Barclays is targeting net zero carbon emissions by 2050 after pressure from shareholders and activists, and has committed to aligning its entire financing portfolio with the goals of the Paris Agreement.
The targets cover not only Barclays’ direct and indirect CO2 emissions, but also emissions that result from its financing activities, in order to meet Paris targets that aim to keep global warming to below two degrees.
Barclays is the biggest financier of fossil fuel in Europe, and seventh largest globally, and has provided more than £100bn to the fossil fuel industry since the Paris Agreement was signed in 2015, according to the Rainforest Alliance Network.
“Our new ambition to be net zero, and our commitment to aligning our financing portfolio across all sectors to the goals of the Paris Agreement, will mean we can play much more of a leading role in meeting the climate challenge and in financing energy transition,” said Barclays chairman Nigel Higgins.
The announcement was welcomed by shareholder group ShareAction, which said that the bank still has urgent work to do this year to curb its financing of fossil fuel companies in the short term. Investors including specialist asset manager Sarasin & Partners also commended Barclays board.
“The message is powerful and reaffirms that continuing to finance activities that undermine planet stability is not in anyone’s interests, and certainly not shareholders,” said Natasha Landell-Mills, head of stewardship at Sarasin & Partners.
TWO RESOLUTIONS
In an unusual move, Barclays’ board is putting the proposal to a formal vote by investors at Barclays' AGM on May 7, in addition to an earlier climate resolution that was coordinated by ShareAction and filed in January by 11 institutional investors and 130 individual investors.
That detailed and targeted resolution called for a phase-out of financing activities to the most carbon-intensive companies.
“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,” said Wolfgang Kuhn, director of finance sector strategies at ShareAction.
ShareAction is recommending that investors vote in favour of both resolutions to cement the bank’s climate commitment and insist on near-term ambition to deliver results.
Sarasin & Partners also said that shareholders should show their support by backing Barclays resolution and the shareholder initiated resolution at the AGM.
“Shareholders should underline their support for this by backing not just Barclays’ resolution, but also the shareholder-initiated resolution at their forthcoming AGM,” Landell-Mills said.
WHOLE PORTFOLIO VIEW
Barclays views its announcement as broader than ShareAction’s climate resolution as it looks across the bank’s entire portfolio, rather than just the energy and power sectors that the shareholder resolution targeted. It will also look at clients at a broader entity level, rather than just group level.
The bank will start with the energy and power sectors, however, as energy production and use is the biggest source of greenhouse gas emissions globally, and Barclays will also impose further restrictions on fossil fuel financing.
The work will require a huge amount of data that does not currently exist, and Barclays will build new, open source tools to map the greenhouse gas emissions of its portfolio to the goals of the Paris Agreement, based on the International Energy Agency’s sustainable development scenario.
It will allow Barclays to look at the carbon intensity and absolute carbon emissions of the activities that it finances, which will help it to price carbon and carbon emissions in different financial portfolios.
The bank will be able to extend this methodology beyond its lending activities to capital markets financing and will provide transparent targets to just progress and will report regularly from 2021.
“Ours is a clear and implementable strategy, and will be backed up with specific targets and regular reporting to ensure we implement it,” Higgins said.
Barclays is targeting at least £100bn of green financing by 2030 and will also invest £175m in the next five years in environmental innovation, through a new sustainable impact capital initiative.
Barclays, which signed the Principles for Responsible Banking in 2019, is the first big UK bank to target net zero emissions and also published its annual ESG report on March 30.
“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,” Sarasin’s Landell-Mills said.