigated finance from the bank.
According to RAN, Barclays has provided more than £100 billion to the fossil fuel industry since the Paris agreement was signed, making it Europe’s largest fossil fuel financier and the world’s seventh largest. The bank increased financing for certain oil, gas and coal companies working to expand fossil fuel infrastructure by £2.9 billion in 2019. These numbers illustrate why the bank must now significantly tighten its energy policy, one of the weakest in Europe, to meet its net zero ambition.
ShareAction and other co-filers of its resolution will be fully involved in the multi-stakeholder process being promised by Barclays in the run up to November when new detailed targets, energy sub-sector policies, and the methodology underlying both will be published by the bank. ShareAction will continue to publish analysis highlighting progress and any gaps between Barclays’ short-term financing decisions and its newly unveiled long-term ambition.
“Today’s news from Barclays is a win for investor stewardship in the UK. Nevertheless, announcing a 30-year ambition is arguably the easy bit. The test is now on investors who are serious about climate change to translate this ambition into a strong fossil fuel phase-out plan by supporting both climate resolutions on May 7th,” Kuhn commented.
Since January, a clutch of high-profile investors has publicly committed support for ShareAction’s resolution, helping create the context for the commitment announced today by Barclays. These include Amundi, Europe’s largest fund manager by assets under management; the Church of England Pensions Board and the Church Commissioners; Nest, which invests on behalf of 9 million UK pension savers; and Jupiter Asset Management, which has a 1.15% holding in the bank.
Natasha Landell-Mills, CFA, Partner, Head of Stewardship at Sarasin & Partners, a co-filer of ShareAction’s resolution, said: “Today, Barclays has committed to aligning all of its lending and corporate finance with the Paris Agreement goals, not just for power and energy, but for all sectors. The message is powerful: continuing to finance activities that undermine planet stability is not in anyone’s interests, and certainly not shareholders. This is ground-breaking and the Board deserves to be commended. Other banks should follow suit.
“What matters now is that the Board sets robust nearer-term targets that leave no doubt about its determination to deliver net zero emissions by 2050. Shareholders should underline their support for this by supporting not just Barclays’ resolution, but also the shareholder-initiated resolution at Barclays’ forthcoming AGM.”
Dominic Burke, Investment Director at Lankelly Chase, a co-filer of ShareAction’s resolution, says: “We need commitment not just ambition from a bank that only last year increased financing for oil, gas and coal companies by £2.9 billion. If a net-zero ambition does not involve phasing out fossil fuel financing, then what does it mean? Investors should ask what Barclays’ ambition will amount to if it doesn’t encompass at the very least a timescale for phase-out. The time has passed for carefully drafted position statements. Investors must support the original resolution and show they intend to hold Barclays to account for its response to the climate emergency.”
Central bankers, policy makers and institutional investors have increasingly recognised the critical role of the banking sector in enabling a swift low carbon transition that delivers on the ambition for 1.5°C of global warming in the Paris Climate Agreement. It is imperative that every bank, insurer, asset manager and pension fund publishes a credible strategy to be net zero by 2050 at the very latest, taking into account the Just Transition.