- Barclays sets emissions reduction targets for its lending and capital markets activity in the power, energy, cement and steel sectors.
- Capital Monitor analysis shows Barclays is the most ambitious in percentage reduction terms on energy sector targets, while HSBC is the most ambitious on power sector goals.
- The bank puts policies to vote under the Say on Climate initiative but provides little clarity on what the next steps would be.
From smashed and oil-doused windows at Barclays’ Canary Wharf headquarters to guerrilla advertising campaigns and campus bans, climate activism is all too familiar to the British bank. And the target is always the same: Barclays’ large exposure to fossil fuels.
Until now the group has largely been silent in the face of public charges of greenwashing, but it appears to be changing tack and meeting head-on a new breed of climate activist: its shareholders.
Barclays is putting to public vote its latest set of climate commitments. The move reflects growing recognition of stakeholder engagement as a powerful tool for driving change on climate action. Banks’ net-zero emission pledges – like those proliferating among corporates and asset managers – have engendered much scepticism as to how achievable they are.
Still, over the past 18 months, campaign groups as such as ShareAction have successfully proposed climate resolutions at HSBC and Credit Suisse, prompting policy changes at both banks.
As the first bank to join the Say on Climate initiative, which is backed by the Children’s Investment Fund Foundation, Barclays is inviting shareholders to vote on its climate strategy – which was made public on 22 March – at its AGM in Manchester on 4 May. The campaign encourages companies to disclose emissions, set out plans for managing them and put these to an annual shareholder vote.
Barclays’ new climate strategy sets 2030 emissions reduction targets for the energy, power, cement and steel sectors, covering both lending and capital markets activities, which ShareAction praises as “leading practice”. The targets also explicitly include other potent greenhouse gases such as methane, in a step forward from solely counting carbon dioxide emissions. The bank has also pledged to phase out from coal and restrict financing to coal developers.
Barclays has urged shareholders to vote in favour of the resolution. But it is unclear what happens next – particularly if the resolution is rejected – or whether there is any mechanism for the bank to adjust or amend its targets in response to feedback from shareholders.
Say on Climate campaigns have a mixed reputation among the climate community. Some view them as an important shift towards greater transparency and a recognition that climate decisions made by banks have implications for a much bigger set of stakeholders – namely, people and the planet. But critics suggest they may end up legitimising weak or inadequate climate targets by placing the onus on shareholders to vote on policies that are complex and take time to digest.
Assessing the ambition and impact of Barclays’ new climate strategy is no easy task. Campaigners are disappointed that the bank has not updated its oil and gas policies to pare its lending to the sector, nor taken into account the extensive lobbying work carried out by ShareAction on the bank’s financing to oil sands, one of the most carbon-intensive forms of fossil fuel.
“Targets are really important but they’re only part of the story,” says Jeanne Martin, senior campaign manager at ShareAction. “Investors should look at the sectoral policies because the point of targets is to reduce the emissions of a specific portfolio. But the strategy doesn’t really distinguish between companies, and having a robust set of policies ensures that what is financed is a Paris-aligned activity.”
Martin is referring to the 2015 Paris Agreement on Climate Change that seeks to keep global warming to no more than 1.5ºC above pre-industrial levels.
ShareAction says Barclays’ Say on Climate plan lacks the ambition needed to address the climate crisis. But setting science-based and time-bound targets is seen as a key step in wresting global finance onto a clearer path. The initiative is mandated by major groups and organisations from the Glasgow Financial Alliance for Net Zero to the United Nations Environment Programme Finance Initiative’s Principles of Responsible Banking, but so far very few banks have signed up to it.
Energy sector targets
Here’s a brief look at how Barclays' new targets stack up against some of its peers.
Few banks have as comprehensive a set of sector reduction targets as Barclays. For the purpose of this article we compared it against three other large investment banks with substantial exposure to fossil fuels that have set targets for the energy and power sectors in the past 12 months: Citi, HSBC and J.P. Morgan.
Barclays defines the energy sector as all companies that extract fossil fuels with all emissions associated with the extraction, downstream processing and use. It defines the power sector as all companies that generate electricity. Its targets also include coal producers. Citi’s targets also cover its broader energy sector portfolio, while HSBC and J.P. Morgan explicitly target oil and gas.
For its power targets, Barclays attributes to each company the emissions that result from combusting fossil fuels to produce electricity.
Barclays’ and J.P. Morgan’s targets include capital markets and lending activities, while the other two lenders do not as yet. But HSBC says it plans to include capital markets in its calculations from the fourth quarter of this year.
- Three banks – Barclays, Citi and HSBC – have set absolute emissions targets, meaning they will reduce the total emissions associated with the oil and gas (and coal, in the case of Barclays) portion of their portfolios. J.P. Morgan, however, has only set emissions intensity targets, meaning it aims to make its portfolio less energy-intensive, rather than cutting its overall emissions. This is not deemed best practice for the oil and gas sector.
- Barclays' absolute emissions reduction target for the energy sector – a 40% cut, amounting to 31.4 megatonnes of CO2 equivalent (MtCO2e) – is the most ambitious of the four in percentage terms. HSBC is aiming for a 34% reduction.
- Citi’s portfolio has the highest associated energy emissions so it makes sense that the bank’s total emissions reduction in MtCO2e is also the largest. Citi intends to reduce its total emissions for the sector by 41.7MtCO2e (or 29%) by 2030 from a baseline of 143.8MtCO2e.
Power sector targets
Barclays aims to reduce the energy intensity of its power portfolio by between 50% and 69% by 2030. Critics point out only the top end of that range would keep the bank’s decarbonisation plan in line with the International Energy Agency’s net-zero 2050 scenario for Paris alignment. And the bottom end of the range is merely in line with the work that Barclays’ clients are already expected to undertake climate-wise, which questions the ambition of the target here, says ShareAction.
- All four banks have set intensity reduction targets for the power sector. Barclays has the least ambitious target of the group, at 50%, when the lower end of its range is considered.
- HSBC has the most energy-intensive power portfolio with 550kg of CO2 equivalent per megawatt-hour (kgCO2e/MWh) despite having the lowest exposure to the sector of $11.2bn, while Citi has the least, at 313.5kgCO2e/MWh for its $27bn portfolio. Barclays’ power portfolio is also at the lower end of the intensity range at 320kgCO2e/MWh.
Assessing the ambition of bank targets is challenging, partly because each firm uses different definitions and methodologies. Barclays uses BlueTrack, its proprietary methodology for reducing financed emissions, while J.P. Morgan has Carbon Compass. Each bank also attributes associated emissions in a different way. The following chart shows below the credit exposure of the banks to oil and gas and power and utilities. Excluding Citi, these figures below do not mirror the pool of assets to which the sector targets are linked. This is down to differing reporting approaches.
Barclays’ energy sector climate targets could be deemed the most ambitious. It has the broadest definition of in-scope sectors and the largest percentage reduction in emissions.
For power, meanwhile, HSBC has the most ambitious targets, largely because its power portfolio is the most energy-intensive in the first place.