Barclays to end direct finance for oil and gas expansion

The statement, released on Friday (9 February), was somewhat overshadowed in national media outlets due to Barclays’ acquisition of Tesco’s retail banking business.

Included in the statement is a pledge to immediately cease providing new project finance and all other kinds of direct finance for upstream oil and gas projects and related infrastructure.

“In the International Energy Agency’s Net-Zero Energy scenario, new long lead time upstream oil and gas projects are not required on a 1.5C-aligned pathway,” Barclays stated. “For current and future (declining) demand to be satisfied, investment is needed to support existing assets while clean energy is scaled”.

To that end, Barclays has published its first transition finance framework, intended to support a new ambition to facilitate $1trn of ‘sustainable’ and ‘transition’ finance by 2030.  It has also created a new energy transition group comprising sector specialists from across the bank.

Transition finance is finance provided to high-carbon sectors to assist their decarbonisation work, including changes to business models.

The UK Government is notably in the process of reviewing the current global and national transition market size and assessing definitions and standards to identify potential loopholes that permit greenwashing. The six-month review began in December 2023.

Targets and transition plans

Barclays’ new statement also includes a swathe of broader changes that will impact most energy companies which Barclays supports.

All oil and gas clients will need to set out plans to end non-essential venting and flaring by 2030. These practices are major sources of methane emissions globally and, according to the IEA, can be phased out at either no or low net cost for large firms.

These venting and flaring plans, Barclays has confirmed, will need to feed into broader 2030 methane reduction strategies for energy clients.

Moreover, energy clients will need to present updated emissions goals for all Scope 1 (direct) and Scope 2 (power-related) emissions by January 2026.

Energy clients have also been requested to produce climate transition plans by January 2025.

ShareAction has warned that the exclusion of Scope 3 (indirect) emissions reductions requirements is a loophole in Barclays approach. For most fossil fuel companies, the final burning of fuels, which falls into the Scope 3 category, accounts for the bulk of their emissions footprint.

The responsible investment group has also highlighted that Barclays remains technically able to provide indirect finance to oil and gas expansion.

Its campaign manager Kelly Shields said: “Barclays’ intention to request decarbonisation plans from its oil and gas clients is the right one. But for it to have teeth, the bank must demand clients stop engaging in activities that increase the climate crisis such as oil and gas exploration.

“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.

“We should expect the banks’ shareholders to hold them to account on this policy and make significant efforts to close the loopholes in this strategy.”

ShareAction classes Barclays as one of Europe’s three biggest lenders to the oil and gas sector between 2016 and 2021, alleging that it provided $46bn to companies leading oil and gas expansion in this timeframe.

Make My Money Matter said the plan “catches Barclays up with other banks but in reality covers just a fraction of their fossil fuel lending”.

HSBC x Google

In related news, HSBC has announced a partnership with Google that will focus on growing climate technology start-ups. This feeds into HSBC’s commitment to allocate $1bn in venture debt financing to green start-ups this decade.

Google will connect HSBC with companies that it selects for its Google Cloud Ready Sustainability programme, a startup accelerator initiative which picks startups based on the quality, efficacy and commercial potential of their technologies.

Companies already supported through the programme include those producing automated building control systems for energy efficiency; early weather warning platform innovators and 24/7 clean energy tracking pioneers.

“There is so much innovation that needs to be commercialised and deployed at scale to make net zero work across our industries, so it’s great to join up to mobilise skills, ideas and finance,” said HSBC’s group chief sustainability officer Celine Herweijer.

HSBC last month unveiled a transition plan for the delivery of its 2050 net-zero target, which was first set in 2020 and which has seen the bank come under increasing pressure to address its historic support for fossil fuels.