Barclays Lags European Peers in Halt To Funding New Oil and Gas Fields

UK banking giant Barclays has just announced that it will drop direct funding for new oil and gas projects, joining other major European banks in halting the financing of fossil fuel expansion.  Barclays has been one of the top ten banks financing fossil fuels globally since 2016, just after the Paris Agreement was signed, according to the 14th annual Banking on Climate Chaos report published by environmental groups last year. Estimates by climate campaigners, including Rainforest Action Network and Reclaim Finance, showed that Barclays spent $190.58 billion on funding fossil fuels between 2016 and 2022, becoming the world’s seventh-largest and Europe’s biggest banker of oil, gas, and coal since the Paris Agreement. Four U.S. banks, a Canadian bank, and a Japanese bank, are ahead of Barclays in financing fossil fuels.

Europe’s biggest lender to fossil fuel projects has just pledged to restrict financing for oil and gas, including direct funding for new projects, in a move welcomed by environmental groups. Campaigners, however, say that Barclays could have gone further in its commitments and that the announcement of the UK banking giant now puts pressure on the U.S. banks, which are the top lenders to the fossil fuel industry—JP Morgan, Bank of America, and Citi.

Last week, Barclays said in its revised Climate Change Statement that it would no longer provide project finance or other direct finance to energy clients for upstream oil and gas expansion projects or related infrastructure. The bank will also impose restrictions for new energy clients engaged in the expansion of oil and gas, as well as restrictions on non-diversified energy clients engaged in long lead expansion. Barclays is putting additional restrictions on unconventional oil and gas, including Amazon and extra heavy oil.

The bank will also require its energy clients to have 2030 methane reduction targets, a commitment to end all routine/non-essential venting and flaring by 2030, and near-term net-zero-aligned Scope 1 and 2 targets by January 2026.Barclays is also looking to avoid claims of greenwashing with a new set of guidelines about what ‘transition finance’ is and how its new transition finance team should apply it.

Barclays is late to the party. Other banks in Europe have already started to reduce funding to oil and gas projects as part of their own climate targets.UK’s HSBC said that at the end of 2022, it would stop funding new oil and gas field developments and related infrastructure as part of a policy to support and finance a net-zero transition.

France’s biggest bank, BNP Paribas, said in May 2023 that it would no longer provide any financing for developing new oil and gas fields, regardless of the financing methods. The bank also pledged to reduce its financing for oil exploration and production by 80% by 2030 as part of its energy transition goals.Barclays’ announcement this month was welcomed by campaigners, who naturally want further restrictive moves from the bank and its peers “to stop helping wreck the climate.”

Although Barclays’ updated policy “contains some positive commitments,” “the strategy could have gone so much further,” Kelly Shields, Campaign Manager at responsible investment charity ShareAction, said in a statement.“Barclays is wrong not to have ruled out financing companies that focus exclusively on fossil fuel extraction. This should include fracking, which is causing so much environmental and social harm and is an activity the bank is heavily exposed to,” Shields added.

Barclays is “a bit late” compared to its European peers, ShareAction senior research manager Xavier Lerin told Euronews Green.“Barclays is taking a similar approach but retains a lot of discretion as to how it will restrict financing, while peers are ahead of the curve because they have clearly said we’re not going to finance these companies anymore,” Lerin noted.The halt to new oil and gas project funding from Barclays is putting pressure on U.S. and Canadian banks to announce similar policies, Rainforest Action Network and other campaigners said.

“The new policy, while still not strong enough, stands in stark contrast to backsliding by US banks and inaction by Canadian banks,” they added.“While it’s clear that Barclays still has much work to do to actually deliver on its own climate commitments, these moves further widen the climate ambition gap by banks across the Atlantic,” said Adele Shraiman, Senior Strategist, Sierra Club Fossil-Free Finance Campaign