Barclays and HSBC blasted over £158bn fossil fuel financing

Banking giants Barclays and HSBC have been accused of financing a combined £158bn into the fossil fuel sector since the signing of the Paris Agreement in 2015, despite both organisations pledging to ramp up sustainable investment portfolios.

Barclays and HSBC blasted over £158bn fossil fuel financing

40% of banks are failing to develop financing and investing restrictions or exclusions on high-carbon portfolios

A new report from NGO and partners, names the two UK organisations as the top two fossil fuel financiers in Europe. According to the report, Barclays has funnelled £91bn between 2015 and 2019 into fossil fuel firms and projects, while HSBC has contributed £67bn over the same period.

NGOs are now calling on the banks to fully align themselves with a net-zero economy in a way that contributes towards a green recovery from the impacts of the coronavirus.

Caroline Lucas, MP and former leader of the Green Party, said in the report’s foreword: “This report demonstrates that several years on from the Paris Agreement, major UK banks, despite their progressive rhetoric, are not taking meaningful steps towards the necessary phasing out of all fossil fuel financing.

“The parallels with events leading up to the 2008 financial crisis are obvious: private short-term profiteering at our collective long-term expense, facilitated by inadequate regulation. It’s time to acknowledge this approach is not working.”

Pledges and promises

Both banks have made notable sustainability commitments in recent years, but funding is still largely assigned to the fossil fuel sector.

Last month, Barclays pledged to become a net-zero business by 2050, under new a new climate policy which covers both direct operations and finance allocated externally.

It states that Barclays will set numerical, time-bound targets on decarbonising its investments in energy companies this year and begin reporting progress “regularly” and “transparently” from 2021.

Time-bound, numerical targets will then be developed for other sectors Barclays invests in “over time”, the bank said in a statement, as will more ambitious targets for investing in green innovation. On the latter, Barclays has set a short-term commitment to provide £100bn of green finance by 2030 – £175m of which will be allocated to “environmental innovation” by 2025.

A spokesperson from Barclays told edie: “The new position includes reporting on targets from 2021, and a specific 30% reduction of CO2 intensity in our power portfolio and a 15% reduction in CO2 intensity in our energy portfolio by the end of 2025. Achieving these milestones requires immediate new restrictions on fossil fuels which are also part of our announcement and take effect immediately.”

However, a report last year by NGO ShareAction revealed that Barclays had invested more than $85bn into fossil fuel projects, making it the largest European funder and sixth largest globally. 

This finding prompted green groups including Greenpeace UK and Extinction Rebellion to take direct action against the bank, with members of the latter staging high-profile protests at Barclays’ Northampton HQ and branches across the UK, including in Cambridge and Manchester

It also prompted further joint research from Rainforest Action Network, BankTrack, Indigenous Environmental Network, Oil Change International, Reclaim Finance and Sierra Club, which ultimately concluded that Barclays has been the top European financier of fossil fuels in the last four years.

As for HSBC, the bank announced in April 2018 that it would “stop financing new coal-fired power in all countries around the world”, excluding Bangladesh, Indonesia and Vietnam. The report notes that projections were made regarding those exclusions, as more than 43,000 people could die annually in South East Asia due to pollution from fossil fuels. 

HSBC currently offers a range of green finance services aimed at helping businesses of all sizes strengthen sustainability initiatives. Green Loans services have been launched following a in 2018 and have been extended to SMEs wanting to secure loans for sustainability initiatives. The minimum green loan starts at £300,000 and HSBC UK has already provided green loans totalling £600m as part of the pilot.

More broadly, HSBC has pledged to provide $100bn in sustainable financing by 2025, as well as launching a $1bn green bond portfolio.

edie reached out to HSBC for comment.

Sector issues

The two banks aren’t alone in funding fossil fuels. Analysis of the 35 leading global investment banks, by an alliance of US-based environmental groups, found that financing for fossil fuel extraction had increased by 40% in the last year.

Separate research from Boston Common Asset Management (BCAM) stated that 40% of banks are failing to develop financing and investing restrictions or exclusions on high-carbon portfolios and business clients.

It does appear that a tipping point is being reached, thanks to stakeholder and NGO pressures. The Bank of England has unveiled plans to introduce a mandatory and uniform climate risk test for major banks and insurers in 2021. If introduced, the tests would analyse whether companies within the sector are “properly managing” both transition risks – the likelihood of losing assets as the transition to a low-carbon economy continues – and physical risks – whether assets will be damaged or rendered unproductive by occurrences such as droughts, flooding or fires.

Matt Mace

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